Luxury Travel Retail: A $125 Billion Opportunity for Luxury Brands

Airports have become a global showcase for luxury brands, with retailers using their unique captive audience and cultural insights to create targeted and engaging shopping experiences.

Registering global growth of 9.6% a year, travel retail is expected to reach $174 billion in sales by 2030 1. The growth in travel retail is closely linked to air traffic trends which although susceptible to external shocks, as shown by the COVID-19 pandemic, is not going away anytime soon. Departing passenger numbers have quickly bounced back to pre-pandemic levels by the start of 2023.

Airports such as Heathrow are strategically targeted towards luxury and business travel and as Heathrow refines the passenger experience, spend per passenger increases. Travel retail is especially attractive for luxury brands, which account for about 35% of the travel retail market by value.

Why are luxury brands bullish on travel retail?

Travel retail is a "media" channel that allows brands to reach a global audience of affluent consumers. A presence in Heathrow airport is an opportunity to showcase their brand identity and heritage in a captive and immersive environment. Travel retail allows luxury brands to create unique experiences that engage and delight customers, as well as to introduce new products and collections that cater to different tastes and preferences.

The growth of the global middle class seems unstoppable

Source: A long-term view of COVID-19’s impact on the rise of the global consumer class | Brookings. (2022, March 9)

The world’s growing middle class are inclined to spend on luxury products while abroad. Moreover, a person’s willingness to spend on luxury items is strongly linked to their cultural norms: how important is a visual indicator of your success? According to a study by McKinsey & Company, Chinese travellers accounted for 32% of global luxury spending in 2018, and more than half of that spending occurred outside China 3.

Future Trends in luxury travel retail

One key trend in luxury travel retail is the increasing importance of Asia. The region is home to a growing number of wealthy consumers, and airport retailers are investing heavily in new facilities and offerings to cater to this demand. For example, China Southern Airlines recently opened a new luxury terminal at Guangzhou Baiyun International Airport, which features a wide range of high-end brands.

Another trend in luxury travel retail is the increasing focus on personalization. Retailers are using data and technology to better understand their customers' needs and preferences. This allows them to provide more tailored shopping experiences, such as recommending products that are likely to be of interest to the customer.

Luxury travel retail is a complex and dynamic industry. However, the key trends of globalization, personalization, and innovation are shaping the future of this sector.

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