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TFWA: GTR outlook ‘encouraging’ but tensions remain

The long-term outlook for global travel is “encouraging”, but interim economic and political tensions will limit growth, the Tax Free World Association (TFWA) president warned.

TFWA Cannes 2024
The TFWA World Exhibition & Conference celebrated its 40th anniversary this year

Speaking during the opening conference at the TFWA World Exhibition & Conference in Cannes, France, on Monday 30 September, TFWA president Erik Juul-Mortensen gave an update on the current global travel retail (GTR) landscape.

He noted positive improvements to passenger numbers, “rising by 11.5% this year versus 2023, putting passenger traffic about the 2019 pre-Covid levels”.

He also noted how in the six months to the end of June 2024, international passengers were up by 1.4%, while domestic travellers were 1.3% higher.

However, Juul-Mortensen added: “As we know, the recovery is not evenly spread geographically.”

The TFWA president said the Middle East and Africa, and Latin America bounced back “strongly” in the first half of 2024, while North America and Europe were “more measured”.

“Asia Pacific remains below its pre-pandemic level, although the deficit has reduced to 5.6% in the first half of this year, and passengers were up 18% on the first half of 2023,” he continued.

‘Encouraging’ long-term outlook

“ACI World’s long-term outlook is encouraging,” he said. “The current projection, updated in August, shows a sustained resurgence by air travellers rising from 4% above pre-Covid traffic this year to 29% above by 2028.”

Those increases would result in 9.78 billion passengers by the end of this year, doubling to 19.5bn by 2042, and reaching 24.5bn by 2052.

While the passenger growth looks positive, Juul-Mortensen noted that lower spend per head was impacting the channel, with some retailers in the Middle East and Europe noticing that sales growth can be slower than passenger growth, particularly with travellers reluctant to shop in uncertain economic times.

“Research shows that two aspects vital to attracting today’s travellers are value and personalisation,” he said. “When the cost of living pushes consumers to economise, value can be a powerful tool. But beyond accessible pricing and promotional discounts, shoppers may also perceive value in qualities like functionality and convenience.”

Protection needed from ‘heavy-handed legislation’

Erik Juul-Mortensen TFWA
Outgoing TFWA president: Erik Juul-Mortensen

Juul-Mortensen also highlighted the need to be cautious about legislative developments in the GTR space.

“Our industry is defending itself from heavy-handed or even misguided legislation in tough times,” he said. “In tough economic times, governments are always looking to close possible tax loopholes in our industry, which is often misunderstood by politicians.”

As an example, in July 2021, the UK government removed tax-free shopping with the cancellation of VAT-free shopping for passengers leaving British airports and seaports.

Arrivals duty free has also been scrutinised, Juul-Mortensen warned.

“As an industry we must remain true to our principles of duty and tax-free sales to travellers departing on an international journey, and in some cases offering the alternative of purchase at a duty and tax-free store.”

Younger generations

Generation Alpha – those born between 2010 and 2025 – should be a demographic to watch. While they are still young, Juul-Mortensen said, “there will eventually be two billion of them”, according to Pragma Consulting. As the consumers of tomorrow, they will shape retail strategy for years to come.

“Pragma describes Generation Alpha as the most digitally savvy generation yet, with a technology device as much a part of their play as building blocks. Almost half of them have a tablet before the age of six and over 60% own a smartphone by their 10th birthday.

“Although it’s tempting to think these youngsters inhabit a superficial world, both Generation Z and Generation Alpha are highly aware of social and environmental matters. They expect to see diversity and inclusion in the media and advertising they encounter. Their heightened climate consciousness makes sustainability a key criterion in their consumption choices.

“Taken together, all these factors mean that brand experiences in duty free and travel retail must move beyond core, physical products to tell a story that is relevant to their consumers’ lifestyle.”

The TFWA World Exhibition & Conference celebrated its 40th anniversary this year, which also marked Juul-Mortensen’s last event as president of the association.

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