Higher spend per passenger is bright light in troubled Americas travel retail landscape

IAADFS President and CEO Michael Payne, meanwhile, gave an update on the advocacy efforts of his organisation and other aviation and non-aeronautical revenue pressure groups. He said the members of this coalition have set out to educate decision-makers and lawmakers throughout the Americas region, “providing as much data and information as we can about the value of the duty free/travel retail industry”.

He noted that many airports and airport stakeholders across the US are in “really dire financial straits”. Payne stressed that it is vital that the coalition’s voice is heard given that business in many cases is down by over -90%, and the wider implications for employment.

“In the US, this coalition has been advocating for as much as US$13.5 billion in help for airports and concessionaires – whether or not we’re successful in getting that remains to be seen.”

Describing this situation as an “evolving story”, he continued: “When you think you’ve got it sorted, then the next day someone changes the rules. The political situation in the States, as you can imagine, is a little tricky. There is a new administration coming and lots of transitions are going on; lots of staff changes on the [Capitol] Hill. So it’s hard sometimes to get a straight answer.”

Jackie McDonagh offered keen insights into the current travel situation across Canada – where ARI runs stores at four airports.

Travel restrictions are in place across Canada’s 11 provinces which means that even travelling domestically is a challenge.

He lauded the support of airports in waiving rents and flexibility on operating hours since the start of the pandemic. Advocating changes to future airport-retailer contracts in the face of COVID-19, he said: “We would like to have language included in our leases that speaks to how we would address these ‘act of God’ events in the future.”

Greenbaum added: “There really has been an environment of understanding, where people seem to understand what each party is going through, and everybody realises we have to all get through this together.”

In this context, he also offered high praise to International Shoppes’ suppliers for their flexibility in the current difficult trading circumstances. He said: “I want to acknowledge that many of our suppliers have been very creative and flexible in terms of how we’re partnering together. They’ve been very patient with new orders; they’ve been receptive to taking back merchandise that’s not sellable.”

Looking ahead, Greenbaum – who also noted a significant increase in spend per passenger – said that he anticipated a long-term change in purchasing patterns. He explained: “We need to make sure that we’re turning over our goods a little bit more frequently. So with that, we’re going to need a more efficient supply chain, including speedier and more frequent deliveries.

“So I expect there to be some pressure on suppliers to find ways to process orders more quickly, and get the goods to us more quickly so that we’re not sitting on inventory, in the same way that we were before.”

International Shoppes has expanded its ecommerce platform, but Greenbaum stressed that standards of in-store experience must be upheld and continually improved. Emphasising this, he added: “We’re really seeing the value of having more sophisticated salespeople to generate incremental business.”

He added: “I’m really excited to see some of the efficiencies that we’ve developed these past few months. I think as business comes back online, we can look forward to becoming much more profitable.”

Erasmo Orillac, representing Panama-based Motta Internacional, noted that Latin American flight numbers were -83% lower in September compared to the same month last year.

Orillac noted that the general economic conditions currently being experienced by all countries in Latin America “does not look good due to the effects of COVID-19”.

He called for airport concession contracts to be extended to compensate for losses, or “until we get to the levels of 2019”. He added: “We need wording in these contracts [for events like COVID-19] because this could happen again.”

Completing the Americas travel retail picture, René Riedi reflected on the tribulations being experienced across South America. The lack of international travel into the continent’s major countries due to travel restrictions and lockdowns in place across key markets such as Europe, Asia Pacific and the US, he noted, has brought forward a reliance on domestic travel to stimulate travel retail business.

He observed that Brazil’s lack of a national pandemic strategy led to a complete collapse of international traffic and its citizens being banned from entering neighbouring and overseas countries. “So what is working in Brazil is basically domestic traffic,” Riedi said. “And we also see a growing importance of bank holidays in the country and the simple fact is that Brazilians have changed the travel pattern, they book more domestic holidays, instead of going abroad.”

By contrast, South America’s second-largest country, Argentina, Riedi observed, has adopted a very strict regime towards containing the virus over the last five months or so. He said the country is now opening up its borders, primarily to other South American countries such as Chile and Peru.

He said that Argentinians being allowed to travel to the US for the holiday season represents a very positive new development. Encouragingly, data from major US airlines shows that about 95% of available advance seating capacity has already been sold.

Of the other South American countries, Riedi said Uruguay “is basically closed” into next year but countries such as Peru, Chile and Colombia are relaxing restrictions and aviation business is picking up gradually. On the international travel front, Ecuador, Riedi said, is currently the best-performing with levels currently at about -30% to -35% of 2019 passenger numbers.

Looking beyond South America, Riedi noted encouraging signs for travel activity in Mexico and, in the Caribbean, Puerto Rico. Elsewhere in the Caribbean, however, he noted that islands such as Barbados, Grenada, St Lucia, Antigua and the Bahamas continue to suffer from strict travel restrictions and the lack of activity from the stricken cruise industry.

Ending with a more positive outlook for Latin America as a whole, Riedi predicts an eventual “hockey stick-shaped recovery” for tourism. He said: ”Traffic volume will pick up as soon as travel restrictions are lifted, and, because of a catch up effect, we will see business travel, leisure and family travel picking up quite sharply.”

Overall air traffic levels will not recover to 2019 numbers before 2023, he predicted, and possibly not before 2024-2025 according to some measures, he noted. Riedi said: “The first half of 2021 will still look very much the same as the second half of 2020, we can’t expect to see a much different picture.”

He did, however, add a very positive note for the travel retail industry as a whole: “We will probably come out stronger than we have been before or where we were when we went into this pandemic. And the reason why is that we are becoming more efficient, trying to control the cash as much as possible. I think that [eventually] we will all be able to outperform whole fields in attendance, revenue, but definitely in terms of profit. That’s simply because we will be leaner and stronger.”