How Can Luxury Goods Explore Business Opportunities For Tourism?

London, July 14th - the day after the terrorist attacks in July 14th, Prime Minister Waals (Manuel) hoped that France must "learn to coexist with terrorism", which was also severely criticized for being so frank. His statement was also consistent with the many leading national security leaders in France and abroad.

According to ForwardKeys, the provider of data on global airline ticket information, Europe is the only region in the world to get fewer international flights in 2016 than in 2015, which has fallen by 2.1% since last summer.

International flights scheduled for France and Belgium fell by 11% and 23% respectively.

Similarly, Atat rk also found that Turkey's international flight reservation also fell by 31% after the attack on Ataturk Istanbul Airport Atat (RK) in Istanbul.

The "required walkway" is more important than your imagination when you take a vacation or business trip.

Bain & amp; consultancy (Bain & Company) data show that the airport

The point (real growth of 18% in 2015) is now 6% of the luxury market, while in 2015 it accounted for only 4%.

The The Anatomy of Travel Retail report released by Exane BNP (Paris The) shows that the tourism retail industry (including airport shopping malls, ferry, cruise ships, border shops and duty-free shops in Downtown) is growing at a CAGR of 8.4%, which is more personal luxury than in the past 10 years.

The average growth rate of 6% is much higher.

Luxury brands need to spread their imprints all over the world, and integrate business costs with flexibility so that tourists can serve them wherever they go.

The cost of terror

According to Marketwatch, in 2015, terrorist attacks cost the tourism retailing industry up to 8 billion 200 million dollars.

The negative impact of terrorism on tourism retail industry is likely to deteriorate this year.

Two weeks after the nice truck attack that killed 84 people: 5 passengers on the train in Bavaria, Germany, were attacked by teenage minors with a hatchet axe. A man detonated a bomb outside the Bach Music Festival in the southern German town, causing 12 people to be injured. The terrorists opened fire in Munich shopping center and 9 people were killed. Two terrorists attacked a Catholic Church in Rouen, and a priest lost his life. International travellers would no doubt be more cautious when considering European travel.

"The biggest question is whether terrorist attacks in Europe should be regarded as a" one-off "event similar to the" 911 "incident, or a sign that Europe will become more chaotic in the future.

In the past, it was basically "disposable", and the flow of tourists would return to normal after a certain period of time.

But in the latter case, there will be structural changes in visitor traffic, "Luca Solca, director of luxury banking at the Paris securities and banking department, told BoF.

"I believe everyone in the industry hopes that the government will be more effective in ensuring European security.

Up to now, the trend is not optimistic -- especially in France and Germany, "Solca continued.

As Europe's popularity in tourists has weakened, ForwardKeys data show that international flights bookings for the Asia Pacific region, including China, Australia and other tourist destinations this summer, rose 7.8% compared with the same period last year.

In fact, the overall trend of air travel is still quite positive for airport retail.

According to (World Travel & Tourism Council), the number of passengers per year has increased significantly since 2009, from 2 billion 225 million to 3 billion 440 million.

Measuring the contribution of global economic output to global tourism, it is expected to increase from 3.1% in 2015 to 3.5% in 2016.

"Tourists' destinations have changed, but on the whole, they have not stopped their journey," said David Scowsill, President of the world travel and Tourism Council.

But can brands respond quickly to changing consumer travel patterns?

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Following the ever-changing "tourist corridor"?

"I'm not sure the travel retail companies can do much about this," Solca said. "Luxury goods are highly exposed in specific cities.

About 1/5 of luxury sales outlets are in the top 10 of the world's fashion capital, "he continued.

More importantly, the vast majority of duty-free tourism retail stores can only access the "restricted area" of the airport after passing the security check, and the concession base will make concessions, usually one rent for several years to prevent rapid changes and track the trend of consumer travel.

"The length of the lease depends largely on the type of airport. Dufry, a professional duty-free retailer, has just renewed the contract with Zurich airport until 2028, so the degree of binding is very strong.

Other airports, such as the Singapore Airport in Singapore, usually do three years of contract in many places, and the turnover is much faster, which allows brands or operators to react more quickly, "said Muriel Zingraff-Shariff, former Retail Director of the retail division, who was responsible for overseeing the retail business of terminal 5.

There are so many terrorist attacks around the world that it is hard for people to make too many long-term plans.

"You can predict that you have a number of long-term (airport retail) rental contracts on your hands, and your business may be affected at a certain time and place.

But the market has entered a period of volatility, and it is increasingly unable to predict where consumers will go. "Mario Ortelli, a senior analyst at Bernstein, said:" it is important for luxury brands to spread their imprints around the world, but you also need to integrate business costs and become flexible so that you can serve them wherever you go, "Bernstein continued.

But for this channel, sales in the airport area are critical.

In the analysis of tourism retailing, Paris securities and banking department pointed out: "tourism retail mainly concentrates on airports (36 billion 400 million US dollars, accounting for nearly 60% of total retail Tourism), and the largest and fastest growing airports in the past 10 years have reached a CAGR of 10%."

The rest of the sales came mainly from the urban and border duty free shops, about 21 billion US dollars, occupying 33%.

For Dufry, DFS and other professional tourism retailers, which rely mainly on airport sales and relatively small profit margins, the threat of falling numbers of tourists in key areas and routes is not small.

"Professional tourism retail is really dependent on the flow of people, and ultimately depends on the large number of tourists per capita in the store.

As long as people begin to shrink, even at a very small scale, they will have a huge impact on operators and airport returns and revenues, "Zingraff-Shariff said.

"I think if you begin to observe the decline in the number of passengers in certain areas or airports, there are two actions for operators such as Dufry or DFS to consider: first, try to develop retail formats that really attract and capture more passengers.

If there are fewer people, try to increase the actual purchase cost of each passenger, so that the number of passengers can be reduced and balanced, "she continued.

You may not know where the passengers are going, but you know where they are from.

When I was in Heathrow, about 700 thousand people passed the airport.

Even with a drop of 2%, the amount is enormous.

In 2015, Heathrow released the latest net retail revenue per passenger, which was 6.66 pounds.

If you multiply hundreds of thousands of people, you will know that you have lost money.

You can do more promotional activities, you can try more positive pricing, and you can do more activities in stores, but you can never make up for this difference, "Zingraff-Shariff said.

However, the unforeseen trend of consumer tourism should shift retailers to outbound passengers.

Ortelli said, "you may not know where the passengers are going, but you know where they are from."

For many brands, this is where China is.

Targeting Chinese outbound tourists

"China will undoubtedly become the focus of all operators," Zingraff-Shariff said.

Indeed, in China, the new middle class who chooses to travel by air is more than ever before, and has received investment support from the government in 15 megacities airports, which have a population of over 10 million.

"The Chinese government is encouraging more people to shop in China, and there will be new airports and new infrastructure to offer new retail opportunities and continue to develop domestic tourism destinations," Zingraff-Shariff said.

As luxury retail sales in 2015 have 10% sub packages to traditional tourist destinations such as Hongkong and Macao, the overall Chinese tourists are becoming an important source of income for the luxury goods industry.

"The overall spending of Chinese consumers is growing by two figures," said Claudia D 'Arpizio of Bain consulting. "Despite the poor performance of Macao in Hongkong, tourists from the mainland to Taiwan are very optimistic.

Japan is the most important tourist destination for Chinese consumers, "she added.

Zingraff-Shariff believes that the business opportunities in mainland China are the highlight of the gloom: "tourism retailing is currently being plagued not only by terrorism, but also by network technology's erosion of its competitive edge.

Now every passenger feels that the airport should provide free WiFi, which is "stealing" the time that the passengers who were about to board the plane might spend on shopping.

Airport retail is also struggling with many other threats, which is why I say this is very interesting, because this really encourages tourism retailers to become better retailers and better understand how to turn passengers into buyers.

Investing in consumer experience and creating attractive brand products is the key to making travelers spend their time shopping.

"Like the airport environment like Heathrow 5, you will see that the outbound passengers are shopping because there is a lot of experience.

Brand choice is good.

Here's Louis Vuitton's only two store opened at the airport, "Ortelli said.

But if negative trends continue to develop, the risk of reduced revenues will also hit the bottom line of brand and airport operators.

"If the number of passengers does decrease significantly, brand and airport operators really need to sit down and take a closer look at the contracts they signed to communicate with each other: This is not conducive to sustainable development for us, and we need to reexamine these provisions."

Zingraff-Shariff said.