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People often ask me where I see the next big opportunity in travel retail. Which market? Which consumers? Which categories?
Three days in the Philippines has helped shape my answers. Except I wouldn’t say ‘next’ opportunity. It’s here. It’s now. It’s happening.
This week I’ve spent time at Mactan-Cebu International Airport’s splendid Terminal 2; at Duty Free Philippines elegant new downtown LUXE store in Manila; and at Ninoy Aquino International Airport and Fiesta Mall, also in the capital city.
The two airport visits and my tour of LUXE, in particular. opened my eyes to what a vibrant and fast-changing travel retail market this country has. Chinese tourism (and business investment) in the Philippines is booming and on the back of it so is travel-related shopping.
No-one knows that market – or understands the sea change that’s been happening – better than Jose Maria ‘Chim’ N. Esteban III,Chairman of Landmark Management Services and Landmark Management P&C and founder of Regent Travel Retail Group, with whom I’ve had the great pleasure of spending much of my time here, along with son Joey and daughter Celina.
Chim is the pioneer of duty free and travel retail in this country, a man held in huge respect not just here but throughout our industry. Back in 2012, I presented him with an Outstanding and Pioneering Contribution to the Travel Retail Industry award. The occasion was the 25th anniversary celebrations of Duty Free Philippines (DFP), held in Manila. It is worth repeating the words I uttered on stage that night, taken from a book I wrote called ‘Duty Free Philippines 25 years – Aquino to Aquino’, which told the tale of the retailer’s first quarter century.
“Chim was the man who dared to dream. Pioneer, pragmatist and patriot, founder, futurist and far-sighted visionary, a man who has had a profound influence over duty free retailing in the Philippines.
“In early 1987 he was appointed to head a task force charged with mapping out DFP’s initial operations with just US$91,000 in capital at his disposal. He became the retailer’s first General Manager and drove its remarkable progress from a difficult start-up with sales of less than US$10 million in its first year to a US$219 million turnover by the time he left in 1992.
“After that he remained close to the organisation as a supplier, and in 1998 became a sub-concessionaire to DFP through his company Fashion Walk – later adding perfumes & cosmetics to the retail portfolio. He has done as much as anyone to raise the game for Duty Free Philippines.”
Raising the game is precisely what Chim continues to do. Through Landmark Management Services and sister company Landmark Management PandC he acts as a partner and sub-concessionaire to state-owned Duty Free Philippines across fashion and beauty. Through Regent Travel Retail Group, in which Joey and Celina play lead roles as President and Managing Director, he has also created a fast-growing, multi-category duty paid, convenience store and F&B business that is thriving as tourism grows.
In coming weeks I will publish the biggest report yet on travel retail in the Philippines. In this Blog I’m going to focus on what I consider to be two step-changing developments for the sector – Mactan-Cebu International Airport T2 and LUXE.
Both represent a new, different and compelling face of travel retail here. First, Cebu, a terminal opened to much fanfare last June, and to which I gladly add my own accolades to all those that have already been heaped on it. My pictures tell the story better than my words can. The fusion of curved wooden structures, metal and an abundance of natural light makes it one of the most charming airports I have ever used. Charming? How often do you hear that adjective applied to an airport? Come visit (Cebu is lovely, so it won’t be a hardship) and you’ll see what I mean.
It’s also a terminal that’s been developed with commercial services – and the consumer who uses them – front of mind. The retail, a combination of duty free (overseen by Duty Free Philippines working with its sub-concessionaires) and duty paid (Regent Travel Retail) is high class; the food and beverage (a joint venture between Regent and SSP) is attractive, diverse, well-designed and service-led.
More of all that in a moment. Let me first share one of the key dynamics of this terminal – its passenger mix. As Ravishankar Saravu, Chief Commercial Adviser for GMR Megawide Cebu Airport Corporation, which has driven the development, told me, four years ago there were almost no Chinese passengers at Cebu, and no direct flight connections. Today, the Chinese represent around 15% of the 3.8 million (in 2018) international passengers (Koreans lead the way with 30% and the Japanese also represent 15% – a heady passenger profile from a retailer’s perspective) and a much higher proportion of spend (the highest ATV by far and almost on par in total sales with the Koreans).
The retail mix reflects the passenger profile. The big beauty names are mostly out in force and are represented with considerable class, across cosmetics (in particular) and fragrance. There’s an excellent and often premium liquor offer and an eclectic confectionery and foods one. Fashion and accessories, through Regent Travel Retail, is poised for a big step up with a series of openings in coming months.
Regent Travel Retail Group President Jose Alfonso ‘Joey’ Esteban hopes that international brands will start to view travel retail in the Philippines through “a different prism”.
It’s no longer just about the returning Filipino business (important as that sector remains), he points out. The Chinese are coming in ever greater numbers and the offer is being adapted accordingly. Tourist demand is growing and the Philippines is awaiting them with open arms.
“All the fundamentals are in place for growth,” Joey says. “We’ve got a 100 million-plus population, 7,000 islands, 30-plus airports, many of which are very small and provincial – it’s not your typical country.”
And here’s the thing. Chinese tourists – and by definition Chinese shoppers – are increasingly finding their way around those islands. “One of our big strategies is to find the Chinese consumer wherever they are in this country,” says Regent Travel Retail Group Managing Director Celina Marie M. Esteban. “It’s a very focused tourist shopping destination.”
More of that in my main report, coming soon. But first a word about Cebu’s F&B offer, very capably run by Neil Streeter, General Manager of SSP Mactan Cebu. Neil’s a veteran of the F&B business and he’s already got this fledgling business impressively fine-tuned. SSP and Regent are running nine outlets here, ranging from Burger King (believe it or not the most successful Burger King door in the country) to a nicely eclectic, multi-country Asian Kitchen concept and a great, highly instagrammable Ramen offer.
We dined at Asian Kitchen on Monday and Neil’s eyes were on the service as much as they were on the food. He runs a tight ship but one underpinned by respect for all the local staff he has employed here. Again, look out for my interview with him, coming soon, a real insight into how to run a quality F&B operation and a refreshing affirmation that regional airports can deliver a high-quality dinner offer.
So to LUXE, summed up in one word and three letters. Wow. And the project isn’t finished yet. Don’t expect a grand scale T Galleria by DFS or a King Power Rangnam Complex. This is a more understated concept but it’s been classily and subtly executed over its two storeys. It is a game changer for travel retail here.
Fashion, accessories, luxury, confectionery, wines & spirits, destination merchandise on the ground floor, beauty (very well sign-posted from below) one level up. Simple enough. Top brands, stylish design, elegant merchandising. So far, so good. But what’s really exciting again is the Chinese spend. Not just regular tourists to the city but also the huge local Chinese worker community here (Manila is a hub of Chinese investment), who travel frequently back home.
While I sat chatting with Chim Esteban and Duty Free Philippines Chief Operating Officer Vicente Pelagio ‘Vico’ A. Angala in the main reception area, two young, stylish Chinese women entered the store, one carrying an MCM handbag. Noting how they headed straight up the escalator to the beauty department, I followed them just to see what had drawn their interest. Their first stop was the Lancôme beauty counter (pictured). And, yes, they bought. And I doubt they only made one purchase. This is a premium purchase offer, the likes of which has not been seen in this country.
It’s early days for LUXE and Duty Free Philippines and its retail partners are still working on their marketing programme to ensure maximum Chinese awareness of the store. More brands are yet to be added in the luxury area downstairs before the grand opening later this year. But the signs are deeply promising. So much so that Vico confirmed to me that DFP is contemplating further similar openings elsewhere in the Philippines in coming years.
Thanks to its emphasis on arrivals and post-arrivals shopping, travel retail here has always had a unique flavour. To that flavour, a whole lot of Chinese spice has just been added.