Has permanent turbulence become the new normal for global travel retail? – Market Intel

Despite the presence of several predom­inantly dry states, reflecting the region’s large Muslim populations, the Middle East has traditionally been a major duty-free market for alcohol.

Growth has been supported by rising international tourism, millions of expat­riate workers from the Indian subcontinent, and high volumes of transit traffic through regional hubs including Dubai Duty Free (above), Hamad International and Abu Dhabi’s Zayed International.

Last year, Dubai Duty Free, the region’s largest travel retailer, generated liquor sales of more than US$290.6m, selling over 4.7m bottles of whisk(e)y and more than 876,000 bottles of wine in the process.

Unsurprisingly, the US-Israel war with Iran has proved disastrous for this signi­ficant GTR drinks market. “The Middle East has clearly been the biggest challenge for the channel this year,” admits Rufus Parkinson, regional MD of GTR at William Grant & Sons, the owner of the Glenfiddich and The Balvenie single malts.

“We’ve seen disruptions to passenger flows, uncertainty around travel patterns and operational complexities that have affected both retailers and brands. Our approach has been to remain agile and focus on the markets and consumer segments where demand remains resilient.”

The initial outbreak of hostilities result­ed in one of the most severe disrup­tions to international aviation since the Covid pandemic, with airspace lockdowns across Iran, Iraq, Syria and other parts of the Gulf, and thousands of flights being cancelled at the region’s hub in the early weeks of the crisis. Jet fuel prices surged, and airlines operating long-haul Europe-to-Asia routes were forced to reroute around active war zones, adding hours to flight times and pushing up ticket prices.

By August, Gulf carriers, such as Emirates, Qatar Airways and Etihad, had managed to re­store a substantial portion of their sche­duled network, but capacity remains constrained compared to pre-war levels. Inbound international tourism to the wider Middle East region is still depres­sed, with demand moving to other regions, notably Western Europe, South-East Asia and North America. Hundreds of thousands of expat workers in the Middle East have either left or been repatriated to their home countries, although the vast majority – 24m to 25m nationals – have stayed put.

The region’s major GTR operators, such as Dubai Duty Free and Qatar Duty Free, are tight-lipped about the impact of the conflicts on their balance sheet. But in a webinar organised by the Middle East & Africa Duty Free Association (MEADFA) and the Duty Free World Council in June, MEADFA CEO Abdeslam Agzoul admitted that during the peak conflict months of March and April, the association’s members had lost “hundreds of millions” of dollars. This total will have no doubt risen much higher after months of further sporadic military activity and resultant disruption.

While Gulf operators continue to bear the financial brunt of persistent airspace closures and cancelled routes, megahubs along alternative transit corridors are reap­ing the benefits. Airports like Istanbul, ideally positioned as a geographic bridge between East and West, have seen a surge in rerouted long-haul passengers.

Indeed, according to new ACI data, Istanbul Airport has now overtaken London Heathrow as Europe’s busiest air­port. In July, 8.15m passengers passed through the hub in Türkiye’s largest city (Heathrow recorded 7.86m passengers, with Middle East routes down 20.2% year on year), providing a lucrative boost to anchor con­ces­sionaire Unifree Duty Free.

This could serve, then, as proof that even in global travel retail’s most volatile year, worldwide passenger demand rarely disappears. It simply finds a new route.