SAUDI ARABIA. With COVID-19 under increasing control and the country’s borders fully reopened to all but a few high-risk markets, Riyadh Airports Company is preparing itself for rapid passenger growth as the Kingdom presses forward with a hugely ambitious tourism development programme. The company operates King Khalid International Airport, where retail and F&B space is set to treble with the opening of two new international terminals next year, with further exciting developments down the line.
Riyadh Airports Company General Manager Commercial Development Abdulaziz Al Asaker spoke to The Moodie Davitt Report Founder and Chairman Martin Moodie about the challenges of the pandemic period, the airport’s upcoming commercial expansion, and what lies ahead in an extraordinary country set to play a major role within travel retail and tourism circles in the years ahead [with editorial contribution and additional editing by Mark Lane].
Martin Moodie: What can you tell us about Saudi Arabia’s profoundly exciting development as a tourist destination as the country emerges from the COVID-19 pandemic? And within that, what role will travel retail play?
Abdulaziz Al Asaker: Tourism development in Saudi Arabia is one of the Kingdom’s key strategic targets, with the objective of delivering 100 million tourists by 2030, from 42 million mostly religious pilgrims in 2019.
This is a very ambitious goal, but it is supported by a robust plan, budget and infrastructure investment to drive incredible growth and international visitors to some of the most wonderful and undiscovered gems that the Kingdom of Saudi Arabia (KSA) has to offer.
These include AlUla [an ancient city dubbed by Saudis as ‘The world’s masterpiece’ and home to Hegra, a UNESCO World Heritage site -Ed]; the Edge of the World [real name Jebel Fihrayn, a dramatic geological wonder in the rocky desert northwest of Riyadh that derives its nickname from the uninterrupted view of the horizon it offers atop 300 metre-high cliffs, which overlook the surrounding plain] and the Riyadh Season programme of events.
In addition to the six UNESCO heritage and other cultural sites KSA has, there are so many new developments underway and the rate of change and development of the country is incredible.
[Click on the YouTube icon to view some of the majestic wonders of the Kingdom]
Whilst some of these tourists will arrive through other locations and land borders, Riyadh and King Khalid International Airport (KKIA) will undoubtedly be a key hub in this growth. As we focus more on our commercial offer, and the space available for commercial activities at the airport, we expect that our income from travel retail will grow significantly, both overall and on a per-passenger basis. Providing an offer suitable for this growth is a key part of our strategy.
At Riyadh Airports Company, we have been gearing up and preparing KKIA to welcome tourists from all around the world since KSA introduced the Tourism Visa in 2019, which has now reopened from the COVID period.
The tourist visa process only takes a few minutes and can be done over a mobile phone, including biometrics. New services and offerings have been adopted at the airport, such as self-check-in services to provide a seamless experience for passengers travelling through KKIA.
How would you describe the traffic situation at King Khalid International Airport and the current travel restrictions?
KSA is now open to most fully-vaccinated passengers without the need to quarantine or even have a further PCR test on arrival, except for those from some specific high-risk markets.
The authorities have done an excellent job at controlling COVID-19 in KSA and, even with borders open for over three months now, positive cases continue to fall and have been below 100 daily for well over a month.
As a result, our current number of international passengers has now recovered to around 65% of 2019 levels and this continues to grow week on week; we have just had our highest passenger number since the pandemic began.
The limitation is as much access to other markets and the return of full timetables as it is anything else. Perhaps more impressive is that duty free sales are recovering strongly, with September +16% above the sales in 2019.
Domestic air travel reopened in May 2020 and has been encouraging. Recently, seating load fill restrictions were lifted allowing full flights again and that will help build further passenger traffic. Saudi nationals were able to travel internationally from May 2021 and we have seen an especially strong return to international travel since then.
We are very optimistic for 2022 and expect to see a continued growth in passengers as people feel more comfortable to travel again, restrictions ease regionally and globally and the clear pent-up demand returns to the skies. Whilst we can’t be sure there will be no further bumps in the road, all the signs are very strong, and we anticipate great improvements to continue.
“The opening of Terminals 3 and 4 will be a step change in the passenger experience and indeed the commercial offer. The new configuration gives us over three times more retail and F&B space” – Riyadh Airports Company General Manager Commercial Development Abdulaziz Al Asaker
What was the mix of domestic and international travellers at the airport pre-pandemic? Do you see those demographics changing in the future, with a higher proportion coming to the airport from outside the Middle East?
As per the Riyadh Airports’ official statistics in 2019, 42% of passengers were international, 58% domestic. During the early pandemic after the closed period, this naturally swung strongly towards domestic with so many international routes closed. However, now that routes have opened again and Saudi nationals have returned to travelling, we have seen a strong rebound in international passenger numbers, and the mix is starting to meet previous levels.
With such a strong focus on the development of tourism, international passengers from further afield will grow strongly in the coming years and international growth will outpace overall growth. Though with a strong and growing domestic economy, requirements for domestic travel will remain very strong too.
KSA is tipped as one of the fastest aviation growth markets in the medium term, so it’s a very exciting time for opportunities in the Kingdom.
With the new RFPs for retail, F&B and lounges, these are exciting days commercially speaking at KKIA. What are your expectations from tenants and how will you ensure you cater for all demographics?
Yes, it certainly is an exciting time ahead. The opening of Terminals 3 and 4, currently planned for 2022, will be a step change in the passenger experience and indeed the commercial offer. These two new terminals replace the current international terminals, where our space is very limited. The new configuration gives us over three times more retail and F&B space, with an open view from the walk-through duty free shop allowing dwell and easy flow into the commercial areas.
We have had some excellent offers for the spaces available, many higher than our expectations in the current climate. However, with lower short-term passengers, we will not open all space immediately, phasing units in as passengers increase.
The strongest offers came from operators already familiar with the airport, which is recognition of the potential in KKIA. We have a good balance of offers across the terminals but would have liked to have seen more international participation, and still welcome new operators to look at the units we are initially holding back.
Describe some of the challenges you have faced over the past 18 months as an airport company, particularly on the commercial side, and how you have overcome them.
The biggest challenge for us as an airport company is the same as that of our retail partners – less income from fewer passengers. As an airport, we get hit from all sides, but we have worked hard with our business partners to support them as best we can.
Much of the recent focus has been about maximising opportunities, working with what we do have rather than what we don’t. Business reviews with our travel retail partners have focused on this, working to identify and realise opportunities within the limited scope.
We were not always able to help in relief as much as some might have wanted, but we can support in other means in a collaborative way. Many of these initiatives will help us all come out stronger at the other end.
It has been a challenging time for everyone. We have recognised this as best we can and offered all tenants a rent-free period to reflect the early immediate change in passengers. This included both MAG payments and concession rental for the specific duration which amounted to a very substantial support package across our partner base.
Like all airports, we have heavy commitments so have been limited in how we can help, but have worked to find solutions that are as effective as possible in a balanced way.
How do you see consumer behaviour evolving as a result of the crisis?
We have not seen significant consumer behaviour changes once passengers get in the terminal, and spend levels are now largely back to and exceeding where they were pre-pandemic, which is encouraging.
As an airport, we used the crisis period as an opportunity to invest in infrastructure improvements, including the refurbishment of T1, runway development and maintenance projects that might otherwise have impacted operations and the passenger experience during the works period. We are now better prepared for sustained recovery and future growth.
Given what has happened with COVID-19, will the contracts with the new retail and F&B tenants differ much from those formerly in place?
We have a core contract for our tenants which we have found to work well. However, we have been more flexible around certain elements for new contracts and we believe this will give operators confidence to partner with us, as indeed we have seen with those who have already made offers.
Globally, the pandemic has seen an acceleration of ecommerce. How has your digital proposition evolved during this period?
We have introduced a number of ecommerce initiatives since the pandemic began. This has included ‘click and collect’, and our first foray into a transactional site is being launched this month, initially with our domestic terminal retail operator Ahlan Avenue (managed by Aer Rianta International). We have high hopes for this.
Passengers can pre-purchase for collection in-terminal, prior to arrival or whilst in the terminal; they can also order for domestic delivery as these are duty paid products. We will roll this out further in time.
You obviously monitor what is happening at other airports as a source of inspiration for changes in your retail and F&B mix, and the look and feel of the airport. Which other airports do you admire?
We keep a close eye on the regional airports as they are important destinations for our passengers. Bahrain is close to us and a large number of Saudis visit there regularly: we like what they have done in the terminal there.
Dubai is obviously also important to keep an eye on given its size along with Doha, but some of the more diverse airports we like are Singapore Changi and London Heathrow, which are important to monitor.
As GM, Commercial Development how have you been concentrating your personal time in recent months, and what are your key personal priorities and ambitions on the commercial side going forward?
The curfew period was an opportunity to enjoy family time, but of course was also stressful, personally and professionally. I think this period has been a wake-up call for us on the fragility of what we take for granted and to value the essentials; I’ve changed habits for the good and focus on wellbeing.
Professionally, I’ve been working with our airline and retail partners over the COVID period, and preparing for our new terminals has taken a lot of time this past year. Making sure we offer the best passenger experience possible, an excellent commercial engagement and a rewarding visit through KKIA are the things that have been keeping me and my team focused in recent times as we build a stronger growth base for going forward.
Looking forward, any final thoughts?
There are many other exciting developments in the aviation sector in KSA which we’ll be able to talk about in times to come. KSA is not like before and not as most people expect.
The pace of change is incredible and billions of SAR [the Saudi riyal currency] are being invested in infrastructure to drive future growth. Saudi Arabia is definitely a place to watch, and of course visit for the culture, hospitality and opportunities.
