UK/SWITZERLAND. Dufry is today unveiling its new company strategy – dubbed ‘Destination 2027’ at its much-anticipated Capital Markets Day in London, England.
The strategy is focused on four pillars, with a new purpose “to make travellers happier”, Dufry said.
In setting out those pillars, Dufry offered a positive but evolutionary context on the state of the aviation and travel retail sectors. “The airport travel market has proven to be a resilient and attractive space, showing a strong rebound after the COVID crisis,” it said. “Passenger volume is bound to resume growth in line with the historical trajectory, after a steady acceleration of demand over the past six months.
“While the fundamentals of the market are solid, the industry is experiencing a significant shift in consumer behaviour and in travel patterns. Consumer demographics have changed, bringing about, amongst other things, a stronger demand for personalised experiences, a greater influence of online media in purchasing decisions, and stronger interest for sustainable, healthy, eco-friendly products.”
Travel patterns are also changing, Dufry noted, characterised by a stronger rebound of domestic and short-haul routes, an increasing share for low-cost service, the acceleration of leisure versus business travel, and a different mix in the origin of international travellers during the path to full post-COVID recovery.
Destination 2027 is designed to cater to the needs of such ‘new’ travellers, and continue to lead what it dubbed the ‘travel experience space’.
The four pillars are:
*Launch a Travel Experience Revolution by creating – together with brand and landlord partners – a unique new value proposition for customers. The new value proposition, Dufry said, is based on customised offerings for travellers, including elements of experience, new categories, and exclusive products.
This experience will be delivered both in physical ‘smart’ stores, featuring a modular concept that allows customisation of the offering to different passengers, routes and nationalities, as well as through digital channels. Extensive digital engagement before and after travel will drive consideration and loyalty, Dufry said.
Pushing beyond the boundaries of retail, the travel experience revolution brings together travel retail and food & beverage. This will be underpinned by the “transformative” business combination with Autogrill, which will allow the group to engage consumers with a broader set of products and a wider range of experiences, providing a platform to make travellers happier during travel.
*The company will continue the journey to Diversify its Geographical Presence to tap into fast-growing markets and hedge against regional economic cycles and shocks.
Building on a strong portfolio of international airport locations and global brands, Dufry will continue to expand its footprint, with strong focus on the highly attractive and resilient US market, and a dedicated strategy for Asia Pacific, where it will build a team focused on a set of strategic markets in the region and on the fast-growing cohort of the Chinese traveller.
In Europe and the rest of the world, Dufry will accelerate its business development process and set clear priorities and targets.
The combination of travel experience revolution and geographical expansion will drive passenger acquisition, spend per passenger and net new concessions, which is expected to translate into annual turnover growth of +5% to +7% in 2025-2027, Dufry said.
The years 2023-2024 are considered a transition period, for which Dufry expects annual turnover growth of +7% to +10%. Both annual growth rates refer to an unaffected environment and to the pro-forma combined company, pending regulatory and other approvals.
*Foster a Culture of Operational Improvement to fuel profitability, accelerate cash-flow generation, and reinvest in growth.
Dufry will continue to strive for superior profitability with a logic of zero-based budgeting, focused on disproportionally allocating resources to activities that make the most impact for the customer, while leveraging technology to simplify work and operations.
In addition to budgeting discipline, Dufry said that it will “systematically and actively” manage its portfolio of concessions, with stronger focus on the evaluation of full profitability and cash flow contribution.
For the years 2025-2027, Dufry expects gross 30 to 40 bps annual core EBITDA margin improvements for the combined entity, partially reinvested, with expected cost synergies from the Autogrill combination of approx. CHF85 million p.a. on core EBITDA level to come on top.
CORE EBITDA margin improvements in the years 2023-2024 should amount to net 75 to 100 bps annually for the pro-forma combined group, pending regulatory and other approvals. The company further expects a sustainable strong cash flow generation, targeting an Equity Free Cash Flow conversion on CORE EBITDA for the combination of Dufry and Autogrill of above +20% in 2023-2024, and above +30% in the medium term 2025-2027.
Connecting the other three pillars of the strategy, ESG continues to be a defining ambition, Dufry said, describing it as a “strong lighthouse” for the group’s day-to-day business, providing a source of inspiration of what to do best for customers, employees and the world at large.
Dufry CEO Xavier Rossinyol said: “The new company strategy has been crafted based on a deep understanding of our stakeholders’ needs, customer insights and the current market trends evolution.
“Our new strategy Destination 2027 will be delivered by further empowering our already excellent teams and reinforcing them when needed. As a team, we are in a position to generate sustainable long-term value for all our stakeholders, including employees, landlords, brand partners, and, finally, our shareholders. This is supported by the transformative business combination with Autogrill as an inherent part of our vision to deliver a holistic travel experience and to make travellers happier.”
Note: The short-term outlook 2023-2024 and mid-term outlook 2024-2027 are based on current visibility and exchange rates, with external factors impacting performance and outlook.
Dufry is holding its Capital Markets Day in London today, with members of Dufry’s Board of Directors and Global Executive Committee participating.
