‘Destination 2027’ – Dufry’s new direction
We report on the four pillars of an updated strategy revealed last week by Dufry, plus the company’s views of the travel market and the new consumer.
On 6 September Dufry unveiled its updated company strategy – dubbed ‘Destination 2027’ at a much-anticipated Capital Markets Day in London.
The strategy is focused on four pillars: launching a Travel Experience Revolution, Geographical Diversification, creating a Culture of Operational Improvement and, connecting the other three pillars, ESG as a defining ambition. Dufry described ESG as a “strong lighthouse” for the group’s day-to-day business, providing a source of inspiration of what to do best for customers, employees and the world at large.
In setting out its strategy, Dufry said that the “addressable market” in which it will operate – Including its planned business combination with Autogrill – is valued at US$115 billion a year, based on duty free, other airport retail and F&B sales (2019 figures). The size of the travel F&B channel Dufry puts at US$28 billion a year (2019).
Dufry CEO Xavier Rossinyol said the core of the new plan was around ‘making travellers happier’. He added: “This is an idea we have been thinking about a lot. Happier travellers will yield higher consumption and higher revenues for Dufry. We are in a fantastic market with very good fundamentals, it’s resilient and is recovering fast.”
Xavier Rossinyol: “We are in a fantastic market with very good fundamentals. It’s resilient and is recovering fast.”
Dufry offered a positive but evolutionary context on the state of the aviation and travel retail sectors. “The airport travel market has proven to be a resilient and attractive space, showing a strong rebound after the COVID crisis,” it said. “Passenger volume is bound to resume growth in line with the historical trajectory, after a steady acceleration of demand over the past six months.”
Passenger traffic worldwide, it noted, is estimated to reach 2019 levels by 2024, with varying speeds by geography. Airline travellers will continue to be an attractive demographic, Dufry added, with the number of trips rising as GDP per capita increases across many markets.
With this as a positive platform, the airport retail market is expected to reach pre-COVID levels by 2025 according to Dufry’s modelling.
Addressing that consumer base, Dufry said new travel ‘personas’ are emerging that demand new experiences and a different value proposition. Generation Y and Z, for example, will represent 70% of the market by 2025, compared to 40% in 2019 (more on this below).
Travel patterns are also changing, Dufry noted, characterised by a stronger rebound of domestic and short-haul routes, an increasing share of the market for low-cost service, the acceleration of leisure versus business travel, and a different mix in the origin of international travellers during the path to full post-COVID recovery.
Pent-up leisure demand has driven the rapid travel recovery to date, and said Dufry, customers are using their ‘long-term savings’ to spend on missed trips over the past two years. Domestic and regional travel remains popular compared to long-haul for now.
While the fundamentals of the market are solid, the industry is experiencing a significant shift in consumer behaviour and in travel patterns. Consumer demographics have changed, bringing about, among other things, a stronger demand for personalised experiences, a greater influence of online media in purchasing decisions, and stronger interest for sustainable, healthy, eco-friendly products, said the retailer.
Sales influenced by online channels are estimated to rise from 10% in 2019 to around 30% in 2025. Amid the Chinese government’s drive to retain traveller spend at home, the share of Chinese luxury shopping within China will hit 50% by 2025, compared to 33% in 2019, said Dufry.
With an eye on its expansion into food & beverage, Dufry said that consumers are now more driven by principles such as health & wellness – food that suits their lifestyles today – sustainability and enhanced transparency. In retail, there is higher demand for local products and for wellbeing and eco-friendly goods, the company added.
The travel market is changing in other ways too, said Dufry.
From operational disruption and staffing challenges driven by the accelerating passenger return today, Dufry predicted a more “seamless airport of the future” in a few years with the evolution of airport operations and digital systems.
Crucially, argued Dufry, using pre-COVID traveller segments as a basis to predict future behaviour has limited value. Previously these were based on travel needs and demographics. In future, new travel personas will be identified through “social media listening”. Trending topics noted by Dufry through its research include “brain boosters in F&B, sensory retail experiences and regenerative [rather than sustainable] consumption”.
Its updated research has identified three new personas: Working Wanderers, Experience Seekers and Young Explorers.
Characterising each, Dufry said of Working Wanderers that “remote schooling and work are freeing families and professionals from homes, providing an opportunity to fulfil travel dreams and career aspirations”.
Of Experience Seekers it said: “Curated travel deals are catching the attention of consumers who look for premium, personalised experiences.”
Of Young Explorers it noted: “Tech-savvy, disruptive young travellers seek travel experiences providing social, meaningful, joyful moments without neglecting sustainable or ethical values.”
Destination 2027 is designed to cater to the needs of such ‘new’ travellers, and continue to lead what it dubbed the ‘travel experience space’. Summarising its goals, Dufry said it aimed to “revolutionise the travel experience by addressing evolving consumer trends, driving spend per passenger and responding to the changing needs of airports”.
In the pages ahead we assess each of the pillars of the new strategy in more detail.
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