the meadfa report: day two · · 2018-01-30analysis consultancy forwardkeys, ... environment, the...

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The MEADFA report: Day two

By Claire Malcolm in Dubai on January, 30 2018 | Associations

Following an entertaining evening of gala dinner networking, coffee-toting delegates took their seatsfor day two of the 2018 MEADFA Conference with Samir Sweida-Metwally and Gary McFarlane, SeniorAnalysts with Emerging Markets intelligence & Retail, opening the program with a statistically-loadedpresentation on the economic state-of-play in the region.

Samir Sweida-Metwally, Senior Analyst, Emerging Markets Intelligence & Research

With oil prices set to hover around the US$70 mark this year, the scene set for US$ depreciation ofaround 5% benefiting numerous markets, and recovery in Russia and Europe stimulating tourismmovement, they noted that 2018 is nonetheless not expected to be a “bumper year by any means”with MENA region economic growth expected to pick up to 3-3.5%.

“Consumers are still feeling relatively squeezed and that won’t be helped by an increase in inflation,averaging at about 8% in 2018,” said McFarlane.

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Gary McFarlane, Senior Analyst, Emerging Markets Intelligence & Research

The tourism rollercoaster

Commenting on positives in the tourism economy, the pair discussed opportunities in Saudi Arabiawith its impending launch of tourist visas, and in the UAE where two GCC nations feature in the topfive source markets, for whom travel is all about discretionary luxury. Sweida-Metwally also flaggedthe spending potential of Chinese travelers, the country’s number five source market, for whom theUAE is back on the travel agenda with average spend (primarily jewelery and watches) up 42% year-on-year as at Q3 2017.

North Africa’s outlook is a mixed bag with Egypt on course for a better year, relatively speaking (4.5%economic growth forecast), with its tourism sector recording growth of almost 53% in the first 11months of 2017, with European visitors accounting for 81%. Morocco, specifically Marrakech, is thecurrent star performer, welcoming two million visitors in 2017.

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Olivier Jager, Co-founder & CEO, ForwardKeys

More data was thrown into the mix courtesy of Olivier Jager, Co-Founder & CEO of travel industryanalysis consultancy ForwardKeys, who shared insight into regional traffic trends, noting thatinternational arrivals into the Middle East grew by 10.5% in 2017 led by ASPAC with the “free visa onarrival definitely having something to do with this.” He also pinpointed Tunisia’s rebound (arrivals up+29%) following the mid-2017 rescinding of travel warnings by the UK and other countries, whichtriggered business in the second semester.

Opportunities for the region’s aviation hubs were also addressed with Jager noting Oman’s proactivegrowth strategy through its national carrier, and touching on “super connector” gateways Istanbuland Dubai, both of which continue to benefit from the Qatar situation. “However, [Qatar] is stabilizingas they have redeployed their fleet and adjusted their routes, but they are still losing a lot of Chineseand Indian travelers,” he added.

When quizzed about the impact of global terrorism on booking patterns, Jager had plenty to say. “Wecould write a book about it, but when people stop booking for one month this means you’re not goingto get bookings for another three months. If you consider the Chinese reaction to the [European]terror attacks, people were still travelling, just to different destinations. We work in a fairlyindestructible industry and the Chinese are among the explorers.”

Chicken, fish or duty free?

The waning fortunes of the inflight retail sector dominated the first half of the post-coffee break line-up with Karen Durban-Villeval, President, Inflight Sales Group Europe stating the case for the future ofonboard sales.

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Karen Durban-Villeval and Inati Ntshanga panel discussion

Airport duty free remains the “real competition” according to Durban-Villeval, who said that the holygrail combination of attractive pricing, strong communication and an interested sales-motivated crewis a non-negotiable moving forward.

She also pooh-poohed the idea of the death of onboard luxury sales, noting that brands such as LouisVuitton, Rolex and Hermès remain highly desirable. “Some luxury brands have pulled out butpassengers still want to buy them on board. In Africa, for example, they are still willing to buyexclusive items and sometimes this is the only way they have access to luxury brands.”

Technological innovation is also critical. “For us, it’s just a took and won’t replace actual duty free onboard. We need to develop CRM technology and targeted customer promotions,” she said.

Inati Ntshanga, Aviation Consultant and former CEO, SA Express Airways also joined the conversation,even mooting the idea of having crew report into the commercial division in the future.

“If [African airlines] could increase ancillary sales revenues then you’d see a huge difference inprofitability,” he remarked, adding that by only selling duty free and not within the domestic travelerenvironment, the industry is missing out on opportunities generated by 19mn+ passengers.”

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Audience poll from inflight session

The sensitive topic of information sharing was also touched upon. “By sharing data we could set uptargeted customer offers, and of course we’d sell more. We need airlines to understand that thebusiness model has to change,” concluded Durban-Villeval.

Preparing to do battle

Sarah Branquinho returned to the podium in her capacity as ETRC President to address the pressingissues affecting the industry’s future, with the implications of the FTC Illicit Trade Protocol,ramifications of the recent introduction of GCC excise tax and VAT, new labelling legislation and handbaggage restrictions sobering topics.

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Sarah Branquinho, ETRC President – industry challenges presentation

Commenting on the WHO’s non-negotiable tobacco sales stance, she said: “It’s not whether we arepart of the illicit trade, but the extent to which we contribute. It means there is an assumption beforewe even start. The worst case scenario is we are looking at a worldwide ban on duty free tobaccosales in 2021.”

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With 34 countries already committed, including 10 MEADFA member nations, the clock is ticking withonly six more countries needed to ratify by October 2018 for the ITP to come into force. SaidBranquinho: “We’ve only got a brief window now to get to those countries that haven’t ratifiedalready, and I think there’s a lot of misunderstanding among governments as to what duty free is.”

Labeling was also discussed and Branquinho provided a detailed update on the under-developmentETRC digital pilot scheme for liquor, beauty and food, that she hopes will demonstrate to the EU thattravel retail has a workable solution.

Bernard Creed, Senior VP – Finance for Dubai Duty Free walked delegates through a GCC Excise/VAT101 introduction, remarking on Sharjah Duty Free’s decision to stop selling tobacco on arrival fromthis week; with Nuno Amaral, MEADFA Vice President and CEO, ARI ME, weighing in on the dualimpact. “The difficulty we have is that we are not that developed in the region in terms of lobbyingcapacity. We need to speak as one voice but it’s difficult as an organization with each company in itsown country dealing with their respective authorities.”

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Sarah Branquinho, ETRC President, Nuno Amaral, MEADFA Vice President and Bernard Creed, SeniorVice President – Finance, Dubai Duty Free – panel discussion on industry challenges

Brand Africa

A welcome dose of humor and passionate market insight defined the final speaker session withbroadcaster, business and branding expert and author of Africa is Open for Business, VictorKgomoeswana, spreading his own unique pro-business Africa gospel.

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Victor Kgomoeswana, Author, Broadcaster, Branding and Business Expert on Africa

With virtually every airport on the continent investing in expansion and upgrades, new government

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leaders making democratic moves and carriers like Ethiopian Airlines pushing for increased globalconnectivity, according to Kgomoeswana it’s time to talk brands – and not just the Apples, Coca-Colasand Nikes of the world.

“With 300 million people, there’s a lot of duty free business that can be done and brands are a lotmore sentimental in Africa than you think. It’s a symbol of status,” he remarked.

He shared data from a 2016 survey of citizens in 19 African countries that analysed brand admirationand value, which produced some surprising results with a decent showing from brands unique to thecontinent, including Anbessa Shoes (Ethiopia) Tusker beer (Kenya) plus mobile money transferservice, M-pesa and several telecommunications names.

“Mobile telephony and IT reign supreme. Payment systems in duty free zones need to match Africancontinent norms, like M-pesa, and blockchain cannot be overlooked, noted Kgomoeswana, adding:“The real growth [opportunity] is not just finding out where you are opening but if there are brandsout there, favored by Africans, that you are not aware of.”

the meadfa report: day two · · 2018-01-30analysis consultancy forwardkeys, ... environment, the...

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