Into the future
Travelling to – and through – the Middle East can be a pleasantly confusing experience due to the ongoing developments gripping the travel retail environment of the region’s airports. Abu Dhabi, Bahrain, Dubai, Qatar – wherever you go, chances are that if you have not visited the airport in recent months, what you will find will have been transformed, modified, enhanced and improved so as to almost give the impression that you have landed in a different airport. With booming economies and an itching desire to build and develop, places like Dubai and Bahrain offer an ever-changing cityscape, and something of an eternal, gigantic building site. And the investment that benefits the cities is also seen in the quality of the airport infrastructure and of the duty free offering.
“The region is undergoing a huge period of growth and development with billions of dollars being spent on airport and airline development,” says Colm McLoughlin, managing director of Dubai Duty Free. “The region is marketing itself as a business, leisure destination and a solid place for investment opportunities. The UAE and Dubai in particular are spearheading some fantastic projects, and the Palm islands, Dubailand and Dubai World Central are fast becoming a reality. This is all great news for the travel retail industry.”
According to Maurice Burke, general manager of Bahrain Duty Free Shop Complex, there has indeed been “a massive increase in the volume of investment in infrastructure and development in the region. The building boom is still continuing and now expanding in most of the GCC states.”
Growing operations
Things have come a long way since Dubai Duty Free was founded in 1983. Its first full year results posted US$20m in sales, which rose to US$712m last year, making it the third-largest airport retailer in the world in terms of turnover. The impact McLoughlin, who has headed the operation since its beginning, has had on the industry is such that he received an award for Outstanding
Contribution to Airport Commercial Business – the first of its kind – from The Moodie Report earlier this year. And the ongoing performance of the operation shows no sign of slowing down with first quarter sales increasing by 28%.
“Sales have increased by 28% compared to a 16% increase in traffic,” McLoughlin tells Frontier, “so therefore we are doing our job properly in terms of selling to more of our passengers. At present, we sell to 45% of departing passengers and we would ultimately like to increase that to 50%. Similarly, we would like to increase our penetration level in Arrivals to 10% from the current 7%, and we think that is achievable.”
Factors contributing to this growth are two-fold. On the one hand, Dubai is becoming an increasingly attractive destination for travellers. On the other, Dubai Duty Free is extremely serious about providing passengers with a first class service and facilities, and spares no expense in developing its own offering to stay up to date and attract as many travellers as possible to its shops. “The long term growth is certainly sustainable,” McLoughlin states. “We are going to double our retail operation in the coming year and over the next few years the massive project that is Dubai World Central will be phased in.”
Bahrain Duty Free is another operation experiencing strong growth with sales in 2006 increasing by 16.4% over 2005. “Development of the regional markets and introduction of more budget airlines in the marketplace resulting in higher passenger numbers are always a solid indicator for a rise in sales, coupled with the marketing of the duty free shop,” says Burke. “Long term forecast from our colleagues in CAA are that the growth will be constant at from 4% to 7% over the next five years. This will help sustain the growth in sales.”
Bahrain Duty Free is also set to benefit from a new extension to the terminal in the next five years, which will increase retail and catering space to 22,000sqm. The airport is also investing heavily to allow for
improvements, which will enable Bahrain International Airport to handle the new Airbus A380.
Similarly, DDF will see its retail space doubled by the end of the year. “The retail areas of Concourse 2 and Terminal 3, where we have two arrival shops, has given us a great opportunity to build on our successes and learn from the past,” says McLoughlin. “The retail area in Concourse 2 runs along the spine of the building and is located on the same level as the departure gates. This should provide us with great access to our customers and the layout of the shops reflects this.”
One important factor that will further help the retailers’ fortunes is the growing traffic passing through the region. Indeed, the number of international passengers in the region is consistently growing above the world average. According to Airports Council International, this world average stands at 7.3% for the first four months of the year, while the Middle East experienced growth in international passengers of 14.5% over the same period.
The wow factor
Rising passenger numbers, however, do not always mean rising sales. Travellers are becoming evermore discerning and look for real bargains or items they would be hard-pressed to find elsewhere. As a result, it becomes increasingly important for retailers to constantly update and upgrade their offer, both in terms of the items on display and in the way they are presented to the customer.
One way of increasing visibility and the attractiveness of the retail offer is marketing. And the Middle East is famous for its marketing campaigns and promotional offers, creating millionaires by the bucketful and making more than one traveller happy by sending him home with a luxury car. “Our job is to ensure that travellers firstly choose to shop at Dubai Duty Free and we do this by making the retail offer as attractive as possible in terms of our location, layout, product range, staff friendliness and product awareness, and by offering value for money,” McLoughlin explains. “We have been offering this for over 23 years now and definitely our customers have high expectations when they shop at Dubai Duty Free. We are constantly reviewing the retail offer and will upgrade, refurbish and renew whenever we think something is getting tired.”
Adding a sense of theatre is another priority for McLoughlin, who believes it is important to make
travellers feel included in the environment they find themselves in and to encourage them to participate in the events, such as the millionaire or luxury car draws.
Bahrain Duty Free follows the same concept, pushing it a step further with its most recent campaign, the Magnificent Six. “The concept was once again developed by our in-house team of marketing, retail and
human resources,” says Burke. “Following on from our ‘All Four, One Winner’ last year, the new promotion of one ticket wins six cars has been a driver in our sales.”
Abu Dhabi Duty Free, on the other hand, recently developed a brand new retail concept, which is called Domo. The upper level of Terminal 1 at Abu Dhabi International Airport has been split into two sections, one catering to men and the other to women. The concept is not, according to Abu Dhabi Duty Free, simply another retail outlet, but rather an environment designed to accommodate, follow and facilitate a trend for lifestyle shopping. It features brands such as Tumi, Sabo, Pilgrim, Porsche Design, Morgan, Hugo Boss and Abu Dhabi Duty Free’s own fashion brand, Vespucci.
Qatar also found a very unique way of creating value for its customers, this time targeting exclusively first and business class travellers with the opening, at the end of last year, of its Premium Terminal, which
features an exclusive check-in area, duty free shops, conference room and even goes as far as offering a nursery and play area, spa treatment rooms, sauna, jacuzzi and fine dining restaurants.
Widespread growth
Throughout the region the duty free offering is becoming more sophisticated, making sure that customers will leave the airports with bulging shopping bags – or at least the thought that they will need to come back soon to do some shopping. Other countries are also picking up on the success of places like Dubai and Bahrain and want to jump on the bandwagon to improve the sometimes non-existent travel retail offer. Saudi Arabia, for instance, was recently awarded a ten-year deal to operate duty free retail at the country’s three international airports. The contract was awarded to a partnership between Aldeasa and a local company, Al Musbah, which has extensive experience in running retail outlets in Saudi Arabia.
Under the terms of the contract, the partners will be running five duty free outlets, two in Riyadh’s airport and covering a total of 2,600sqm; another two in Jeddah over a total area of 1,500sqm; and the last one in Dammam, which will cover 400sqm.
What is certain is that the Middle East has firmly established itself on the global travel retail stage and increasingly commands the attention of suppliers. “This region accounts for an ever-increasing proportion of global duty free sales,” McLoughlin points out, “and you only have to look at the growth and
developments of gatherings such as the MEDFA conference to see the recognition that this region now deserves.” n
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