Are Airports and Hotels Key to the Future of Retail?
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In April, Nike opened its largest store in Southeast Asia: a two-story, 10,700-square-foot store in Singapore’s Jewel Changi Airport. Foot Locker, too, debuted a sprawling store in the award-winning travel hub, which last year saw a record 65.6 million passengers passing through its four terminals.
The athletic retailers have good reason to hope for strong performance in these new outposts: For one, the Jewel Changi Airport has held on to the number-one spot on Skytrax’s list of the world’s best airports for seven years running. And looking at the broader picture, spending in airports is forecast to reach $49 billion globally by 2021, a 27% increase over 2016, according to GlobalData analytics.
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A report from Bain & Company also showed a 7% increase in luxury sales in airports in 2018 during which same time department store sales sunk 4%.
Amid industry-wide disruption, airport retail has emerged as a small but growing force, and according to a new report from the commercial real estate organization CCIM Institute, travel and hospitality could be increasingly important channels for retailers in the coming years.
In the report, CCIM Institute Chief Economist K.C. Conway predicts that, by 2025, successful retailers will be those that align themselves with services “services like hospitality, transportation centers, health care and education.”
Hotels will be an important component of this shift, he writes, pointing to some of the partnerships and large-scale ventures that have launched in recent years.
This summer, the luxury fitness chain Equinox opened its first hotel in New York City’s Hudson Yards development, with rooms starting at $700 per night. It’s planning on expanding soon to cities including Seattle; Chicago; Los Angeles; Santa Clara, Calif.; and Houston. West Elm, the furniture store, is opening five boutique hotels in 2020, and in April, minimalist lifestyle store Muji opened its first hotel in its native Japan (its first two locations are both in China).
Luxury brands such as Bulgari, Fendi, Armani and Versace also have international hospitality destinations, with more underway for the coming years. And hotel chain giants such as Marriott and Hilton report that high-quality retail options are an important draw for today’s guests.
“The attractiveness of leveraging hotels is strong,” writes Conway. “The hotel real estate option provides brand exposure, offers product interaction in high traffic areas and requires less physical real estate space and labor, which can improve margins to mitigate the rising costs for fulfillment.”
These partnerships can be a win-win scenario when done right. “Both the retailer and hotelier also benefit by dovetailing loyalty programs and tapping into what airlines and car rental companies figured out decades ago there are synergies in bundling services.”
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