As Travel Picks Up, Can Airport Retail Fly Again?

After the COVID-19 pandemic brought United States tourism to a standstill, Americans appear ready to travel again — and that could be a boon to beleaguered airport retailers.

In a recent study, database Research and Markets reported that the travel retail market was valued at $74.3 billion in 2019 and has grown consistently over the past two decades. But after a sharp decline in passenger traffic due to the global health crisis, it’s expected to record only $33.4 billion in retail sales for 2020 — a year-over-year drop of more than 55%.

However, amid easing restrictions and widespread vaccinations, the country has lately seen an uptick in the number of travelers, partially fueled by spring breakers and vacationers. The Transportation Security Administration screened upwards of 1 million passengers a day for almost every day in March (only five days in the month were under 1 million). According to experts, airport retailers will naturally benefit from this influx of tourists, who often have time to spend at shops before boarding their flights or are willing to shell out for last-minute gifts on a whim.

“U.S. airports have seen a steady increase in travelers over the past few weeks. The airport retail industry will see a similar comeback, benefiting from consumers’ excitement as they return to the skies — and to a sense of normalcy,” explained Dara Busch, president of consumer practice at 5W Public Relations.

The new travel consumer

Today, many retailers at airports such as John F. Kennedy International Airport in New York and the Los Angeles International Airport in California are still shuttered — and even when they do resume operations, some experts suggest that the new traveler shopping habits, which have dramatically changed amid COVID-19, could become permanent.

According to a study by AlixPartners, 86% of respondents said they plan to travel less frequently and spend less in airport shops, even when restrictions are lifted. The consulting firm also reported that 43% of consumers said they would avoid interacting with sales staff when in shops.

It’s no surprise then that cashier-less technologies and contactless services — offered by an increasing number of standalone chains, as well as stores in malls, outlets and other shopping centers — are also taking over airport retail. Early in the year, for instance, travel retail giant Hudson Group launched a pilot program using Amazon’s Just Walk Out technology, which allows shoppers to be charged for the items they take out of the store without the need to interact with a salesperson or cashier.

“We will see a shift in the way consumers are shopping, with airport retail adopting many of the contactless practices we’ve seen across the retail industry in general, from self-checkout to vending machines and even [Amazon’s] technology,” explained Busch. “We may also see a change in what consumers are spending their money on, with interests and priorities shifting over the past year.”

Luxury, say experts, is one of the categories that could see marked growth as travelers fly once again. In the years preceding the pandemic, high-end retailers sought to expand at airports due to the surge in tourism from emerging markets like China, India and Brazil. According to management consultancy Bain & Co., 6% of global spending on personal luxury goods two years ago occurred in airports — also one of the fastest-growing channels for luxury goods, with sales climbing 11% for the year, compared with the market’s 4% growth overall.

“Once people are fully vaccinated and able and willing to travel, retail sales within airports will thrive for certain,” said Farla Efros, president of consultancy HRC Retail Advisory. “I think the excitement will have increased benefits — lots of pent-up demand from the lack of travel, lack of in-person gift-giving or even lack of potential duty and tax savings.”

Miles to go

But while domestic travel is picking up, experts say it will likely take a while for tourism to truly regain its pre-pandemic momentum. Even with a greater volume of tourists commuting through airports with time to burn and money to spend between flights, Aptos VP of retail innovation Nikki Baird said the general consensus is that airport travel is still nowhere close to normal in terms of consumer behavior.

“People are not doing any time-killing browsing or spending time anywhere that is a ‘crowded’ space, like shops,” she explained. “And with international travel still severely curtailed, the opportunity for duty-free shopping is also still going to be very limited.”

Ultimately, the road back from the health crisis remains a long one: The future of the airport retail industry is highly dependent not only on business travelers, who are steadily returning back to work amid office reopenings, but also leisure travelers, whom experts say are more inclined to spend on discretionary goods and make impulse purchases before heading to their destinations. But, according to credit ratings agency S&P, passenger traffic could remain below pre-COVID-19 health crisis levels until after 2023.

“Tourist travel is going to drive a lot more of the retail spend in airports, outside of food service, so until tourist travel can come back to any large degree, then airport retail will likewise suffer,” Baird added. “Business travel drives some retail spending, and it looks like that will start to come back sooner, but that drives much less of the retail spending than tourism does.”

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