CENTRAL & EASTERN EUROPE. The Central & Eastern European Travel Retail Association (CEETRA) staged an event last week in which key industry stakeholders tackled issues surrounding travel recovery and the challenges of the pandemic.
The CEETRA Travel Retail Forum – held on 29 June – brought together representatives of brands, airports, travel retailers and related service providers, and a strong speakers line-up.
CEETRA Chairman Andrzej Milaszewicz, who is also Managing Director of Lagardère Duty Free (Poland), opened the event. He said: “While it is reassuring to see that people in the region still have an incredible hunger for travelling, business didn’t come back as expected and there are many question marks still ahead of us.”
Milaszewicz underlined the importance of CEETRA members exchanging best practice. In outlining the current difficult trading climate, he declared: “Even with some recovery after the darkest times of the COVID-19 pandemic, retail at airports and transportation hubs in CEE is now hit hard by the effects of the war in Ukraine, inflationary pressures, airport capacity restrictions and staffing issues.”
The following speaker, Odesa International Airport Chief Commercial Officer Dr Vyacheslav Cheglatonyev, reminded attendees that Ukraine was hailed as one of the top five countries in terms of post-COVID air traffic recovery only one year ago.
Odesa International opened a new terminal in February 2020, followed by an extension of the apron and a new runway. Retail space of 600sq m has been operated by Dufry since February 2021, including a very successful duty paid shop in domestic departures, according to Cheglatonyev.
“The biggest scar is that there is a big shift of people from the hospitality industry to other industries” – SSP Hungary Managing Director Christos Orthodoxou
The terminal includes a diverse food & beverage offering, and he explained that the airport had opted for local operators with shorter-term concessions first to ensure that the region was well represented.
A large international tender was set to follow, Cheglatonyev revealed. However, he said Ukrainian airports have been targeted by Russian bombs and missiles since the beginning of the invasion and it is uncertain when and under which circumstances they can reopen. He called on attendees to stand by Ukraine and participate in any kind of aid possible.
Anna Marchesini, Business Development Director of research company m1ndset, revealed survey data from Central and Eastern Europe which showed that airport shop footfall in Q1 of this year remained the same, but conversion has decreased on a year-on-year basis.
“Give the visitors a reason to shop once they are in the store,” she said, adding that shoppers now buy only from only 1.5 categories on average, compared to 1.8 one year ago.
Marchesini explained that customer motivation to shop is shifting too. ‘Gifting’ has decreased (28%) while ‘sharing with others’ has steeply increased to 23% of all purchases.
She noted: “Instead of value for money, convenience is now the number-one driver to purchase compared to pre-COVID levels.”
During his presentation, SSP Hungary Managing Director Christos Orthodoxou declared: “Now there is a setback, but the world will be richer. People will be going back to their roots, in terms of their eating and also amusement habits.”
Orthodoxou also shared best practice thoughts on digitalisation, pre-order and the reduction of disposable cups. Turning to the impact of the pandemic, he said: “The biggest scar is that there is a big shift of people from the hospitality industry to other industries.”
In order to motivate and reward staff, Orthodoxou said SSP Hungary combines advertising on POS and uniforms with rewards for the best performers on the floor, financed by local suppliers.
He described self-order kiosks as a breakthrough for airport commerce, as people now “do have the time to spend, and they do spend more”. F&B spend per passenger has increased, Orthodoxou noted, also observing that overall passenger behaviour has not changed dramatically in recent times.
“That’s a good sign,” he said. “We see the curiosity, it is stronger today. People are willing to taste and to try new things.”
Kraków Airport Chief Commercial Officer Paweł Galiak gave a landlord’s perspective, underlining the importance of partnerships with retailers and F&B operators. During the crisis, the airport abolished minimum guarantees, he noted, and linked retail concession fees to passenger numbers. He added that this ensured market confidence just ahead of an RFP for commercial space which was launched in December 2021.
With its location two hours by car to the Ukrainian border, Galiak said the airport has had to take a different approach to passenger services. He said: “Since the outrageous invasion of sovereign Ukraine, 4.3 million people have crossed the border to Poland. Some are at an airport for the first time.”
Galiak said airport staff are going out of their way to help in this difficult situation, especially when handling numerous special refugee flights.
He added that he believed that the travel retail industry will yet again “prove its resilience to external shocks” and that we will see “cooperation and collaboration to an extent that was not seen before”.
Obstacles to fast recovery are staffing issues, inflationary pressure and the threat of new variants of COVID, Galiak said. He added that he believes that any resulting decline of non-essential travel is likely to directly affect Kraków as a city-break destination.
The final speaker was European Travel Retail Confederation (ETRC) Secretary General Julie Lassaigne, who updated attendees on her organisation’s arrivals duty free campaign.
Building on the high-level engagement achieved with EU and member state policymakers, Lassaigne said she was pleased to see the launch of a formal study on VAT rules applicable to the travel and tourism sectors. The study will also assess opportunities to allow duty and tax free shops on arrival in the EU.
She explained that this study is part of the EU VAT Tourism Package which will be published by the European Commission next year to support the recovery of the sector post-pandemic.
Lassaigne added that ETRC has now launched in response a campaign aiming to ensure industry contribution to the study, momentum for a legislative process to be launched, and engagement with members states once the decision-making process starts.
She said: “Czech Republic, Croatia and Poland are where they want to deep dive a bit more about how these rules work in those countries. ETRC are here to support members with any questions they might receive related to the study from the EC or their governments.”
In addition, Lassaigne noted that work is ongoing to publish a comparative study showing how duty and tax free for arriving passengers is a successful model in several European countries, such as Norway, Turkey and Switzerland.
