By Esther Fung
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 4, 2020).
Airport retail outlets have been a rare success story in the
slumping bricks-and-mortar world. Now, duty-free and other airport
shops are under siege from the coronavirus.
Airport terminal stores enjoy a captive audience, often one with
time on their hands. These retailers have become havens of high-end
shopping, with travelers buying luxury goods, liquor or perfume
often on a whim or as last-minute presents.
Travelers from Asia in particular have made duty-free shopping
sprees an essential part of their itinerary. Brands such as Estée
Lauder now have higher sales at major airports than in North
American department stores. L'Oréal SA said revenue at its travel
retail division, which occupies 9% of its global sales, rose 25%
last year, making the division one of the French cosmetics
company's fastest-growing channels.
But these stores are being pummeled since the coronavirus
outbreak began, as foot traffic drops at airports popular with
international tourists. Airport retail at some of the major Asian
hubs has tumbled 60% to 70%, according to the Moodie Davitt Report,
a travel retail-intelligence service provider.
"This is the greatest crisis the travel retail sector has faced,
worse than [severe acute respiratory syndrome], the two Gulf wars
or various financial crises," said Martin Moodie, chairman of the
report. "That's largely driven by the fact that the Chinese
traveler has become the epicenter of the sector over recent years
and many retailers are worryingly reliant on them."
In a February survey of more than 1,000 international travelers
from the U.S., U.K., Australia and Asia who are regular duty-free
shoppers, more than one-third said they would spend less time in a
store, not make a purchase if they need to wait in line, and would
be less likely to touch or pick up items, according to U.K.-based
travel-research specialist Pi Insight.
"There's a high portion of travelers who want to go straight to
the departure gate," said Stephen Hillam, managing director at Pi
Transport authorities in Singapore and Thailand began to offer
rent relief in February to retail, dining and service operators for
a period of six months to a year, to help defray costs and protect
In Hong Kong, the airport authority said it is expanding an
earlier relief package first extended in September to help retail
and catering outlets, airlines, ground handling agents and other
support-service companies. In total, these relief measures,
including rent adjustments and concessions, are expected to reach
1.6 billion Hong Kong dollars (US$205 million).
Airport foot traffic in San Francisco fell 15% in February,
compared with a year earlier, and declined 20% at Los Angeles
International Airport, according to geolocation data platform Advan
At Terminal 1 of New York's John F. Kennedy International
Airport, food-court vendors and retailers such as Hudson News said
daily revenues have fallen as much as 50% in recent weeks as
passenger traffic has plunged. China Eastern Airlines, Air China,
Korean Air and Japan Airlines fly out of Terminal 1, making it the
worst-hit among the airport's terminals because flight suspensions
have been more concentrated there, said Vivian Shi, manager of Wok
& Roll, a vendor that sells Chinese food.
"Now we're making $1,000 to $2,000 a day, compared to $4,000 on
regular days and $8,000 on exceptionally good days," said Ms. Shi,
who has also reduced supplies and cut staff hours.
Mall landlord Unibail-Rodamco-Westfield SE, which operates
stores and restaurants at airports in Los Angeles, Chicago and New
York, said those outlets also face lower foot traffic. But the
company added that only one tenant, in New York, has requested
shorter hours, and none has asked for rent relief.
"Unless the crisis persists beyond six months, I think many
tenants will stay put and wait this out," said Manny Steiner,
founder of real-estate consulting firm Steiner Placemaking
Write to Esther Fung at firstname.lastname@example.org
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March 04, 2020 02:47 ET (07:47 GMT)
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