The emergence of Asia-Pacific (APAC) as a global economic hub and popular tourist destination in the last decade along with a sharp rise in low cost air carriers has resulted in a swift growth of air travelers and investments in airport infrastructure in the region. The APAC airport retail market is estimated to grow at a compound annual growth rate (CAGR) of 8.3 percent between 2019 and 2024 to reach US$ 29.8 billion, says GlobalData, a leading data and analytics company.
This rise in the number of air passengers and continued investments in airport infrastructure, particularly in China and India, will provide airport retailers with expansion opportunities and a broader geographical reach despite the Coronavirus outbreak.
Hrishabh Kashyap, retail analyst at GlobalData, says: “Airport retail remains an exception in an otherwise ailing physical retail market. The growing number of air travelers in the APAC region coupled with elevated security norms at airports delivers a constant supply of captive audiences with a higher tendency to spend, aiding the growth of airport retail revenues across the region.”
However, a number of factors soften the growth potential in the region. The economic slowdown in China, the US-China trade war, Hong Kong protests and the cold war between Japan and South Korea impact tourism levels at the regional travel. Now, the escalating severity of Coronavirus could have a detrimental impact on airport passenger numbers – causing concern for airport operators and retailers. The restrictions on travel for Chinese consumers will impact the performance of airport retail worldwide.
If outbound tourism from China suffers as a result of Coronavirus, airport operators and retailers must adapt their strategies to target other passengers. The virus outbreak has already dented retail and leisure spending across the Chinese new year holiday and could lead to a massive blow to both APAC and global airport retailing. With the Tokyo Olympics around the corner in 2020, as seen with previous Olympics, we expect to see a halo effect and 2021 and 2022 also benefiting from the games. Hence, developments to control the spreading of Coronavirus become far more important for the airport retailers in the whole APAC region. However, if the virus is short-lived, then the lasting impact will be small. The region will continue to be the long-term focus for airport growth – but there may be a short hiatus due to this outbreak.