AUSTRALIA/NEW ZEALAND. Ivo Favotto, a Sydney-based executive and company owner who has worked for all three stakeholders in the Trinity ecosytem, presents his latest commentary and figures on the gradual re-emergence of airport commercial activities in Australia and New Zealand.

Favotto owns and runs The Mercurius Group, a consultancy focused on industry research, consultancy and benchmarking studies, as well as operating his own destination merchandise supply business.

Here, Favotto – in the 15th edition of his unique monthly report tracking the recovery of 832 travel retail outlets across Australia and New Zealand – reflects on further setbacks to the pace of travel retail reopening in Australasian airports in the face of the latest COVID-19 developments.

With a case study, he also compares the fortunes of retail and F&B outlets in Manchester (UK) and Melbourne airports.

Back in September 2020, we wrote about the potential for travel retail’s recovery from COVID-19 following a sawtooth pattern of ups and downs as borders opened and closed according to the advice of health authorities.

The results of our analysis of travel retail’s recovery in June 2021 has seen another sawtooth emerge, with a fall in the proportion of outlets open compared to the pre-COVID-19 situation (i.e. 2019). This downturn breaks the run of three consecutive months since February 2021 when the proportion of travel retail outlets open was increasing.

Of the total number of travel retail outlets across Australia and New Zealand 501, or 60%, have now reopened, down from 64% the previous month.

Australia and New Zealand’s travel retail recovery is being held hostage to the impact of rolling state lockdowns in Australia and their impact on the trans-Tasman travel bubble, as well as to the slow vaccine roll-outs in both countries.

A month by month plotting of the number of F&B spaces and retail stores which have reopened since the pandemic struck (click to enlarge)

Only 30% of Australians and 23% of New Zealanders have had at least one shot and shortages of preferred vaccines means that any significant improvement in vaccination rates remains months away. This contrasts with other parts of the world, such as the UK where more than 45.6 million people (out of a population off 66.5 million) have received at least one shot, and where (helped by eased restrictions) travel is set to quickly ramp up.

At the end of June, Australia was experiencing a domestic border closure frenzy, with half of the country’s state and territories imposing lockdowns on parts of their population due a number of unconnected and small localised COVID-19 outbreaks.

While the average of specialty stores open has decreased from 63% to 58%, the impact was felt more sharply across the duty free (60% to 45%) and travel essentials (59% to 52%) categories with other retail concepts (65% to 61%) more resilient.

The rate of total store reopening is higher in New Zealand (61%) than in Australia (58%) where there are no state governments that can (relatively) arbitrarily shut down borders. And of course, the rate of store reopening is higher in domestic terminals (67%) than international terminals (32%).

The number of outlets open in Australian airport domestic terminals, compared to the number of passengers flying (click to enlarge)

In terms of our store sustainability indicator – outlets open per million passengers – our analysis shows domestic stores per million pax were back at pre-COVID-19 levels. On the surface, this should mean these stores have a pax level that should support a return to pre-COVID-19 passenger spend levels.

In April 2021 (the latest month for which official passenger figures are available in Australia), domestic passenger numbers rose to 68% of their pre-COVID-19 level and with 71% of domestic terminal travel retail sites open.

While this is good news, the constant stop-start of lockdowns and border closures continues to interrupt travel retailers, some of whom keep burning money paying staff during lockdowns and losing perishable stock.

So while the AU+NZ region has been lauded in health circles for its relative containment of COVID-19, travel retailers in the region are looking enviously at their counterparts in other nations that are more rapidly opening up travel in line with increased vaccination rates.

Case Study: A Tale of Two Cities – Manchester (UK) and Melbourne (AU)

Our tale of two cities (or airports rather) is about the travel retail COVID-19 recovery profile of two airports at opposite ends of the world – Manchester Airport in the UK and Melbourne Airport in Australia.

Charles Dickens’ novel A Tale of Two Cities is all about contrasts as first indicated in its famous opening line, “It was the best of times, it was the worst of times”. While Dickens focused on 18th century London and Paris, our contemporary tale is of two airports that enjoy many similarities but have markedly contrasting COVID-19 recovery profiles.

Manchester Airport served 29 million passengers in 2019, a comparable number to those served by Melbourne Airport

Australia’s resolutely shut (other than recently with New Zealand) international borders, its open-closed/open-closed domestic borders and the country’s uber-conservative management of COVID-19 exposure is often contrasted against the UK’s more liberal COVID-19 regime that allows international travel and increasingly greater individual freedoms. But at an airport and travel retail level, the comparison between the two cities has not played out as expected.

First the similarities. Both airports are of a similar scale, serving the second-largest city in each country. Pre-COVID-19 Melbourne Airport served 37 million passengers and Manchester Airport 29 million. And both airports have a similar pre-COVID-19 retail income per passenger (IPP) profile (more than A$6), albeit that Manchester Airport achieves its IPP from materially fewer stores (89 for Manchester versus 153 for Melbourne).

The key contrast however is in their profile of passengers. While Melbourne Airport is dominated by domestic passengers (around two-thirds), Manchester Airport is led by international passengers (more than 90%).

This difference in passenger profile is manifest in the difference in COVID-19 recovery for each airport’s travel retailers.

This table shows that far fewer F&B and retail stores so far have reopened at Manchester Airport (click to enlarge)

The other key consideration is how each airport has dealt with COVID-19 from a terminal operation perspective. Each has taken quite a different approach to how many terminals they have opened, which impacts the number of stores able to be run. This could be positive or negative depending on your perspective.

As at June 2021 Manchester Airport had consolidated all flights into one terminal, Terminal 1, closing Terminals 2 and 3. Terminal 1 currently has 22 outlets open, representing just under 25% of the total of 89 outlets across the three terminals pre-COVID-19. [Editor’s note: However, Manchester Airport will today  open its Terminal 2 extension with Jet2, TUI and Singapore Airlines the first airlines to move to the new facility. The extended terminal is the centrepiece of Manchester Airport Group’s £1 billion Manchester Airport Transformation Programme, which was first announced in 2015. It was scheduled to open in Summer 2020, but was put on hold due to the coronavirus pandemic.]

Melbourne Airport has four terminals which it has continued to operate throughout the pandemic, including skeleton operations out of its one international terminal. The airport currently has 71 outlets open, representing 46% of the total of 153 outlets across all four terminals pre-COVID-19.

In terms of our store sustainability indicator – the ratio of outlets open per million passengers – our analysis shows that pre-COVID-19, Manchester Airport had 3.2 outlets per million pax spread across its three terminals, compared to Melbourne Airports 4.3 outlet’s per million pax spread across its four terminals.

The ratios of total outlets open measured against the number of passengers at each airport (click to enlarge)

For Manchester Airport, in June 2021, this ratio (using the last monthly pax figures published for May 21) was 16 or five times the pre-COVID-19 level.

At Melbourne Airport, the ratio in June 21 was 4.9 – much closer to the pre-COVID-19 ratio of 4.3). Manchester Airport’s ratio is reminiscent of overall Australian domestic terminal performance in May 2020 when pax were just 3% of pre-COVID-19 levels and outlets per million pax were 4.5 times pre-COVID19-levels.

In other words, even though Manchester Airport has a lower proportion of outlets open than Melbourne Airport, those outlets are fighting much harder for each sale due to a relative scarcity of passengers.

With the reopening of international travel and the increasing ‘green list’ of countries available to UK travellers, assuming those countries choose let in UK travellers, it would be expected that the ramp up in travel will quickly accelerate passenger numbers and store opening ratios.

Regardless of the region, returning passengers expect the same, if not better, product choice and service quality as pre-COVID-19 travel days. But with operators struggling to attract staff and grappling with supply logistics and airports balancing the commercial realities of enticing sites to reopen there may be an imbalance between customer desire and commercial reality until the equilibrium (whatever that may be) re-establishes itself.

Meanwhile the Tale of Two Cities continues with Australia/New Zealand’s travel retail recovery now held back until their vaccine roll-outs reach levels that prevent ad hoc lockdowns and allow for international travel to properly restart – increasingly looking like  2022. It may be a winter of despair, while the UK is on the cusp of emerging from its own season of travel darkness.

Footnote: The Mercurius Group, in partnership with The Moodie Davitt Report, has released the inaugural edition of the Airport Food & Beverage Study (AFABS).

The AFABS 2021 edition focuses on the Australian and New Zealand airport F&B markets, covering all 27 airports in Australia and New Zealand with annual passenger volumes exceeding 0.5 million.

The AFABS 2021 also features The Mercurius Group’s Top 12 F&B Operators League Table. These particular operators are responsible for 75% of the outlets within the region.

Other key features of AFABS Australia and New Zealand include:

  • An estimate of overall airport F&B sales in the Australian and New Zealand market;
  • F&B PSRs by country, terminal type and airport size;
  • F&B PSRs by outlet type, outlet location and operator size;
  • The number and type of F&B outlets in the market;
  • A ranking of the Top 12 F&B operators by sales and a profile of their outlet portfolio; and
  • A profile of the F&B programme for each airport (and for each terminal where applicable).

Other special features of the publication include a commentary on:

  • How airports build an F&B programme; and
  • The potential for F&B operator consolidation (mergers and acquisition activity) in the Australian and New Zealand airport F&B market.

To purchase a copy please contact The Mercurius Group:

Tel: +61 423 564 057;