Business at the airports is recovering only slowly

This has far-reaching consequences for airports and manufacturers of luxury products or cosmetics: on average, the travel retail business accounts for ten to 15 percent of airport revenues, which are increasingly becoming shopping temples with transport connections.

Smaller airports in particular make more money with shopping and gastronomy than with airline payments. Even for larger airports, the perfume, tobacco and whiskey business is an important item. In addition to a fixed rent, airport operators also share in the sales. The company Fraport, which operates the largest German airport in Frankfurt, achieved almost 320 million euros in 2021 with the travel retail business – 60 percent of the pre-crisis level.

There are no affluent Asian passengers

Business at airports is also important for branded companies, especially in the luxury segment. The luxury brand of the consumer goods manufacturer Beiersdorf, La Prairie, generates 25 percent of its sales at airports. Products from Hermès, Chanel – or L’Oréal are also seen as strong in sales. “The travel retail business is like a sixth continent for us,” says the Paris headquarters. The cosmetics giant sells 24 brands at the airport, 20 of which are luxury products.

Airport boutiques have been hit as hard by the pandemic as aviation as a whole. Because hardly any planes took off during the first lockdowns, nobody shopped in the shops behind the security checkpoints. In 2020, business collapsed by 73 percent, ETRC figures show. In 2021, the minus was still almost 60 percent. In the fourth quarter in particular, business ebbed away again because of the emerging Omikron variant.

An indicator of how the industry is doing is the Gebr. Heinemann company. With hundreds of airport shops between Oslo and Sydney, Hamburg is one of the market leaders in airport shopping. The family business hopes to achieve 75 percent of the pre-crisis revenues again this year. Sales picked up in the second quarter in particular.

The situation is similar with the Swiss duty-free giant Dufry. The company with around 2,300 stores in 65 countries also reports increasing sales, but was still around 40 percent below the pre-crisis level in the first quarter.

>> Read more: Profiteering from the travel chaos: Gebr. Heinemann is selling more duty-free goods again

What clouds the picture: There are no affluent and high-spending customers from Asia and especially China at the local airports because there are still strict travel restrictions in the Far East. This group spends about three times as much money at the airport as Europeans, reports Raoul Spanger, Co-CEO of Gebr. Heinemann.

best customers

126

Euro

is what each passenger from China spends on average in shops at Munich Airport.

Western branded products are held in high esteem in Asia. Customers prefer to buy them in Europe because the goods are then considered to be particularly authentic. Every passenger from China spends an average of 126 euros at Munich Airport.

The second largest German hub plays a special role. The airport operates a large part of the shops and restaurants itself via subsidiaries. From Munich it is said that, in addition to customers from Asia, travelers from Ukraine and Russia are also missing due to the war. The passenger volume in Munich is currently 25 percent below the pre-crisis level – also because airlines are currently canceling many flights and fewer potential customers are coming to the airport. Lufthansa alone canceled 12 percent of flights this year.

Fewer customers than before Corona – but they buy more

What is currently making up for the lack of passengers to a certain extent: “Customers spend more at the airport, they want to enjoy their regained freedom,” says Jan-Henrik Andersson, who is also responsible for the shops in the management of Munich Airport. “That helps us to partially compensate for lost sales.” Gebr. Heinemann even notes that buyers spend on average just 20 percent more than before the pandemic.

The airport business also compensates for part of the lack of income with the luxury segment, in which the margins are significantly higher. In addition, this offer serves a wealthy clientele. In the luxury sector, demand is even higher than before Corona, reports a Fraport spokeswoman. Although the range of shops at Munich Airport is 20 percent lower than in 2019, luxury brands are returning there in greater numbers.

In the long run, however, consumerism and demand for luxury will not replace the missing passengers. “The effect of the additional expenditure per passenger is temporary,” says the industry association ETRC. Inflation is likely to further dampen the willingness to buy. In addition, passengers who stand in line for hours at the security checkpoint may lose interest in shopping.

But a coffee is apparently still in it: At the airport in Frankfurt, sales in the catering sector have developed disproportionately to passenger growth, according to the operator Fraport. In some cases, the revenues would be above the pre-crisis level. In Munich they are still 14 percent below.

Cosmetics account for 40 percent of sales

The family business Heberer runs around 200 branches of the Wiener Feinbäckerei nationwide, the most profitable of which are in Frankfurt Airport. “We’re selling more sandwiches, pretzels and coffee again,” says entrepreneur Georg Heberer.

On average, European customers buy two to three products in airport shops. According to the industry association ETRC, mainly cosmetics. These account for almost 40 percent of sales. Alcoholic beverages make up 18 percent, tobacco stands for 17 percent. “Our typical consumers travel twice a year and see airport shopping as part of their vacation,” the association says. It’s mostly impulse buying.

Since duty-free shopping within the EU was abolished in 1999, shopping at the airport has hardly been cheaper than anywhere else. In order to distinguish it more clearly from traditional retail, airport shelves contain perfumes with scents or in sizes that are not available in drugstores. Providers are increasingly opting for more exclusive and high-quality products.

The prospects for the travel retail industry are subdued: It is not likely that sales will have reached the pre-pandemic volume again until 2024 – and then only increase marginally. This is the result of a study by the management consultancy Bain. Industry experts also count on it.

A cognac vending machine becomes a money machine

The Bain consultants see the development of profits as even more drastic: they assume that pre-tax profits last year were only 20 to 30 percent of the 2019 level. In the coming year they could then reach 70 to 80 percent.

According to the authors of the study, retailers at airports are facing the greatest upheaval in their history: business travelers and Chinese tourists in particular, i.e. those customers who have mainly bought luxury goods up to now, will stay away permanently.

In addition, generations Y and Z will account for half of the customers in a few years. They have other wishes when shopping, such as linking stationary business with digital elements. For example, L’Oréal is introducing virtual tools at more and more points of sale to make it easier for customers to find the right make-up color.

According to Bain, customers at airports will in future be more likely to be looking for experiential offers than expensive products. The first providers are experimenting with it: the cognac brand Hennessy has tested a machine at Paris airport where customers can compare the smell of different varieties. Apparently with success: The offer is now to be extended to other airports.

Cooperation: Katrin Terpitz

More: 6000 flights canceled – why a Lufthansa board does not see a quick end to the flight chaos