Dubai Duty Free eyeing $3bn in sales by 2022 as airport expands

The retail operation is benefiting from weak dollar, uptick in Chinese visitors

Colm McLoughlin, chief executive of Dubai Duty Free, said sales in 2018 could reach Dh7.3 billion. Victor Besa / The National

Dubai Duty Free (DDF) expects sales to grow by more than half to $3 billion by 2022 as Dubai International Airport, the world’s busiest for international travel, boosts capacity to meet a rise in tourist arrivals, its chief executive said.

"We are planning to reach $3bn [in sales] and 9000 staff [by 2022]," thanks to "expansion of traffic and penetration and the number of people we sell to," Colm McLoughlin said in an interview with The National.

DDF, which grew its annual revenue 5.6 per cent to Dh7.05bn in 2017, expects it to reach Dh7.3bn this year, based on figures for the first two months of the year, which saw sales rise about 11 per cent.

Expansion work at DIA, which is expected to boost capacity by around a third to 118 million by 2023 is benefiting DDF. The uptick in sales is in part due to an increase in the number of Chinese tourists, the biggest buyers who account for 9 per cent of total sales, as well as the return of Russian tourists. Both nationalities have been granted visas on arrival by the UAE. The number of passengers at DIA from Russia climbed 28 per cent to 1.3 million in 2017, while visitors from China surged 19.4 per cent to 2.2 million thanks to the relaxation of visa restrictions.

“Russian traffic is not back yet to what it was 10 years ago but it is beginning to grow again,” he said.

As part of its strategic focus on shifting trends, DDF, which didn’t have any Chinese employees 15 years ago, now employs 693 Chinese staff out of 5900 people in total.

The total number of tourists to Dubai grew 6.2 per cent to a new record of 15.8 million last year as the emirate inches closer to achieving its target of welcoming 20 million travellers annually by 2020, when the emirate hosts the world Expo exhibition. Dubai International is the busiest international airport measured by total passengers for the fourth consecutive year, serving 88.2 million passengers in 2017, an increase of 5.5 per cent from 2016. Traffic in 2018 is forecast to grow 2.4 per cent to 90.3 million, according to Dubai Airports’ projections.

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The Duty Free is also benefiting from a weaker dollar against the euro and pound. The UAE's retail sector has suffered in recent years from the strong US dollar, to which the UAE dirham is pegged, making items sold in the duty free expensive to visitors from countries such as Europe and China.

“Currency fluctuations are a big consideration for us, and for a couple of years the euro dropped considerably and the pound sterling had dropped considerably and that meant we had to continually give discounts to passengers [from those countries],” said Mr McLoughlin.

“The dollar being weak, the sterling and euro being strong is good for us and good for visitors and good for Dubai generally.”

Western Europe displaced the GCC as the main source market region for Dubai visitors in 2017, with a 21 per cent market share and 3.2 million visitors, up by 5.5 per cent from 2016, according to government figures.

DDF, which is charging five per cent VAT on arrivals, expects sales in that segment to fall, but it will be surpassed by sales on departures as customers stock up on tax-free items.

“We think naturally our sales will drop on arrivals in comparison to last year,” said Mr McLoughlin. “But it has a positive effect on departing passengers because they see the value is very good and they see the value even better than it used to be in comparison with the local market."