What Does The Trump Travel Ban Mean For Duty Free & Travel Retail?

By: Daedalus   •   email: info@trunblocked.com

Travel bans are never good news for tourism, air traffic or, by extension, the duty free and travel retail business. At the moment there are two in operation that affect two of the world’s top three DF&TR markets: USA (3rd) and South Korea (1st), based on Generation Research data.

Here we are only looking at the USA market. Donald Trump’s revised executive order (EO) banning nationals from six (previously seven) Muslim-majority countries for a 90-day period, was again struck down by a Federal Judge, this time in Hawaii at the end of March.

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This means the ban is on indefinite hold, which might appear good news on the face of it, but the outcry that ensued from the original ban – and the muddled way it has been redrafted (apparently still not in a legally-acceptable way) – is damaging to both the reputation of the Trump administration, and to brand USA.

The initial January ban covered Iraq, Syria, Iran, Libya, Somalia, Sudan and Yemen (with Iraq now removed). From a travel and tourism viewpoint the issue for the US is not so much the inevitable decline of traffic from these markets – because it is extremely small in percentage terms – but the reaction of travellers from others much larger inbound markets and their travel intentions to the USA in the light of what many perceive as a discriminatory ban.

Discouraging more than Middle East travellers

In February seat analyst ForwardKeys pointed to a -6.5% ‘Trump slump’ reflecting year-on-year seat bookings globally in the week following the first EO.

The analyst concluded that the ruling has discouraged travellers globally saying: “The ban is putting off people travelling to the US from many regions of the world, beyond the Middle East.”

At global analyst Euromonitor, travel project manager, Nadejda Popova, comments: “The ambiguity of these developments introduced by President Trump is casting a shadow over the future travel demand to and from the US. The executive order could also impact how the US is perceived as a tourism destination.”

The reaction from the UN World Tourism Organization was scathing. Secretary-General, Taleb Rifai, said: “The image of a country which imposes travel bans in such a hostile way will surely be affected among visitors from all over the world”.

Not just an image crisis…

The USA travel trade is rightly worried about the country’s image, but other factors are also at play. The US dollar has been riding high against many world currencies since mid-2014, in particular the UK pound and the euro, making the USA a more costly proposition for most Europeans. The UK is the biggest inbound market for the US, excluding Mexico and Canada.

Top 10 Foreign Airports based on international
pax traffic to/from USA (2016 vs 2015)

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Source: US Dept of Commerce

Before the Trump ban, traffic to/from the USA was on shaky ground from European hubs. While overall international traffic to/from the USA increased to a record 220.8m in 2016, as the table shows, there was a reduction in growth from all the top hubs in Europe. London Heathrow was flat last year against +2% in 2015, Paris CDG was +0.6% (vs +6.1%), Frankfurt was +0.1% (vs +2.1%) and Amsterdam slightly better at +2.3% (vs +4.2%).

The growth slowdown is stark. In fact among the top 10 foreign hubs only Toronto and Tokyo Narita showed increases in 2016 y-o-y. There may be more low-cost carriers flying to/from the USA from regional or secondary airports – but the bulk of DF&TR sales will be concentrated at the key hubs.

Strong traffic to the US from China was a major success story in 2016 allowing DF&TR operators to make up for European shortfalls in west coast gateways such as Los Angeles (LAX) and San Francisco (SFO), but east coast retailers at airports such as Miami and New York (JFK) may struggle this year if a confluence of a high dollar and negative European sentiment towards the US lingers past the second quarter of 2017.

This year’s inbound flows from Europe will therefore be a telling sign of the reaction to Trump’s travel ban – whether or not it gets a green light from the USA judiciary. The mere fact that it has been struck down twice at home is a signal that perhaps the response in its top markets in Europe will also not be too favourable. Canada or Mexico anyone?

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