Middle East conference addresses key regional challenges

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Day one of the Middle East Duty Free Conference produced some lively debate among the leading operators in the region, with the issue of pricing among the most contentious

Delegates heard that the Middle East was the standard-bearer for standards in global duty-free, at the event co-organsed by TFWA and Moodie International for the Middle East Duty Free Association (MEDFA).

President of Dubai Dept of Civil Aviation and chairman of Emirates Airlines HHSheikh Ahmed bin Saeed al Maktoum opened the proceedings with an upbeat view of the future of the region, and outlined the ambitious infrastructure plans for transport and aviation-related business in Dubai. The government has pledged $3bn for a new Dubai International airport terminal dedicated to Emirates, and set to open in 2006. Dubai Duty Free will operate alnmost 10,000sq m of retail space there.

MEDFA president John Sutcliffe said the region accounted for just 4% of global sales, but pointed out that it was the fastest-growing duty-free region in the world. With tourism arrivals growing at 10% a year and a resilient industry that has bounced back quickly from other setbacks, Sutcliffe said: "Imagine the potential of this region if peace arrives. It will be huge."

Irish MEP and former minister of foreign affairs Gerry Collins also forecast a bright future for the business, given the huge investment by governments in transport infrastructure, growth predicated on strong tourism rises, with benefits accruing to duty-free.

In a video interview, HH Sheikh Hamdan bin Maktoum said Gulf Air would be back in profit by 2005 after a year of heavy losses, with passenger figures of 6m a year by then. A new terminal at Abu Dhabi International airport, where work begins next year, will take commercial space to 6,500sq m for Abu Dhabi Duty Free, and he added that Abu Dhabi could one day even launch its own airline.

A panel of regional operators singled out potential war in the region as the greatest threat to the business in the coming year, as tension builds around Iraq. Abu Dhabi Duty Free managing director Mohamed Mounib said: "This time we may take longer to recover if there is war. We should be discussing this problem, not ignoring it. We need to work in partnership together as an industry, and we need to plan for that eventuality. Kuwait Duty Free operator Habchi & Chalhoub managing director Anthony Chalhoub said security was top of the agenda for travellers now, and this was preventing travel and spending.
The leading operators also called into question some supplier attitudes towards the region.
"Some suppliers are taking advantage of the fact that we don't pay royalties to an airport authority and use that to set prices that suit them but not us," said Mounib. "Some suppliers, particularly in tobacco, just aren't playing fair." Dubai Duty Free managing director Colm McLoughlin said: "Some operators in other places pay less for goods than we charge at retail and we don't like that."
When asked how MEDFA might respond as an organisation to these concerns, president John Sutcliffe said he didn't want to see price-fixing in the region or create barriers for suppliers, but he added: "If there is a structural problem with a category, then that creates concern for our members and we will act on that next year."

To conclude, Alpha Retail regional managing director Paul Topping discussed the huge potential of India in duty-free. With per passenger spend of under $2, he said there was huge business to be created if certain obstacles are overcome. These include the regulated market, legislation, red tape, protection of the local market, an unhelpful government, privatisation of airlines and airports and Customs problems.
Most Indians shop overseas as goods are often not available in Indian duty-free, and credibility needed to return to the market, said Topping.
He said: "When India becomes competitive, it could be the second largest market in the world."