By Larry Leung
Canada continues to enjoy a record number of international visitors. China is one country that has experienced the most growth in the past five years. This article focuses on how Canadian airports with service to China perform in addressing retail needs of Chinese tourists and where opportunities may be available to attract more spending and improve non-aeronautical revenue.
Tourism and Growth
International tourism to Canada has been experiencing tremendous growth owing to the weakness of the Canadian Dollar against most major world currencies. Statistics Canada just-released arrival data for May 2017 showing that it was the best recorded May ever with 1,715,791 visitors into the country. While visitor numbers from the United States dipped 0.3% in May 2017, the bright spot continued to be China at 53,302 visitors (up 11%).
Over the past five years, visitors to Canada from China jumped from 315,512 to 651,860. This firmly placed the Asian country in second place out of the top 15 most visited (excluding United States) list behind United Kingdom at 869,574 visitors.
In percentage form, China showed the best growth in the top 15 at 106.60% over the past five years with Mexico being the only other country with more than 100% growth during this time period.
The high growth contributed to demands for additional flights from Canada to China. As of July 2017, there are 8 airlines operating up to 20 flights daily between the two countries. Being geographically closer to China, Vancouver International Airport has the most routes/frequencies and is followed by Toronto Pearson International Airport, Montreal Pierre Trudeau International Airport and Calgary International Airport. Air Canada continues to be the dominant player controlling over 40% of all available seats in the market.
International travellers have more of a propensity to spend money while on trips. In 2015, Statistics Canada and Tourism & the Centre for Education Statistics compiled data which showed that, while there were more United Kingdom visitors overall, they were outspent by visitors from China by CDN$21 million totalling CDN$993 million.
Chinese shoppers are keenly aware of the latest foreign brand trends and shop aboard to take advantage of prices that can be up to 40% lower due to the lack of import tariffs and consumption tax from home.
To determine where the retail opportunities lie for Canadian airports, we must first look at the most popular luxury brands in China and specific brands relevant for Gen-Y and Gen-Z.
Agility Research noted that China made up 20% of the global luxury market and listed the following ten brands as the most popular:
- Louis Vuitton
Gen-Y and Gen-Z:
When it comes to Gen-Y (the millennials born 80s to mid-90s) and Gen-Z (born mid-90s to 2000s), RTG Consulting Group based in Shanghai, China published the 2016 RTG Brand Relevance Report highlighting the more important brands for these groups in other different categories.
From this report, we focused our attention on fashion, electronics and food & beverages and noted that many North American and European brands made the list:
- For fashion, both Gen-Y and Gen-Z preferred Adidas, Zara, Nike and Uniqlo and differed on H&M (Gen-Y) and Converse (Gen-Z);
- For electronics, Apple, Samsung, Huawei and Mi made the list for both groups while Gen-Y related more to Microsoft over Gen-Z preference for Le Group and finally:
- KFC, Starbucks, McDonalds and Tsingtao beer made the food and beverages list for both groups. In addition, Gen-Y chose Coca-Cola over Gen-Z’s Pepsi.
All this information is important as we reviewed how the brands mentioned above have been procured as standalone shops at the four Canadian airports with service to China*.
* note that Coca-Cola and Pepsi products are available at fast food outlets or convenience stores and would not be listed separately in the above table. Retailer Insider performed a search for Tsingtao beer with each airport’s website and did not note it listed in the food & beverages section.
In our analysis, all four airports have multiple Starbucks spread out in different terminals. In addition, both Vancouver and Toronto airports have standalone retail presences for Gucci and Burberry while Vancouver has Hermes and Toronto has Montblanc. However, all four airports did not perform well overall in procuring the brands that Chinese tourists associate with the most which could affect sales.
Our review indicated that there are many retail opportunities available for airport operators to determine the viability of attracting these brands into the premises. Their inclusion can lead to positive engagement for Chinese tourists which will contribute to an improvement to non-aeronautical revenue.
About the Author:
Larry Leung is a research and strategy director based in Toronto. He focuses on technology, experience creation, marketing and loyalty in the aviation and retail industries. Larry contributes blog posts for aviation consulting company Experience The Skies (www.experiencetheskies.com) and writes for Urban Toronto. Follow him on Twitter at @larrykleung. You can also email him at: firstname.lastname@example.org.
*Top Photo: www.frankfurt-airport.com.