Road to Recovery
Heathrow looks to ‘test and learn’
Heathrow Retail Director Fraser Brown updates The Moodie Davitt Report on the impact of COVID-19 on business at the UK hub, and says he expects the airport company to refine its services and offer in response to evolving passenger needs. By Dermot Davitt.
In these extraordinary times, London Heathrow Airport has taken extraordinary measures to protect its business amid the severe impact of the COVID-19 crisis. With passenger numbers down by -52% in March, accelerating to an estimated -97% in April, the UK hub has consolidated operations into terminals 2 and 5. It also moved to single runway operations from 6 April.
Q1 results, released last week, do not fully reflect the extent of crisis the today, but offer some telling insights. Group Q1 revenue declined by -12.7% to £593 million but March revenue alone declined by -28.9%, reflecting the impact of reduced passenger numbers after the UK entered lockdown, and most retail outlets closing from the last week of the month. For the quarter (to 31 March) retail revenue fell by -15% year-on-year. However, retail revenue per passenger still increased +4.0% to £9.28.
Fraser Brown: The focus is on a return to business with safety top of mind
The airport company said: “The increase is due to minimum value guarantees included in many of our concession agreements providing a bottom threshold while passenger numbers declined.”
Against the backdrop of falling traffic, consolidation of terminals and continuing conversations with business partners about their contract terms, we spoke to Heathrow Retail Director Fraser Brown.
He said the past few weeks have been “incredibly challenging” and highlighted the support of business partners in the period. Updating us on what retail is still functioning, he says: “Currently Boots and WHSmith are the only retailers currently operating in the terminals, ensuring those travelling for essential purposes are able to access pharmaceuticals and refreshments.”
Amid the crisis, Heathrow has taken action to conserve cash and reduce costs by around -30%, through cutting management pay and other measures.
How business is done in future is a core topic for airports around the world (Dufry at Heathrow T4 pictured)
On retailers in particular, Brown does not provide details of updated agreements but says: “We are in constant discussions with our retail partners as we react to the unprecedented impact of the COVID-19 pandemic.”
The management team’s priority, he adds, is to ensure “a safe airport for our colleagues, passengers and the colleagues of our retail and F&B business partners still operating”.
Now the focus begins to turn towards the future. “We are now planning for the re-start of our retail operations, as part of our overall recovery strategy. We need to create safe and efficient processes to ensure our retailers and F&B operators can, once again, provide great services and products to passengers as they return to flying to and from Heathrow.”
Heathrow and its partners have been acting to mitigate the impact of large amounts of stock left unsold. Brown says: “A significant amount of perishable items have been donated to local foodbanks, as Heathrow and our partners support the local community throughout this pandemic, while some retailers are able to re-market stock across their own channels.”
With the capital expenditure budget cut by £650 million, the timing of upgrades and expansion will change. Brown says: “We are re-planning a number of future projects across the terminals with our retail and F&B partners and have been ensuring that any construction work already underway can be completed safely in line with social distancing measures.
“As we work through our plans for recovery, we will continue to invest in our retail and F&B offer so that these products and services play their part in delivering our continued vision of providing the ‘best airport service in the world’.”
Taking a 'test and learn' apprach to the future at Heathrow
Asked whether the wider industry needs to rethink its relationships, notably around concessions, in future, Brown says: “Businesses across the travel sector will be reflecting on their own challenges and opportunities as a result of the pandemic and we are no different. We have worked with a number of our retail partners for decades, from opening the airport in 1946 with WHSmith to a nearly 30-year partnership with Harrods.
“We will be working with our partners as the weeks and months progress to refine our services and offer in response to a, perhaps, different set of passenger needs. I expect these refinements and changes to fluctuate as we all ‘test and learn’ what works best and caters to consumer behaviours in a new post-pandemic world.”
In that post-crisis world, ensuring passengers feel safe and comfortable in travel environments is critical. As reported, Heathrow has called for a Common International Standard for safe air travel to help the economy recover from the COVID-19 crisis.”
The company said last week: “We are ready to work with governments and the global aviation industry to agree a consensus around standardised processes for responding to health crises like COVID-19 in the future. This could include a number of measures such as a health passport, health screening, enhanced cleaning standards and innovation which will reduce physical contact in airports. Common measures across the world would help passengers build confidence in flying so that the personal and economic benefits of global travel can continue after COVID-19.”
Chiming with that key message, Brown says: “We are planning now for the future, continuing to work collaboratively with retailers and brands to ensure a safe and successful business recovery. Key to this recovery is a consistent approach alongside our airline partners, ensuring passengers feel confident and safe to travel once restrictions are lifted.”
*Fraser Brown will be a speaker in the Symposium at the inaugural Moodie Davitt Virtual Travel Retail Expo in September. As reported, the Symposium will be themed ‘Road to Recovery’ and will explore how the travel retail channel will (or should) look in the future. He joins other big names in the travel retail and F&B communities, together with key executives from outside the channel. Brown will examine the evolution of airport retail and other consumer services and talk about how the post-COVID-19 landscape will evolve.
The Moodie Davitt eZine
Issue 279 | 4 May 2020
The Moodie Davitt eZine is published 12 times per year by The Moodie Davitt Report (Moodie International Ltd). © All material is copyright and cannot be reproduced without the permission of the Publisher. To find out more visit www.moodiedavittreport.com and to subscribe, please e-mail email@example.com