Global airport retail sales are forecast to reach $48.2bn in 2020, up 6.1% on 2019, but the escalation of the severity of coronavirus could now have a detrimental impact on airport passenger numbers – causing concern for airport operators and retailers.
Asia Pacific is forecast to be the fastest performing region for airport retail spend in 2020, with sales rising 8.4% to $21.7bn – 45.1% of the global channel. While this recent outbreak cannot yet be compared to the impact of SARS, if the coronavirus continues to spread globally over the course of 2020 its impact on tourism and economies, particularly across APAC, could be severe.
Back in 2003, SARS caused tourism spend in China to collapse while visitor numbers to the likes of Thailand, Malaysia, Singapore and Hong Kong significantly dropped off causing airlines to ground planes and reduce flight schedules. While just a short term hit, the coronavirus has already dented retail and leisure spending across the Chinese New Year holiday due to consumers being encouraged, and in some cases forced, to stay in and avoid travel. In response to the crisis, retailers are considering closing stores, with the China Duty-Free Group closing its mall in Haitang Bay – impacting the APAC duty-free market in 2020. Should foreign offices extend their advice of avoiding travel to the Hubei province to other regions, then passenger numbers and airports in tourism hubs such as Beijing, Shanghai, Chengdu and Xi’an will be negatively hit.
Despite the economic slowdown in China, the US-China trade war, the Hong Kong protests, and the cold war between Japan and South Korea already impacting tourism levels and domestic travel in APAC, the airport channel is heavily reliant on the region, especially China, as growth in the US and Europe is more challenging to achieve. APAC will be the second-fastest-growing region after MEA over the five years to 2024, but in value terms, it will make the largest gains – an increase of $9.8bn. Favourable demographic profiles, the performances of economies, consumer desire to travel, and continued investment in airport infrastructure will support a rise in passenger numbers (+6.4% in 2020, pre coronavirus breakout) and airport channel growth. Therefore, unforeseen inhibitors in APAC, such as the coronavirus, can have a significant impact on the growth forecasts for the channel globally.
The prevention of travel for Chinese consumers will impact the performance of airport retail worldwide. Over the last few years airport retailers, especially those in Europe, have tailored their propositions, integrated Chinese payment solutions and invested in Mandarin-speaking staff to target Chinese passengers and maximize sales growth opportunities. If outbound tourism from China suffers as a result of coronavirus, airport operators and retailers must adapt their strategies to target other passengers.
The 2020 Olympic Games in Tokyo should provide a significant boost to airport retail in Japan, but also neighbouring countries as visitors tour the APAC region. As seen with previous Olympics, we would also expect to see a halo effect with 2021 and 2022 also benefiting from the games. However, controlling the spread and severity of coronavirus over the next two months is vital to ensure this event will still attract international visitors and achieve the forecasts produced pre-breakout.