UAE’s Airport Retail Industry Rakes In Revenues

With airports in Dubai and Abu Dhabi recording stellar growth in passenger traffic, the country’s airport retail sector has been cashing in.

Dubai and Abu Dhabi International Airports have now emerged as regional hubs for international travel, and their respective duty free outlets are swiftly expanding operations.

Dubai Duty Free (DDF) announced a 13 per cent increase in sales with a turnover of Dhs3.2 billion during the first half of this year. The retailer’s first quarter sales touched Dhs1.6 billion ($438 million), up 12 per cent over the same period last year.

Sales in Dubai airport’s Terminal 3 – dedicated to Emirates operations, rose by 19 per cent and accounted for 61 per cent of the retailer’s total turnover in Q1. However, the average-spend of passengers in Terminal 1, which accounts for 31 per cent of sales, was higher. Sales in Terminal 2 also increased by 22 per cent for the first quarter, DDF said.

“Sales in DDF have continued to grow year-on-year and we expect the sales to touch $1.8 billion this year, an increase of 12 per cent,” said Colm McLoughlin, executive vice chairman at DDF.

DDF’s counterpart Abu Dhabi Duty Free (ADDF) too has been reporting strong revenue growth figures in 2013. According to ADDF, sales increased by Dhs108million to reach Dhs437.6 million in the first half of this year, up 17.4 per cent from last year.

ADDF’s revenue growth even exceeded the 12.6 per cent rise in passenger traffic registered in the Abu Dhabi international airport during the first half of this year.

Both the airport retailers have said that the growth in sales is directly linked to the increased number of passengers transiting via the airports.

Gavin Mckechnie, vice president, commercial at ADDF, also attributed the growth in revenue to rising spend per passenger(SPP). The retailer’s SPP increased from Dhs53.96 in 2012 to Dhs55.10 this year, a 2.1 per cent year-on-year growth.

“Since we began operations in 1983, our sales have doubled six times,” said DDF’s McLoughlin. “The sales per head has grown from $5 per head in the beginning to almost $50 per head of departing passengers.”

Thriving Luxury Market

Both ADDF and DDF house several luxury brands that witness strong demand from customers, said airport retailers.

The retail space in the Abu Dhabi’s airport boasts of luxury brands such as Emporio Armani, Burberry store, Jimmy Choo, Hermes, Bvlgari, and Pure Gold.

Mckechnie said that the luxury market has always been a really important sector for the Abu Dhabi airport.

“We have recently doubled the size of our Burberry boutique in Terminal 3 as well as adding a brand new Emporio Armani to our portfolio of over twenty standalone luxury boutiques,” he said.

McLoughlin said that luxury retail at DDF too has been growing, driven by the Asian consumers, especially travellers from China.

“Last year, Chinese passengers accounted for four per cent of traffic at Dubai International Airport but their spend accounted for almost 12 per cent at DDF showing that they are the biggest consumers of luxury goods in particular,” he said.

Other products that saw a strong demand at the duty free outlets are gold, perfumes and liquor.

“Perfumes showed strong growth with sales increasing 18 per cent to Dhs496 million ($136 million), while gold retained its third position showing an increase of 13 per cent to Dhs322 million ($88 million),” said McLoughlin.

“Sales of Tobacco were up by 13 per cent to Dhs269 million ($74 million) while confectionery was up by 15 per cent to Dhs258 million ($71 million) accounting for eight per cent of total revenue for DDF.”

Mckechnie also said that gold was a top performer in ADDF along with products like fragrance, tobacco and liquor. The airport’s Pure Gold jewelers store recently reported an increase of 32 per cent in gold sales during the first half of this year. Overall jewellery sales including diamond, pearl, and silver grew nine per cent.

Bright Future

Both the major airport retailers see increased demand for retail space in their respective airports.

“We are currently redeveloping Terminal 3 to allow us to bring in more brands,” said Mckechnie.

“The demand is so great we are even expanding our land side operations in Sky Park Plaza. In 2014 we will be going to the market for retail space in the new Midfield Terminal which will have around 30,000sqm of commercial space.”

Currently, ADDF and DDF do not sell or lease out their retail spaces to brands.

Mckechnie said that ADDF invites proposals suggesting a concept and a financial offer for Abu Dhabi Airports Company that consists of an agreed percentage of sales and a minimum monthly guarantee.

DDF handles the retail through its own stores, working directly with suppliers.

“We do have hundreds of suppliers with whom we work closely to ensure that we have the right products at the right time and price,” said McLoughlin.

“There is a huge demand for additional space by new or existing suppliers, so we have to manage this effectively.”