ARI aims to sustain ‘Brexit bounce’ to duty free sales at Irish airports

Ireland had one of the longest and strictest lockdowns of any society in Europe through the pandemic, with overseas travel heavily restricted – apart from several months last Summer – from March 2020 through to July 2021. The rebound in spending at Dublin and Cork airports since then is not altogether surprising, as pent-up consumer demand is unleashed after a lengthy lull. That demand is also being fuelled by the introduction of a duty free regime between Ireland and the UK (since 1 January) that has driven liquor sales in particular, with an enhanced four-litre allowance stimulating additional business. And there’s plenty of potential to build on this early progress. Passenger traffic at Dublin Airport reached 40% of 2019 levels just last week, growing steadily from a low base since restrictions on non-essential travel were lifted on 19 July. Volumes now are forecast to reach 50-55% of pre-pandemic levels by year-end, which would be encouraging progress, but the high of 32.9 million passengers in 2019 remains a long way off. For Aer Rianta International (ARI), the combination of returning traffic, consumer demand for shopping and the new-found value in duty free to the major destination market, the UK, have been paying off over recent months. ARI Director of Retail Ireland Paul Neeson says that liquor in particular is showing “spends significantly above overall growth”. He tells The Moodie Davitt Report: “Brexit has driven the duty free business on UK routes in a big way since 1 January. But there are other factors too. Gifting is one of them. Pent-up demand has been huge and people who have flown overseas have used the opportunity to buy for their loved ones, and spent at levels they had not done before. “Another factor has been our strong campaigns. We have the UK going duty free, we have a four-litre allowance on liquor, so our -20% off key lines in liquor has had a big impact. “We have a €13 duty free price to the UK on entry level spirits, ranging from Smirnoff to Captain Morgan to Gordon’s gin, which has proved very strong. They are headline products across those categories. In Ireland taxation on alcohol has always been a challenge. People measure value not so much by what happens overseas but by what they see every day. And when many supermarkets are selling their alcohol at single-digit margins or as loss leaders, it has a negative impact on value perceptions of the airport – especially at times like Christmas for example.

Paul Neeson: Duty free pricing and a wider alcohol allowance have fuelled a Summer spending surge

“Now with duty free returning we have pricing on larger bottles that is better than the supermarkets can ever do, so that is positive.” But, he adds, shoppers are also trading up to more premium categories too. “We have seen the effect [of duty free and more generous allowances] on the likes of Redbreast, other Irish whiskies and premium gins, sales of which have been lifted by people who are trading up. “We maintain a broad range, and those spends have become so significant that we are having to forecast more and more with the brands for future demand, especially on those premium Irish whiskies.” The Ryanair traveller, which dominates traffic and spends in T1 as travel has returned, has played a vital role – and even US travel has played its part, though Irish people cannot fly there yet. Neeson says: “London has always been our number one route and still is, followed by New York, and then it’s a combination of Amsterdam, Malaga, Faro and Chicago. The US is delivering some of our strongest spends. Even though Irish people cannot travel there, Americans are coming here and are purchasing really significantly, way above anybody else. The Ryanair impact in particular has been amazing. Last week we were at 96% of comparable 2019 sales from Ryanair passengers, driven mostly by the UK.”

And that has benefited duty free and the overall business. In 2019 just 21% of departing passengers could purchase duty free. That figure has rocketed to 39% (year to date) with the addition of the UK, but will come closer to 50:50 as more US and Middle East flights return, according to ARI. The company says that its value marketing message is therefore now relevant for a much wider audience.

Neeson says: “Previously the challenge on liquor was that the value message was not easy to communicate, especially as you are selling to many travellers going to southern Europe, where duty paid spirits are so cheap. But even among those travellers we have seen spends rising as they are treating themselves and are happy just to be flying again.” With travel still rebuilding, and the duty free message a relatively new one, many shoppers still don’t realise the savings they can make – something ARI has been working on relentlessly. “Awareness of the duty free aspect and of the higher allowance is rising with our messaging and staff talking to passengers, and that value message will continue to be important,” says Neeson. Marketing Manager Nicola Lindsay adds: “We have been consistent in our campaigns, leveraging insights from teams and customers – and most of all being flexible. A good example was our Summer campaign. We saw customers wanting to treat themselves so we adapted to that, and kept the value message high on the agenda.” Business has not only been strong in spirits: fragrances have outperformed as a category too since the return to travel.

“The fragrance market has exploded well beyond the overall trend,” says Neeson. “Across the board in beauty what we see is that those brands that have reintroduced Brand Ambassadors are performing well above the rest of the market. That does have an impact. “Makeup has not performed as well – Dublin was previously a high performing market for many brands – but we have seen that with cutbacks among the brands, newness is no more than half of what it would have been in the category two years ago. So brands as well as retailers have cut ranges, and makeup has been a casualty. But we’ll review that and I’m sure in time our makeup ranges will creep up again.” The other challenge for that category is that the retailer cannot test products (tasting has begun on liquor since July). A key date is 22 October when Ireland plans a wider relaxation of COVID protocols, with more options hopefully emerging to sample in-store. Neeson says: “What we do know is that people are willing to engage with and talk to staff. There’s excitement about returning to the airport – and our staff get a buzz out of this too.” The challenge now is to keep the momentum going once more travellers return. “To date, our spends have been phenomenal, and are holding up even as passenger numbers increase,” says Neeson. “We thought they might taper off but they are significantly higher than they have been before. “I cannot underestimate the role of staff in this. We were lucky in that we only closed for around four weeks, which was very difficult for everyone. But we traded the rest of the time., There were some lousy days, with hours between flights, and there’s only so much cleaning of shelves you can do. But our team have been brilliant. They looked out for each other, for the customers, and how they have emerged from this has made me very proud. If you ask me, keeping open and engaged with the team has been the biggest thing we have done through all of this. If you have a really mobilised team, they are worth their weight in gold. “Now it’s very much about maintaining the momentum. We will be engaging with the travellers as more of them return. People have a bit more time now. They are coming earlier as there is still some uncertainty about the airport process, but also are relaxing and are excited as they are maybe making their first trip away. So we are seeing the benefit of all of those things, and we have to maximise that in the period ahead.”