The opening of international flight routes is good news for luxury airport and duty-free retailers, but leading duty-free operators say full recovery won’t come until Asia reconnects with the rest of the world.

In any case, duty-free shopping is booming on the Chinese tropical island of Hainan. Driven by an enhanced duty-free shopping policy, sales are expected to double in 2021 for the second year in a row. During the peak Chinese New Year period (February 11-17), they topped €153.5 million.

Leading duty-free operators Lagardère, Dufry and DFS are all benefiting from the Hainan boom, but the island stands out as a rare beacon of hope during an ongoing pandemic that has been catastrophic for the sector.

“For the short term, we are likely to see two broad travel destinations emerge, Asia versus the rest of the world,” said Benjamin Vuchot, Chairman and CEO of DFS Group.

Vuchot acknowledged that much of the industry focus has been on Hainan, but DFS also reports growth in other hotspots, such as its downtown Okinawa Galleria store.

Vuchot said: “We are closely watching Hong Kong and are hoping that the China-Hong Kong border restrictions might be lifted in the next few months as the COVID-19 situation in Hong Kong comes under control. We are also monitoring travel bubbles being discussed within APAC, especially to key destinations such as Australia, New Zealand, Singapore and Hong Kong.”

Pre-pandemic, airport stores were one of the fastest-growing retail channels for luxury brands, but revenues evaporated overnight when COVID-19 struck. Luxury retailers in airports across Europe remain firmly shuttered. A fast rollout of vaccines in some countries and a tentative resumption of international travel within Asia suggest an end is in sight, although time frames remain unclear.

Few operators or analysts predict a broad recovery this year. A piecemeal resumption of travel is likely to cause significant challenges, particularly in making sure the right assortment is in the right places to capture any increased demand. 

Dag Inge Rasmussen, Chairman and CEO of Lagardère Travel Retail, a brand partner for Gucci, Hermès and Burberry, says much will come to good planning: “We’re in 40 countries and we have strong local management and they know what is happening so we’re very close to the markets. However, for some products – and luxury is obviously among them – you cannot just order and have the order come the following week. We have to have some macro-planning.”

Some potential hotspots for duty-free sales are emerging. Within Europe, London could be an early beneficiary.  Olivier Ponti, Vice President, Insights at ForwardKeys, says: “Data shows that the most popular city pairs for first class and business class tickets booked this summer include many US-to-London routes, despite booking levels being significantly down on last year. US to Mexico routes, such as New York and Houston to Cancun, are showing growth. The expectation within the industry is that the first wave of summer tourists are likely to skew higher income than usual.”

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