ITALY. The official opening of the latest commercial units by Lagardère Travel Retail at Venice Marco Polo Airport on Friday wasn’t simply a showcase of new stores and retail concepts.
Instead it was a statement of the Paris-based travel retailer’s intent about developing regional (small- and medium-sized) airport businesses internationally. Plus it displayed how bringing together three key commercial segments, food & beverage, core category duty free and convenience can be a winning combination.
A lavish pre-opening dinner organised by Lagardère Travel Retail Italy was staged at the impressive Punta della Dogana (once Venice’s Sea Customs House), underlining the importance of the next day’s unveiling. Now home to the Pinault Collection, it features the private artworks of Francois Pinault, the majority shareholder of luxury conglomerate Kering, owner of Gucci and Yves Saint Laurent, among others.
Speaking in the Tadao Ando room surrounded by provocative works from art duo Gilbert & George, Lagardère Travel Retail Chairman and CEO Dag Rasmussen hailed the airport-retailer partnership.
“Ten years ago, SAVE (which runs Venice Airport) and ourselves were the only two companies in the market that had the vision of having travel retail encompassing duty free and fashion; travel essentials and foodservice. So when we first met, we saw that our strategies were fully aligned,” he said. “Together we have been able to grow something great. We don’t always agree but when you look at the results, you will see that it is worth the effort. I even hear that Enrico Marchi (President of SAVE) is satisfied… and you don’t hear that everyday.”
Master concession benefits
That satisfaction stems from a joint venture that started in 2014 between SAVE Group, the operator of the Venice-Treviso Airport System, and Lagardère Travel Retail, which has a master concession contract across the airport group. This has another ten years to run, according to SAVE.
At a time of great infrastructure development, that model has been pivotal in quickly and efficiently achieving the retail and F&B offer that passengers now see at Venice Airport.
At the inauguration, Lagardère Travel Retail COO for Europe Middle East and Africa Frédéric Chevalier said: “We are showing you, today, a milestone of a transformation that was initiated years ago. We are particularly proud of the operational excellence we have delivered in the shops and F&B, and the way we achieved that together with SAVE. The duty free store is beating the targets we set for it. The result – and the way we get to that result – are both very important.”
Speaking to The Moodie Davitt Report, Rasmussen said: “The results of this walk-through have exceeded the dreams of the landlord, both in terms of turnover and the quality of execution. I can’t disclose the sales per pax (SPP), but the increase is tremendous.”
Chevalier pointed out that the badly-needed upgrade of the airport was a very complex affair because of the extensive terminal infrastructure changes needed – while maintaining a good passenger experience. He said: “Due to the master concession model we agreed in 2014, we were in a position to initiate very quickly – and without any major passenger disruption – a big retail transformation without impacting passengers and commercial operations.”
Chevalier was adamant that using a master concession framework allowed Lagardère to make commercial changes that could not have been achieved so efficiently if multiple parties were involved.
Long-term value creation
SAVE Group CEO Monica Scarpa saluted the master concessionaire relationship, due to the stabilising effect it can have on building value, and because SAVE can focus more time on its intensive infrastructure developments.
“Value creation is something you need to measure over a long period of time, not short. So maximising profitability in one year, and not the next, compromises that long-term goal,” she told The Moodie Davitt Report.
She added: “The work we did with Lagardère has been really great. From the beginning we shared the vision and strategy needed to take care of our passengers and create an ambience where they can enjoy the travel experience. Our points of view may not always be the same, but our meetings are constructive and we find the best solutions.”
Venice Marco Polo is the third most important intercontinental airport in Italy after Rome Fiumicino and Milan Malpensa. It operates 10 direct long-haul scheduled flights to airports in the USA, Canada, UAE, Qatar and South Korea. In 2017, the airport accounted for 10.4 million of the 13.3 million passengers using the dual gateway Venice-Treviso Airport System (up +9.2% on 2016).
Including airports in which SAVE has a less than 50% share, the company also manages Verona and Brescia airports as part of the so-called Northeast Airport System, processing 16.6 million passengers in 2017.
A winning regional formula
As for the wider Italian market – now Lagardère’s third biggest – it grew by double digits last year to reach €333 million (US$378 million). While such a high rate of increase may not be sustainable, Rasmussen said: “Italy remains a growth area with very dynamic development at airports, both in duty free, in food, and for our Relay stores which are now in about ten different airports.”
The plan is to develop Lagardère’s three pillars equally. “Ideally this is what we want but it depends on the opportunity. We have a flexible model so we give airports and train stations options,” he said. “Here for instance, food is growing a lot which was not the case when we started with this strategy. Travel essentials, too, was slower in the past but with the reinvention of Relay like-for-like growth is excellent.”
The answer highlights one major advantage of Lagardère’s strategy of spreading its commercial offer across key areas of passenger demand. When one is trending lower, the others can take up the slack. In airports across Europe, for example, F&B has been the growth driver, as duty free SPP has been static or falling.
Local teams and local networks
Asked if Lagardère was positioning itself as a regional airports expert, Rasmussen said: “Yes, but not only. We know how to create tailor-made solutions using local teams developing local networks. Airports can see that we do a good job this way, and they want to work with us. In Sicily for example, it’s not Italian products you will find there but Sicilian products. That’s how we work everywhere.”
In addition, at SAVE’s request, the F&B offers at Venice Marco Polo were developed locally. This not only makes them a better financial option in margin terms, but also gives passengers a genuine feeling of Sense of Place which they often find lacking in larger airports, said SAVE.
In the case of the landside Emporio del Grano, SAVE’s Scarpa told The Moodie Davitt Report: “In this restaurant we wanted table service and self-service. Lagardère was able to accommodate this in their design because this format is theirs. In the end, they matched exactly what I had in mind.”
Scarpa added: “The quality of F&B and retail are important to the overall experience and to attracting passengers to the airport. So this is part of our overall strategy in developing our traffic here.
“We also think F&B and retail can be complementary to each other,” she added, firmly eschewing the idea of food courts. That complementarity is evident in the Bottega dei Sapori retail store where passengers can order freshly-made sandwiches. The sandwiches use ingredients such as cheeses and meats that can be bought at the adjacent delicatessen counter of the shop.
Chevalier said: “I don’t know the current share, but three years ago, sales from this small counter accounted for 10% of total sales of this store – which itself was generating a very high turnover.”
Retail and F&B expansion is locked in
SAVE is in the middle of an €850 million (US$964 million) capital expenditure plan of which €430 million (US$488 million) has already been spent. Having completed the areas in which Lagardère revealed its latest stores, the group is now working to enlarge the extra-Schengen area, and next year it will start on the enlargement of the north side of the airport.
Putting F&B and retail at the heart of SAVE’s growth strategy has led to some ambitious space allocation plans from the group. “We would like to see 1,200sq m of retail and F&B per million passengers which will be an increase from 800sq m per million today,” Scarpa told The Moodie Davitt Report.
As the latest infrastructure projects take shape, that +50% increase in space per million passengers will be music to the ears of Lagardère. As master concessionaire, it is in a strong position to hone a retail offer to the exact specifications agreed between just two parties – and build some profitable concepts that can deliver a real sense of place.
(All on-location images © Kevin Rozario)
