Russia and abolition among key themes at St Petersburg

Dermot Davitt

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RavenFox.com reviews day one of the Baltic and East European Travel Retail Conference

Russia's airport retail market, intra-EU duty-free abolition and airport development in eastern Europe were among the key issues discussed on a lively first day of the Baltic & East European Conference in St. Petersburg today (November 24).

Opening the event, Vienna Institute for International Economic Studies Leon Podkaminer said he was "cautiously optimistic" about the region's economic development. Over the past 10 years, he said, GDP growth in the new EU states and Russia had outstripped that of western Europe, and he expected this growth to continue in the coming years. The purchasing power of consumers would increase, he added, but would remain lower than that of the existing EU states even in 10-15 years' time. He cited the challenges of unemployment and competition from the low-cost markets of Asia as possible obstacles to growth.

A strong line-up of airport authorities led the day's first panel session. Prague Airport director of international affairs Vaclav Muchna said EU accession and abolition had hit Prague's duty-free business hard, although traffic has increased by 30% year on year in the past three years and led to an increase in total revenues to the airport. Riga airport marketing director Liene Freivalde said that Riga was embarking on a new commercial strategy from 2006, including tenders for 15 shops, which will include some new concepts. East Line Group head of marketing Leonard Blinov outlined the ambitious developments planned at Moscow Domodedovo, including an Airport City complex designed to attract employees and locals to visit the airport, as well as plans to create Domodedovo Plaza in 2006, which will add 10,000sq m (107,600sq ft) of landside commercial space to the airport.

European Travel Retail Council president Frank O'Connell outlined to delegates the benefits of better industry representation and asserted the Council's goal to have membership in every European country within three years.

Dufry Eurasia chief operating officer René Riedi and Lenrianta general manager Liam Flood delivered fascinating insights into their respective key markets at the airports of Moscow Domodedovo and St. Petersburg.

In a session on how companies have coped with the abolition of intra-EU duty-free in the region, Inflight Service airport retail director Lars Olof Corselli said abolition had resulted in customer confusion, more taxes and administration for retailers, plus more competition from the local market. Silja Line senior vice-president passenger services Pekka Helin said shopping revenues had fallen from 39% of income to 35% between 2003 and 2005. Overall, the retail business is about 65% of what it was previously, with sectors such as beer and tobacco bearing the brunt of the losses. But he said there were still opportunities for the Baltic ferry business. These included the trend towards cruising as a leisure option, growing interest among passengers in pre-order, and the fact that travellers were now more ready to buy on impulse if presented with the right assortment.

In the final panel discussion, Gebr Heinemann regional director Pierre Viarnaud said Travel Value remained the best option for retailers facing duty-free abolition, but they require a suitable local tax structure and flexibility among airports in renegotiating concession fees. On the opportunity for growth in the region, he said the only questions was not if, but at what pace the key markets would grow. Dufry's Riedi said economic growth and low-cost traffic would be among the factors that define the future of the business, while Aer Rianta International's John Moriarty said Russia's possible entry to the World Trade Organisation and the political landscape after president Putin leaves office would have a big impact on the trade in future.

Russian Standard vodka, the main sponsor of the event, hosted the Opening Cocktail on Wednesday evening.

A full report of the event will appear in DFNI's December 15 issue.