NEW ZEALAND. Auckland Airport today posted a +5.2% rise in retail revenues to NZ$162.8 million (US$118.5 million) for the year ended 30 June 2017.
However, international PSR was down -2.4% as strong +11% international passenger growth was offset by a -10% reduction in retail space due to building disruption.
Underlying retail income per international passenger fell -5.4%, driven by disruption, fewer retailers trading above minimum annual guarantees, and central business district construction continuing to impact off-airport business.
Total passenger movements rose +10.2% to 19 million. Domestic passengers were up +8.9% to 8.6 million, international traffic (excluding transit) increased +11% to 9.7 million and international transit passengers rose +16.8% to 0.7 million.
Duty free and food & beverage PSR increased +2% and +6% respectively. Overall PSR, however, was dented by falls within specialty retail (-9%), news & books (-11%) and destination retail (-12%). All were impacted by the departures zone redevelopment. 2018 will see a +65% increase in retail square metres on departures level 1. Total airport revenue rose +9.7% to NZ$629.3 million (US$458.2 million).
The company said: “FY17 has been a formative year in the commercial businesses, enhancing our physical offering, undertaking a significant leasing programme and building our online platform for the future. Terminal retail sales (excluding FX) were up +8.6%, ahead of the wider Auckland retail market (up +3.6%).”
The airport company said that as part of “significant” ongoing retail development, 57 new retail concepts will be launched over the next 18 months, 42 related to the departures expansion. The retail terminal area decreased in FY17 and will continue being squeezed in 1H18 due to construction activity. The expanded departures duty free stores and first destination stores are expected to open at the end of 1H18. The remaining sections will open over the next year.
The upgrade is focused on delivering a vision dubbed ‘The Best of New Zealand and the World’, Auckland Airport said. “The range of stores is widening and yield is expected to grow due to a competitive bid process,” it noted.
Particular emphasis is being placed on the digital offer, the company added. The departures upgrade will not only enhance the physical offer but also enable the execution of an ambitious digital strategy. This will feature an expanded click and collect and improved payment channels.
Plotting a digital future
“We are focused on the digital future, developing enhanced multi-channel solutions to improve customer experience and expand reach,” the company said. “[We plan to] establish a single view of the customer across lines of business with investment in our CRM system.”
The airport company said it will improve service performance with artificial intelligence (AI) and personalised customer benefits. It is launching the Strata Club and new Strata lounge as part of a mission to create a world-leading omni-channel/e-commerce platform, including an online multi-retailer mall (MRM) being developed with German company AOE.
“We remain confident in an improved multi-channel business opportunity,” the airport said.
Shift in passenger mix on Chinese routes
Auckland Airport noted a change in Chinese visitor profile featuring a higher proportion of free independent travellers (58% of visa approvals). Load factors on Chinese routes remained steady even with a +28% increase in capacity to Mainland China and a slight decline in Chinese residents, the company added.
It said that Chinese departures per capita are low compared to other more developed economies, offering growth opportunities as does tourism from Tier 3 and 4 cities in China.
There is potential to expand New Zealand’s share of Chinese outbound tourism from 0.3% (in 2014 it was 0.2%), the company said.
Summing up the year, Auckland Airport Chair Sir Henry van der Heyden said, “The 2017 financial year was another strong year of growth right across our business with the company continuing to focus on upgrading its airport infrastructure, growing and supporting tourism and providing the best possible customer experience during a time of significant change.”