Presentation on theme: "Travel Retail Evolution: A look into the next decade"— Presentation transcript:
1Travel Retail Evolution: A look into the next decade MaltaNovember 2012
2m1nd-set # 1 in Travel Retail Research & Consulting Based in Vevey, SwitzerlandTailor Made Research for Brands, Operators & AirportsResearch Partner of TFWA, APTRA, MEDFA1st in Travel Retail Research (2001)1 Mio Interviews with travellers at 80 Airports Worldwide
3Exclusive Research conducted for DFNI Conference: 1’045 interviews with international travelers(about future needs & expectations)16 in-depth interviews with Travel Retail experts(about market development & trends)Desk Research
4Key projections of air traffic in the next 10 years
5Projections of Air Traffic Air travel has proved to be resilient to external shocks the last 40 years:2 Oil CrisisGulf CrisisAsian Crisis9 / 11SARSFinancial CrisisWorld air traffic has doubled every 15 years ( / )World Annual traffic has grown almost 50% between(despite 3 crisis)
6Projections of Air Traffic Expected average world annual traffic growth: 4.8%Global Air Travel will probably nearly double again in 15 years(despite potential crises)
7Projections of Air Traffic Main drivers for future air traffic growth:Increasing urbanization driving wealth and traffic growthContinued growth of LCCs, especially in S. America, M.E., Africa, AsiaTourism development (1 Bio tourist today, 1.6 Bio tourists in 2020)
8Projections of Air Traffic People around the world expect to fly much more in 2020 (infrequent flyers nearly the double amount per year, or for the first time), because of the following reasons:economic growth - flying becomes affordablea desire to see more of the world(in 2020, 750 Mio people will be 65+, and 2/3 want to travel)the need to see friends and family spread across the globe(250 Mio people will live abroad in 2020)greater flexibility between home and the workplaceglobalisation of business
9Projections of Air Traffic Main regions impacting future air traffic growth:Dynamic growth in emerging markets – population and economicsStrong continued growth in N. American and European marketsExpanding global middle class, especially in Asia
10Projections of Air Traffic The emerging economies drive strong travel growthGrowth in prospensity to travelChina:2 x in 10 yearsIndia:2.5 x in 10 years
11Projections of Air Traffic Shift of ProportionsTraffic within or between emerging markets will grow much faster
12Projections of Air Traffic in the next 10 years Current share of global air traffic Annual future averagegrowth per region
13Projections of Air Traffic Global “Middle Class” expected to grow most
14Projections of Air Traffic World Network evolution
15Projections of Air Traffic Traffic is broken down from macro flows to city pairs and routingsLyon
16Projections of Air Traffic The share of long-haul flights will increase most over next 10 yearsLong-haul traffic will remain highly concentrated on the Mega-hubsFuture top 20 hubs
17Projections of Air Traffic The 19th Century was dominated by EuropeThe 20th Century was dominated by North AmericaThe 21st Century will be dominated by Asia10 years from now, half of the market will be new markets,and primarily in Asia
19LCC – a threat or an opportunity LCC concept started 40 years ago and is growing and growing…LCC carrier shares will continuously increase, not only intra-regional, but also inter-regional.Most likely, there will be several acquisitions and mergers and only a small number of very extensive low cost airlines will be left
20LCC – a threat or an opportunity But, there will be a limit to growth due to LCC concept because of the following impacting factors:Environmental (Rules, Limitations)Economical (Oil prices, CO2-regulations)Political (Regulations)Social (Customers expectations)
21LCC – a threat or an opportunity Worldwide LCCs currently have a 24% market share.The biggest impact has been on the European market, where market share has grown from 9% to 39% in the last decadeGlobally, the LCC share is expected to be around 45% in 10 yearsCurrently 25% LCC share in Asia, probably around 40% in 2022Currently 40% LCC share in Europe, expected around 50% in 10 years
22LCC in figuresTotal passengers numbers across low-cost carriers in 2010 jumped 15.7% to 640 Mio, while passenger load factor grew nearly three points to 80%.OVER THE LAST FEW YEARS, LOW-COST CARRIERS IN ASIA HAVE BEEN RAPIDLY EXPANDING and steadily eating into the market share of full service carriers.Low-cost operations still account for only a small proportion of the region’s aviation activity relative to other regions. However, the overall market in Asia is also growing much faster than other regions.The total Asian passenger market is expected to reach about 900 million passengers (excluding China) by 2020.
24LCC – a threat or an opportunity LCC travelers are coming from all social backgrounds and increasingly from a wider range of geographical destinationsThreat: Continue positioning Duty Free shopping only as luxury goods shoppingThreat: Offer little products for immediate consumptionThreat: Keep Duty Free shops far away from departure gatesThreat: Do not link products to usage at destinationsOpportunity: adapt Duty Free concept to secondary airportsOpportunity: attract not committed duty-free shoppers, by offering fascinating convenience or impulse productsOpportunity: offer continually refreshed product lines that helps to attract even the most jaded consumers
25LCC – a threat or an opportunity when shopping TR RegularMore positive emotions:ExcitementSense of changeLiberationPositive anticipationProudness (exclusivity of flying)More neutral & negative emotions:Purpose of trip is dominantOften stress due to work obligationsAway from familyDelays can cause serious problemsArrive at airport just before departureOpen to explorationWilling to spend more time airsideBehaviour dominated by routineAirport shopping as part of trip
27Travel TrendsFuture Travel & Travel Retail shopping is increasingly about depth rather than breadth of experience. Technologies such as increased reality and smart mobile devices will transform the travel experience:Automatic transit: Checking-in could become the exception rather than the norm, with the rise of faster and more efficient identity management systems. Chips, biometrics, long range fingerprinting and near field communications can be deployed in a more integrated way to fast-forward how people move aroundPayment with memory: All data on payments made before and during a trip will be integrated, acting as a digital memory of expenditure and activity for individuals, groups and travel industry operators.Intelligent recommendation: As technologies make it easier for people to tag and review all aspects of travel experiences, travelers & Duty Free shoppers will be more influenced by peer groups and expert curators.
28Travel Trends THE WELLBEING AGENDA Taking the stress out of travel: The wellbeing agenda and changing demographics will place greater emphasis on removing travel stress.Intelligent luggage tags and tickets will give greater reassurance whilst mobile-Health applications will allow travelers to manage and monitor their health and wellbeing as if they were at home.The business tourist: Continued emphasis on work-life balance and wellbeing at work may see the rise of the business tourist which will demand speed and efficiency as well as a home-away-from-home.
29Expected future role of Duty Free shopping for airport operations
30Expected future role of Travel Retail for airports The non-aviation business will become increasingly important for airports, because the profit margins are (and will be even) higher.Airports aim to achieve 50% of revenue from non-aeronautical sources, with retail representing the main source.However, Travel Retail will become more complex and diverse to offer a new value proposition.Overall, the complexity of non-aviation opportunities as well as the uniqueness of airports will lead to a large variety of which non-aviation areas will grow.
31Expected future role of Travel Retail for airports AirtownsPast:Transport InfrastructureFuture:Place for shopping, meeting, socializing, entertaining etcAdapted products & services according passenger mixStandard Offer
32Expected future role of Travel Retail for airports Airports will need to become more creative to differentiate themselves from increasing competition (domestic, other airports, internet etc).The are basically five key non-aviation sources:Travel RetailServicesFood and beveragesParkingPassenger accessTravel Retail is e.g. 25% of non-aviation net income at 6 BAA airportsTravel Retail and Services will gain importance over the next 10 years, since the other sources have mostly reached their limits
33Expected future role of Travel Retail for airports Key RegionsCurrent positive spending mainly from Chinese, Russian and Brazilian travelers.It is predicted that Chinese spending will explode even further in the mid-Pacific and on the US West Coast if the US decides to adopt a no-visa policy for this travelling group in future.
34Expected future role of Travel Retail for airports Source: Generation Research
36General consumer trends Travel Retail will need to offer more products adapted to the more complex and sophisticated individual needs of passengers.Travelers will expect products tailored to their ethnic and cultural backgrounds.Brands will need to make people feel good about what they buy, offering products that not only look and feel good, but also do good and contribute to the society and the environment.Source: m1nd-set
37General consumer trends People will be looking more for unique and special (travel related) products when travelling compared to downtown shopping.Travelers will expect more innovations of products in the airport environmentAirport shops should be able to transfer dreams into reality due to unique mind-set of human being when travelling
38General consumer trends Future:Duty Free = Opportunity to meet & get to know innovative & value added products & servicesPast:Duty Free = Price Savings
39Trends in airport retailing Airport shops will receive more space at airportsMore arrivals shopsShops will be closer to passengers (walk-through + gate shops)
40Trends in airport retailing Retail Surface DevelopmentCurrently, in major European hubs the average density (m2 per million departing passengers) is 600m2.Maturity target will be – m2, which promises sales of € per departing passenger (on average).
41Trends in airport retailing Expected future trends in airport retail offer:Technology will play key role:Practically all travelers will have internet access through mobile phones 10 years from nowContact through Smartphones (Pre-order, Sales, Promotions)Stronger interacting with customers (QR codes, games etc)Feasibility of daily social media offers
42Trends in airport retailing Expected future trends in airport retail offer:More exciting customer experience(focusing on added value and less on savings)Tailored offers to customers depending on where they are travellingDiversified offers due to diversified regional needs (local footprints!)Wide range regardingprice level of products:High-End(Cave à Cigars at CDG)Mid-EndLow-End(H&M and Esprit at AMS)Source: Arthur D. Little, m1nd-set
43# 1 in Travel Retail Research & Consulting Thank you!m1nd-set# 1 in Travel Retail Research & Consulting