In the wake of the coronavirus outbreak, The Moodie Davitt Report Senior Editor Liam Coleman looks at the travel retail industry’s strength in the face of global crises.
In his final speech as Tax Free World Association (TFWA) President in 2018, Erik Juul-Mortensen looked back on a lengthy career in travel retail and tenure as the Association’s President.
“The timeline of sales evolution [in travel retail] is punctuated by a series of huge crises,” he told the audience in Cannes. “If we can congratulate ourselves on one thing, it is that we rose to the challenge of each one of them.”
It may be some time before any self-congratulation is in order, but Juul-Mortensen’s words should offer some comfort as the sector reels from its biggest crisis in several years: the coronavirus outbreak in China.
The significance of the closure of the CDF Mall in Haitang Bay, the main contributor to the CNY13.61 billion (US$1.98 billion) spent in duty free on Hainan Island in 2019, cannot be overstated. That’s one of the world’s busiest duty free doors closing overnight with no hint yet as to when it will be able to reopen.
Other important travel shopping locations have come to a halt, notably at Wuhan Tianhe International Airport (Lagardère Travel Retail), Xi’an Xianyang International and Hangzhou Xiaoshan International airports (both CDFG) and the West Kowloon Station in Hong Kong (Dufry).
However, a look at the history books shows the occasional blips in global duty free sales over the years are merely a footnote in the ultimate narrative: the industry’s consistent ability to rebound quickly from setbacks.
The trade was severely impacted by 9/11, the second Gulf War and SARS in the early years of the 21st century, with global sales flat over this period, but sales then increased +35.61% in 2004 (the year after the SARS epidemic reached its peak), according to Generation Research.
A similar story is painted by the increase in duty free sales in the years after the global financial crisis of 2008-2009. In 2010, sales worldwide rose +13.09% and in 2011, from a much higher base, they increased again by +18.06%.
Similarly, according to UNWTO numbers, worldwide passenger traffic rose +23.75% in 2004 (the year after the worst of the SARS outbreak) and by +26.07% in 2010 (the year the global economy recovered from the financial crisis).
There’s no doubt that travel retail will be hit hard – in terms of passenger numbers, sales and investor confidence – over the coming weeks. Yet if history offers us consolation, it is this: once the worst is over, the bounce back is likely to be swift, strong and sustained.
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