Avolta – the joint venture of travel retailer Dufry and travel food operator Autogrill – posted its first full-year results as a combined company today with a promise that revenues will outpace global passenger traffic growth in the future.
On a call with investors, Avolta CEO Xavier Rossinyol told analysts that under a medium-term outlook where passenger traffic would increase by 4-5% annually, he expected the company's revenues to rise by 5-7%. “Thanks to our new customer- and traveler-focused strategy, we will increase our spending per capita,” he said.
This is a brave message to convey to a company in the travel industry where unexpected events can be disastrous. The Covid calamity is not a distant memory; This caused Dufry's revenues to collapse to a low of CHF2.56 billion ($2.92 billion*) in 2020, a fraction of 2019's high of $10.1 billion.
Rossignol's confidence stems from Avolta's strong 2023 results and a strategic plan – Destination 2027 – that is progressing better than expected. Organic growth of 21.6% last year (using a preliminary comparison with the combined revenues of Dufry and Autogrill in 2022) enabled reported sales volume to reach CHF 12.8 billion ($14.6 billion). Operating profit also approached $1 billion, up from $573 million in 2022.
For comparison, French rival Lagardère Travel Retail achieved organic sales growth of 23% last year, with EBIT rising 80%. Most of the revenues of both companies come from the EMEA, North America and Latin America regions which have been very dynamic. In the case of Avolta, sales increased by 20%, 14% and 32.5%, respectively.
But in the last quarter, there was a slowdown to 13%. However, Rossignol described 2023 as a “very successful year” and noted that low-season trading in January and February reached 7% year-on-year. This provided reasons to rejoice in the peak summer months.
“More flexible than ever…”
“Thanks to our diversification today, we are more resilient than ever before – more so than Dufry and Autogrill separately,” the CEO said. “The macroeconomic impacts, geopolitical impacts, or even the risk of (losing) the franchise are much lower than ever.” “And that's why we feel confident about growth.”
The combined entity – whose shareholders include Alessandro Benetton and family holding company Edizione – is present in 73 markets with more than 5,000 points of sale and exposure to 2.3 billion travellers, easily more than its rivals. Last year, Avolta also retained some key concessions, The majority of Spanish airport contracts are renewed for 12 years, as the market is in good shape; and a 15-year contract extension at Harry Reid International Airport in Las Vegas.
However, achieving higher spending per passenger in the current economic and geopolitical climate may not be so easy, and could be a stick in Rossignol's back. Kearney's report to the World Tax Free Association, issued last October, said that although average spending grew during the pandemic, “it showed a decline starting in 2022, which is worrying.”
Kearney surveyed 3,500 customers in 10 countries and conducted in-depth interviews with industry executives. It found one notable problem: a mismatch between the historical value proposition of duty-free and new consumer expectations. About half felt duty-free prices were less competitive than local and online retail prices, and dissatisfaction rose to 40% for some product categories.
Target Gen Z
Rossignol doesn't hesitate to talk about his ambitions to “redefine” the global travel retail and food and beverage sector. It's tackling these issues in a new way: opening its first Avolta hybrid, specialty stores, and it's also targeting Generation Z in a big way, because they (and millennials) are expected to make up more than 70% of the commuter mix by 2040 (from about 40% today).
“We can adapt the offer to what travelers really want whether it's different nationalities, different types of travel, or age groups. We are accelerating that.” “The availability of food, beverage and retail gives us more opportunities to better adapt to changing requirements.”
Digital and generative AI and entertainment such as gaming will be part of the picture, with the ambition to have over 1,000 locations with activation by 2027. 88 stores loaded with advanced technology will be opened by the end of the year.
A greater focus on the Asia Pacific region, where Dufry is under-represented (at 4% of total turnover), will also be a priority. And not only China, but India, Vietnam, Indonesia and others. “These countries have large populations and will become travel powerhouses,” Rossignol said.
Avolta subdivided land in the area in the fourth quarter of last year With a new contract at Hyderabad Airport in India, new or updated stores include a wide range of retail and food and beverage units at Bangalore International Airport, as well as the Diptyque boutique and Crystal Jade restaurant at Shanghai Hongqiao Airport in China.
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*All currency conversions are made at today's exchange rate of 1 Swiss franc = 1.14 US dollars.
