AUSTRALIA/NEW ZEALAND. Ivo Favotto, a Sydney-based executive and company owner who has worked for all three stakeholders in the Trinity chain, presents the latest figures plus commentary on the gradual re-emergence of airport commercial activities in Australia and New Zealand. Favotto owns and runs  The Mercurius Group, a Sydney-based consultancy focused on industry research, consultancy and benchmarking studies, as well as operating his own destination merchandise supply business.

Although there have been increasing airport retail and food & beverage reopenings, Favotto warns that it will be a case of two steps forward, one step backwards for travel retailers in Australia. New Zealand is progressing faster but the action is largely limited to domestic activities, he points out. 

Welcome to the fourth of The Mercurius Group’s monthly reports on travel retail’s recovery from COVID-19 in Australia and New Zealand. We started in April 2020 – amidst the darkest gloom of the crisis-induced shutdown of the aviation industry – when just 8% of travel retail outlets across Australia and New Zealand were open.

Month by month, the number of travel outlets open has climbed steadily. Fast-forward to July 2020 and we are reporting that there are now 41% of travel retail outlets open down under.

To the casual observer it appears that the recovery of travel retail across Australia and New Zealand is well underway. And certainly, 41% of outlets open is better than 8%.

Ominous dark clouds are gathering on the horizon following a significant COVID-19 outbreak in the southern and second-most populous state of Victoria. This hreatens the reclosure of state borders and further delaying the reopening of international borders – probably to sometime in 2021.

But for many of the operators that have reopened, the recovery remains a mirage – it looks like it’s there but it isn’t.  For many operators, trading during the current conditions involves a day-to-day struggle to be cash-positive, let alone profitable. The challenges of dealing with staff, negotiating with landlords and restarting supply chains remains difficult.

So we celebrate the continuation of the recovery as we must – in these times even a small win must be celebrated – but we remain cognisant of the challenges before travel retail across Australia and New Zealand.

Our monthly analysis covers 781 duty free, F&B and specialty retail outlets across 27 airports (those with more than 0.5 million passengers – 19 in Australia and 8 in New Zealand).

In June, with easing of lockdowns allowing inter-state travel, supported by airline positivity of route reopenings and fare discounting, the COVID-19 recovery started to gather momentum in both countries. There was a palpable sense of hope in the travel retail industry as the proportion of outlets open jumped to 27%.

By July, the recovery continued to gather momentum, with 41% of outlets open. But ominous dark clouds are gathering on the horizon following a significant COVID-19 outbreak in the southern and second-most populous state of Victoria, threatening the reclosure of state borders and further delaying the reopening of international borders – probably to sometime in 2021.

During the June-July window of travel freedom, the majority of airports across Australia and New Zealand continued to see growth in stores reopening.  The 41% of all outlets open by the end of July represented a +50% increase from the previous month’s 27%.

Despite the positivity, the stores that are open are far from trading at their pre-COVID-19 strength with many only able to justify trading by the fact that wages are supported by the Commonwealth Government’s JobKeeper scheme which contributes A$750 per week for all employees where employers meet reduction of turnover conditions.

There was a collective sigh of relief across the travel retail industry when the Commonwealth Government announced it was extending JobKeeper beyond its original September 2020 expiry date to March 2021.

F&B reopenings during July 2020 showed a continuation of the upward trend from June, with 182 sites open – representing half of pre COVID-19 levels. For specialty retail the road to recovery continues to be much slower with only 33% of pre-COVID-19 stores open at the end of July, increasing from 20% in May 2020. Following the previous months’ trends, store openings are led by travel essentials (books, news, convenience and pharmacy) with some fashion and gifting sites also coming on line.

Notwithstanding that many retailers are still focusing on running down date-sensitive stock through heavy in-store discounting, it is anticipated that passenger spends rates remain subdued.

Kiwi promise driven by domestic pax growth

New Zealand is providing some tantalising hints as to what the travel retail landscape could look like once there is free travel within Australia’s borders – New Zealand has 57% of all stores open compared to its trans-Tasman neighbour’s 36%.

Drilling down further, New Zealand domestic travel-orientated terminals have up to 100% of all travel retail sites open while there are only very limited stores open across international terminals. However with June domestic passenger numbers at Auckland Airport still -70% below June 2019, it is questionable how sustainable these store openings will be if the New Zealand government wage subsidy scheme (at NZ$585 per week for full-time employees) ends as anticipated in August.

International terminals remain the focal point of travel retailer’s pain in both Australia and New Zealand with borders in both countries remaining tightly shut. The New Zealand Government has also pushed back any consideration of a trans-Tasman travel bubble between Australia and New Zealand given the alarming spike in infections in Victoria and to a lesser extent, Australia’s most-populous state, NSW.

So we celebrate the continuation of the recovery as we must – in these times even a small win must be celebrated – but we remain cognisant of the challenges before travel retail across Australia and New Zealand

Notwithstanding the difficulties, stories of travel retailer innovation are emerging. Both Auckland and Brisbane airports are working with their duty free retailers to provide new channels to supply duty paid products to domestic customers through pop-up domestic stores and online sales channels – no doubt providing some much needed cash injections.

For the mirage of recovery to become a reality, however, the return of passenger traffic will have to be sustained beyond its initial flourish in June and July.

As a post-script to our July analysis, the re-emergence of COVID-19 in Victoria has seen some State borders, notably in Queensland (Australia’s sunshine state and holiday capital), slammed shut once again and flights once again cancelled.  At Melbourne Airport, we have seen stores that reopened in June and July closed once again.

So at this stage, it is two steps forward, one step backwards for travel retailers in Australia, although domestic travel continues to recovery in New Zealand.  We anticipate that August may see the emergence of the first saw-tooth in our recovery chart as openings decline from the 41% high experienced in July.

Welcome to the fourth of The Mercurius Group’s monthly reports on travel retail’s recovery from COVID-19 in Australia and New Zealand. We started in April 2020 – amidst the darkest gloom of the crisis-induced shutdown of the aviation industry – when just 8% of travel retail outlets across Australia and New Zealand were open.

Month by month, the number of travel outlets open has climbed steadily. Fast-forward to July 2020 and we are reporting that there are now 41% of travel retail outlets open down under.

To the casual observer it appears that the recovery of travel retail across Australia and New Zealand is well underway. And certainly, 41% of outlets open is better than 8%.

But for many of the operators that have reopened, the recovery remains a mirage – it looks like it’s there but it isn’t.  For many operators, trading during the current conditions involves a day-to-day struggle to be cash-positive, let alone profitable. The challenges of dealing with staff, negotiating with landlords and restarting supply chains remains difficult.

Many retailers are only able to justify trading by the fact that wages are supported by the Commonwealth Government’s JobKeeper scheme

So we celebrate the continuation of the recovery as we must – in these times even a small win must be celebrated – but we remain cognisant of the challenges before travel retail across Australia and New Zealand.

Our monthly analysis covers 781 duty free, F&B and specialty retail outlets across 27 airports (those with more than 0.5 million passengers – 19 in Australia and 8 in New Zealand).

In June, with easing of lockdowns allowing inter-state travel, supported by airline positivity of route reopenings and fare discounting, the COVID-19 recovery started to gather momentum in both countries. There was a palpable sense of hope in the travel retail industry as the proportion of outlets open jumped to 27%.

By July, the recovery continued to gather momentum, with 41% of outlets open. But ominous dark clouds are gathering on the horizon following a significant COVID-19 outbreak in the southern and second-most populous state of Victoria, threatening the reclosure of state borders and further delaying the reopening of international borders – probably to sometime in 2021.

During the June-July window of travel freedom, the majority of airports across Australia and New Zealand continued to see growth in stores reopening.  The 41% of all outlets open by the end of July represented a +50% increase from the previous month’s 27%.

Despite the positivity, the stores that are open are far from trading at their pre-COVID-19 strength with many only able to justify trading by the fact that wages are supported by the Commonwealth Government’s JobKeeper scheme which contributes A$750 per week for all employees where employers meet reduction of turnover conditions.

There was a collective sigh of relief across the travel retail industry when the Commonwealth Government announced it was extending JobKeeper beyond its original September 2020 expiry date to March 2021.

Source: The Mercurius Group (Click to enlarge)

F&B reopenings during July 2020 showed a continuation of the upward trend from June, with 182 sites open – representing half of pre COVID-19 levels. For specialty retail the road to recovery continues to be much slower with only 33% of pre-COVID-19 stores open at the end of July, increasing from 20% in May 2020. Following the previous months’ trends, store openings are led by travel essentials (books, news, convenience and pharmacy) with some fashion and gifting sites also coming on line.

Notwithstanding that many retailers are still focusing on running down date-sensitive stock through heavy in-store discounting, it is anticipated that passenger spends rates remain subdued.

Kiwi promise driven by domestic pax growth

New Zealand is providing some tantalising hints as to what the travel retail landscape could look like once there is free travel within Australia’s borders – New Zealand has 57% of all stores open compared to its trans-Tasman neighbour’s 36%.

Drilling down further, New Zealand domestic travel-orientated terminals have up to 100% of all travel retail sites open while there are only very limited stores open across international terminals. However with June domestic passenger numbers at Auckland Airport still -70% below June 2019, it is questionable how sustainable these store openings will be if the New Zealand government wage subsidy scheme (at NZ$585 per week for full-time employees) ends as anticipated in August.

International terminals remain the focal point of travel retailer’s pain in both Australia and New Zealand with borders in both countries remaining tightly shut. The New Zealand Government has also pushed back any consideration of a trans-Tasman travel bubble between Australia and New Zealand given the alarming spike in infections in Victoria and to a lesser extent, Australia’s most-populous state, NSW.

Notwithstanding the difficulties, stories of travel retailer innovation are emerging. Both Auckland and Brisbane airports are working with their duty free retailers to provide new channels to supply duty paid products to domestic customers through pop-up domestic stores and online sales channels – no doubt providing some much needed cash injections.

For the mirage of recovery to become a reality, however, the return of passenger traffic will have to be sustained beyond its initial flourish in June and July.

The Mercurius group LogoAs a post-script to our July analysis, the re-emergence of COVID-19 in Victoria has seen some State borders, notably in Queensland (Australia’s sunshine state and holiday capital), slammed shut once again and flights once again cancelled.  At Melbourne Airport, we have seen stores that reopened in June and July closed once again.

So at this stage, it is two steps forward, one step backwards for travel retailers in Australia, although domestic travel continues to recovery in New Zealand. We anticipate that August may see the emergence of the first saw-tooth in our recovery chart as openings decline from the 41% high experienced in July.

Ivo Favotto contact: Tel: +61 423 564 057; E-mail: ifavotto@themercuriusgroup.com; Website: www.themercuriusgroup.com