All over the world, industries have suffered since Covid-19 started to spread during late 2019.

This statement is particularly accurate for the travel and tourism (T&T) sector, it sustained severe damage in 2020 with major airports all over the world closing their runways. The industry also couldn’t fully recover its losses in 2021, regardless of how impressive its financial performances looked on a Y-to-Y basis. The MENA region, that counts more than 60 international airports, including some of the busiest of the world, wasn’t an exception. In a recent report, the World Travel and Tourism Council estimated that Middle East’s T&T sector generated $246 billion in 2021. A total that is still 9% lower than the $270 billion total revenue recorded in 2019, despite an almost 90% surge compared to 2020.

However, things look different for luxury retail, a sector that generates a small, yet consequential, part of its turnover in duty free shops around the world (less than 5 % worldwide, according to numbers revealed by Statista). In the MENA region, and more specifically in the GCC, the sector’s performance was also affected by the pandemic, but the impact varied according to the country’s exposure to tourism and luxury spending repatriation, among other factors, according to a Bain & Company report. Published a year ago, the report showed that the luxury goods market in the GCC fell to $7 billion and that the drop was, for example, more severe in the UAE “where tourists account for as much as 60% of the luxury market”. According to experts, the drop was naturally sharper in airport duty free shops and for in-flight sales as air traffic was reduced to almost nothing for a long period of time during 2020.

But unlike the T&T industry, the luxury retail sector did more than OK in 2021, especially in the GCC, where it outpaced its 2019 results by 23%, with sales reaching an almost outrageous $9.7 billion as found by a report published last March by the Chalhoub Group. The report added that the sector’s growth was driven by a combination of factors including spending repatriation, retail developments across the region, surging e-commerce and a “Tourism recovery in [the] UAE, fueled by Expo 2020”, all of which played key roles.

USD 145 billion  in 2028

This positive trend is mostly limited to the GCC, while other MENA region countries like Lebanon – that has been experiencing a major economic and financial crisis since 2019 – or Egypt – whose growth is sustained by IMF financing facilities – are still waiting for brighter days. Also, despite its strong recovery in the GCC, luxury travel retail (basically duty free shops and in-flight sales) still seems to be underperforming regionally as well as globally, mainly because of the lack of big spenders such as Asian travelers, especially those coming from China, according to several expert opinions and reports.

These trends naturally affect the luxury brands’ strategies in MENA region airports. And while the luxury product portfolio in Beirut International Airport is limited to a handful of names – Salvatore Ferragamo, Armani, Mont-Blanc, etc. -, some brands have lately been investing in retail in other major GCC airports. In February French jeweler Cartier opened an airport boutique concept at Dubai International Airport. Last December, Louis Vuitton opened its first retail store in the Middle East in the very same location.

These strategic decisions could well mark the beginning of a trend that was put on hold by the pandemic and that is not limited to the MENA region. In 2019, the WSJ noted that more and more luxury retailers were reporting great results in major international airports “in large part due to a spike in travelers from emerging markets such as China, India, Russia and Brazil that are seeing rising middle classes”.

Also, analysts believe that the global travel retail market will continue to steadily grow in the next decade, sustained by a substantial development of the T&T sector. It will reach $145 billion in 2028, registering a CAGR of 14.9% during the forecast period, according to an Allied Market Research study published in September 2021. Luxury retail will follow a similar trajectory, but it is likely that brands will have to adapt their sales channels away from traditional duty-free shops to create a new breed of concept store able to optimize their revenues while serving fewer passengers.