x Abu Dhabi, UAETuesday 25 July 2017

Region is duty-free bright spot

The Middle East is the only region to post an increase in duty-free sales for the first half of this year.

Duty free shopping continues to draw consumers in the Middle East.
Duty free shopping continues to draw consumers in the Middle East.

The Middle East is the only region to post an increase in duty-free sales for the first half of this year, while most of the world suffered double-digit losses, according to an independent industry research firm. Yngve Bia, the president of Generation Research, based in Sweden, said global travel retail sales in the first six months of this year fell 7.4 per cent compared with the same period last year, to US$19.9 billion (Dh73.09bn) from $21.5bn.

But sales in the Middle East rose by 2.6 per cent in that same period, partly driven by growing passenger traffic and local investments in travel and tourism infrastructure, Mr Bia said. "The Middle East, they have been capturing market share for the past 10, 15 years," he said. "But now it's quite remarkable that one region in the world has managed to record an increase when the rest of the world has suffered."

Travel retail sales in Europe and the Asia-Pacific were the worst hit, with falls of 17.4 per cent and 18.9 per cent respectively. In Africa, sales dropped 15.6 per cent, while in the Americas the numbers fell by 8.2 per cent. Dubai Duty Free, at Dubai International Airport, held on to its title of number one retailer in the world based on total sales in the first half, Mr Bia said. The airport retailer, which accounts for 60 per cent of all duty-free sales in the Middle East, sold $1.1bn worth of merchandise last year.

From January to August 18, sales at the retailer were on track with last year's figures, said Colm McLoughlin, the managing director of Dubai Duty Free. Sales had fallen 4 per cent in the first five months of the year, but began to recover afterwards, Mr McLoughlin said. They were up 6 per cent in May and June, and up between 7 and 8 per cent last month, he said. Sales from January to August 18 this year totalled Dh2.4bn, down just 0.8 per cent from Dh2.41bn in the same period last year, Mr McLoughlin said.

The relatively strong sales stems from the increase of passengers, with traffic through Dubai airport up 6 per cent from January to the end of July, he said. Mr McLoughlin said he expected Dubai Duty Free to keep its title as the top-selling travel retailer, with a sales increase of 5 per cent over last year. "Given that our sales are almost on par with 2008 figures, I am confident that the same will hold true by the end of the year," he said.

"The duty-free business in the region is doing well, which is encouraging for the industry as a whole." Duty-free retail in Abu Dhabi is also growing, with sales from January to the end of last month up 5.8 per cent compared with the same period last year, said Dan Cappell, the vice president of non-aeronautical revenue and business development at the capital's airport. That was despite two months when passengers arriving in Abu Dhabi's new terminal 3 had to bypass the duty-free shops because of construction, Mr Cappell said.

Terminal 3's new retail wing, with 2,600 square metres focusing on luxury and boosting the airport's total duty-free area by 38 per cent, opened in April. Mr Cappell expects the growth to continue, and is optimistic that passenger growth at Abu Dhabi's airport will average between 8 and 9 per cent each month for the rest of the year, he said. Mr Bia expects the remainder of the year will be tough for the rest of the world's duty-free and travel retailers, and sales will not hit last year's levels of $37bn.

"I think they will be about $2bn behind, which means a decrease of about 5.5 per cent," he said. "We will see an improvement in the second half, but that's comparing it to an extremely poor fourth quarter last year." aligaya@thenational.ae