Travel retailers rejoice as shoppers pack their bags

The travel retail sector has been grounded for much of the last two years, as the pandemic put a stop to travel, holidays were off the agenda for most and commuter stations were deserted as offices closed across the country. Today, however, despite remaining headwinds, there is a sense of optimism and opportunity.

Cost-of-living pressures have not dampened demand for summer holidays, and the number of flight bookings is increasing year on year, leading to airport gates buzzing with crowds of prospective customers. Rail travel has not returned to pre-pandemic levels, as those who once commuted may now be working from home, but the number of consumers travelling for fun, and at a leisurely pace with time to browse, is rising. Retailers that retained their presence at airports and stations around the UK and in international markets will reap the rewards this summer.

“The travel retail sector in the UK has recovered faster than we initially predicted,” explains Simon Black, executive managing director of commercial real estate agency Newmark HDH, which has worked with unnamed retailers to secure 27 new international airport stores over the past year, as well as shops on cruise ships. “The recovery story is occurring at mixed paces across channels. Demand for air travel and cruises has been extremely strong – whereas, because much of the workforce works from home all or part of the week, footfall through UK train stations has not recovered as fast as air travel.”

As a result, prospects are particularly positive for airports, believes Olivier Ponti, vice-president of insights at travel trend forecasting agency ForwardKeys: “Our data suggests [in 2023] the UK’s airport retail sector will have its best summer in many years. As of 31 January, UK outbound flight bookings for the peak summer months of July and August were 31% ahead of where they were in 2022 [but just] 0.1% ahead of pre-pandemic [2019] levels.”

Fashion and  lifestyle retailer Fat Face is well positioned in the travel retail sector. It has nine stores in UK airports and stations, including in Manchester and Edinburgh airports, and London Bridge station. Director of trading and sustainability Nick Stevenson explains that Fat Face’s bestselling categories vary between locations, but that performance has been strong across the board in the six months to February 2023.

“In train stations we generally see a higher mix for accessories than our other stores, but outside that, our bestselling product is quite consistent across all of our channels and stores,” he says. “In the airports, as well as the core offer, we sell summer categories, and flip-flops, sandals, swimwear, dresses and shorts continue all through the winter.”

Stevenson is positive about the potential of the market: “We have a very measured and thoughtful approach to our store portfolio, but travel locations are an important part of this. They’re a great way to get the brand seen by new consumers because of the high footfall that you have in these areas.”

Although customer spend for last-minute holiday buys is not quite back to pre-pandemic levels, last year delivered strong growth in airport retail revenue. London Heathrow airport, which houses concessions for JD Sports, Kurt Geiger, Burberry and Harrods, reported a 238.5% jump year on year in overall retail revenue to £413m in the nine months to 30 September 2022. This was £536m for the same pre-pandemic period in 2019.

Manchester Airport Group, which owns Manchester, Bournemouth, London Stansted and East Midlands airports, reported that retail concession increased fivefold – by 401.2% – to £81.2m in the year to 31 March 2022. However this is still behind pre-pandemic levels of £198.1m for the year to 31 March 2019.

As passenger figures rise again this year, airport retailers are anticipating a bumper holiday season, brands are keen to capture the potential sales and brand exposure a long, hot summer can bring.

“We’ve seen spend not only recover, but exceed pre-pandemic levels across many categories,” says Rachel Bulford, director of retail at London Gatwick airport, home to retailers such as Fat Face, Superdry, Reiss and Dune.

“We’ve continued to see strong spend across our fashion category [compared with] 2019. This isn’t just what would typically be classed as ‘affordable’ – this includes premium watches, fashion, handbags and other accessories. There’s a real desire to not just travel again, but also to make the end-to-end journey one of enjoyment.”

Richard Gill, commercial director at Birmingham airport, agrees, noting that essential retail, sports, fashion and accessories brands are growing well: “The travel environment provides brands with the opportunity to promote to huge numbers of UK and international consumers. Our passengers are looking to enjoy themselves on perhaps their first holiday in a few years, and the start of their holiday commences at the airport.”

Retail derailed

Passengers are also returning to railway stations, albeit more gradually. Department for Transport figures show passenger numbers across the UK’s national rail network hit 990 million in 2022, but peaked at just 73% of pre-pandemic levels in 2019.

Wendy Spinks, commercial director for St Pancras International in London, attributes the limited recovery to changing work patterns: “Most people are travelling again for work but just not as often as they used to.” Convenience and efficiency is key for these shoppers, and Spinks sees stations such as St Pancras as a “one-stop shop” for commuters’ busy routines.

However, leisure travel is on the up, especially at weekends, when footfall is ahead of pre-Covid levels by up to 20% on some routes. Statistics from the Department for Transport show 37% of national rail journeys were made for leisure in 2022, compared to 26% in 2019.

“The shift to more leisure travel is an interesting and exciting trend, as passengers travelling for leisure generally have more time, are looking for experiences and are in bigger groups, so we see real opportunity for the retail sector,” she says. For summer, the station is planning a series of cultural events to draw travelling shoppers into the station. Details are yet to be announced, but St Pancras has previously played host to art trails, seasonal retailer pop-ups and poetry readings.

Nigel Darwin, CEO of footwear retailer Dune Group, says UK travel presents an opportunity for the brand. Dune currently operates three airport and two rail locations in the UK. Despite the positive mood, footfall has not yet recovered to pre-pandemic levels for the retailer, but Darwin is optimistic about the season ahead: “We are expecting more normal patterns through the remainder of the year, and ongoing positive momentum. As the world continues to open up, and individuals settle into new patterns of travel – whether for vacation, business or internal commuting. We expect to continue to see growth from many key groups, and no doubt tourism into the UK will build this year and have an impact."

“Travel retail, like all retail, is always evolving. Keeping close to our customers, listening to our team and what they are hearing from customers is so important,” he says. “We know we can never stand still.”

Darwin highlights the importance of carefully tailored product offers and smart merchandising when building a travel retail offer: “At travel locations, speed can often be particularly important to the customer, so clearly merchandised sales floors and efficient, knowledgeable staff are so important.

“Beyond that, our passion is for product, and we want our stores to fully show off our product: making sure each product has room, works clearly with other products in the range – giving customers helpful choice – and is easy to find and understand.”

Nick Stowe, CEO of Monsoon Accessorize, is “bullish” when it comes to travel retail and is primed to capitalise on holidaymakers’ positivity with a targeted offer. Accessorize has 26 UK travel stores, and eight in European airports, including in Munich and Frankfurt airports in Germany, and Milan in Italy, with stores planned for Hamburg and Zurich airports this year.

“Our travel business is performing well, ahead of our expectations, with strong growth that has built consistently over the past year,” says Stowe. “As a segment of the business, travel has been a focus for us, and we doubled down and invested in it during and after the pandemic. That bet is paying off. The strong performance we saw starting in late spring last year has continued, and we are looking forward to the summer, with some expanded beach collections and a strong bet on inventory.”

Newmark’s Black notes Monsoon Accessorize sits in the gifting category, which performs well for travel retail, and says he has also noticed a demand for athleisure and sportswear brands at travel locations: “This market is relatively under-provided for in the UK travel retail market, despite being a massive growth category in the downtown and high-street retail sector.”

Although the mood is generally positive, challenges remain says Nick Carroll, retail insights category director at research company Mintel: “Plane cancellations, strike action and surging fuel prices all have the potential to seriously affect travellers and, in turn, retailers.

He explains that value continues to be a deciding factor: “Retailers in travel locations can’t do much to impact these factors, but should look at ways to help consumers get value from their purchases when they do travel. While travel hub visitors are, to a degree, a captive audience, they remain savvy and for almost a third (29%) high prices were the reason they didn’t buy [ Mintel's August 2022 travel retail report found].”

When passengers are delayed within airports, there is a silver lining for retailers. Increasing the “dwell time” shoppers have in airports means consumers are more likely to make a purchase. Mintel's report found that 55% of consumers who visited a travel hub are more likely to buy the longer they spend in a location. The challenge for retailers is to create a compelling offer to catch the attention of travellers – whether they are delayed or not.

The CEO of one retailer with a presence in UK stations tells Drapers that trade during the ongoing rail strikes has been “surprisingly resilient”, and that reacting to the present challenge was not dissimilar to navigating typical fluctuating demand – managing hours and wages for staff as they would for slower hours or periods.

During the pandemic, Drapers understands that [national] UK rail stations and airports removed minimum rents, and instead charged turnover rents to help retailers navigate the crisis, while the furlough scheme was widely utilised to manage wages. Now these schemes have ended, airports and retailers are employing new methods in response to continuing fluctuations within the sector.

Gatwick’s Bulford notes that retailers are remaining competitive by offering click-and-collect facilities in airport stores, digital points of sale, and airport-exclusive products and prices. Gatwick also helps retailers with queue management and merchandising to capture a time-poor consumer.

“Our customers have a short timeframe within which to make a purchasing decision, which plays into the offer and layout of a shop. And it’s these points where travel retail tends to be more targeted than you would typically see on the high street.”

Travel retail is without doubt in its strongest position since before the pandemic. Retailers should tailor their offer and make their stores as time efficient as possible to capture the transient, sun-seeking consumers' spend this summer.