Airport Experience® News - Retail Innovation Issue 2024

reduced the Chinese consumer demand for luxury products,” he says. Amber Ritter, CCO and managing deputy commissioner of the Chicago Department of Aviation (CDA), notes that Chicago O’Hare International Airport (ORD) has seen a reduction in luxury brand sales, and while some of this is due to the overall decline in concessions sales related to the pandemic, there are other factors at play that began even earlier than 2020. Like Bisset, Ritter notes that the decline in demand from Chinese travelers has hurt luxury retail sales, but she dates this change back to 2016. “That was when the influx of Chinese travelers decreased significantly due to aggressive fare strategies by airlines like Hainan and China Eastern targeting China-bound routes,” she explains. “ American Airlines also ceased direct flights to mainland China, further reducing the number of passengers from China.” In addition, Ritter points out that the Chinese government imposing a 20% tariff on duty free purchases exceeding $750 USD in early 2017 had an impact, coupled with a strong U.S. dollar. And then specifically

David Bisset, executive vice president and chief development officer for Paradies Lagardère , similarly acknowledges the shaky ground that specialty retail, including luxury, is on. “Duty paid concession trends in North American airports are dominated by food and beverage, accounting for approximately 70% of passenger spending, followed by travel essentials at around 20% and specialty retail at 10%,” he says. “Airports continuously seek the most productive concession programs, often measured by spend per passenger or sales per square foot – in these metrics, luxury retail in duty paid environments struggles to compete with more productive sales categories.” Bisset lays a lot of the blame on changes that occurred during and in the years since the Covid-19 pandemic. “Luxury retail sales trends in travel markets have historically been driven by specific consumer groups, and in more recent times it was the Chinese passenger who was driving the luxury market demand,” he says. “The new post-Covid economic environment, characterized by higher interest rates, the strong U.S. dollar and increased inflation, has significantly

Above, Below, Opposite page: ORD is currently home to two standalone luxury retail locations – Brooks Brothers in Terminal 3 and Coach in Terminal 2 – though luxury brands have strong placement in the airports’ duty free shops as well as the duty paid concept Gallery ORD, operated by Hudson. Photo Credit: Chicago Department of Aviation

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AX NEWS SEPTEMBER 2024