NEWS/ANALYSIS: PHILIPPINES


“We want to penetrate the increased tourism numbers here in the Philippines. Luxe is just a start, in the next few years we could do a bigger store with bigger brands.”


Bernadine ‘Dino’ R. Belmonte, Deputy General Manager, Operations, Duty Free Philippines


bigger store with bigger brands. “We are thinking of doing an


off-airport store in Cebu in 2018 or 2019, it depends on finding a feasible location. “Hopefully we can get a site where


we can bring in brands; a big enough place, somewhere brands would like to be.” Meanwhile, DFP is hoping the


opening of the two new duty free stores in 2018 will soon reverse the decline in total sales experienced over the past four years, which has been mainly due to circumstances beyond the organisation’s control. Highway construction and road


works associated with telephone and water supply services near Manila Airport have caused heavy traffic and daytime road queues in the area for the past few years. This has resulted in decreased


Foreign visitor numbers have almost doubled during the past six years, rising by more than 10% annually since 2011 when 3.5m foreign visitor arrivals were recorded. With foreign visitor numbers


forecasted to double from 2017 to 2022, DFP expects the new Luxe store to be the first of a series of luxury downtown duty free stores that will be opened in Manila and other major tourist destinations. “Luxe is the first time we are


doing something about duty free for foreign tourists,” says Belmonte. “FIT, cruise and convention visitors


are coming, so Luxe is strategically located. We want to penetrate the increased tourism numbers here in the Philippines. Luxe is just a start, in the next few years we could do a


sales at DFP’s nearby Fiestamall downtown store, as returning overseas Filipino workers and their families have been reluctant to visit the store due to time wasted while waiting in lengthy traffic jams.


Exchange rate difficulty DFP is expected to report total airport and downtown duty free shop revenue worth around $206m in 2017 when sales figures are calculated for last year, registering a 5.5% decrease in revenue compared with the previous year. “In 2017 the problem was the


exchange rate. The past year it has averaged PHP 51.5 for $1.00, down 10%. The problem is when the US dollar hits PHP50, Filipinos hold their money,” says Belmonte. “Also, inflation was 1.5% in 2016,


now it’s up to 3.4%. That’s another one of the reasons; it’s a high inflation rate.” Downtown sales in Fiestamall fell


about 18% to $70m in 2017 and were the main reason for DFP’s overall decrease in revenue. By contrast, sales in Manila Airport, DFP’s largest duty free location, rose 3% to about $110m in 2017. “Confectionery is our major


Fiesta Mall’s sales have suffered due to traffic problems. 18 TRBUSINESS


category as returning Filipinos are over 50% of our market, it explains why chocolates are the biggest category,” comments Belmonte. “In our arrival shops its mostly


returning overseas Filipino workers. Confectionery is the top item, then liquor and tobacco. “In our Fiestamall duty free


downtown store confectionery is the top category as well. Our new Luxe downtown shop will be different as it’s for foreign tourists.” At Manila Airport DFP operates


departure and arrival shops and boutiques in Terminals 1, 2 and 3. Duty free sales in T1 rose by


5% to about $47m in 2017, while sales in T2 also rose by 5% to about $35m. Terminal 3 sales, meanwhile, declined slightly to about $28m. T1 is used for international flights


only by airlines that include Saudia and Kuwait Airways, Belmonte explains, while T2 is used by Philippine Airlines for international and domestic services. T3 also is used for international and domestic flights by carriers that include SIA, KLM, Cathay Pacific, Delta, Emirates and others. “T1 has good sales as overseas


Filipino workers return on Middle East flights to use our arrival shops. Departure sales also are doing well in T1 as foreign passengers are buying,” says Belmonte. “By square metre, T1 sales are


still doing better than T3 because of the passenger profile. In departure shops, 70% to 80% of customers are foreign passengers while returning Filipinos are arrival shop customers.” The major foreign customers in


DFP’s Manila Airport departure shops are Chinese, South Korean and Japanese passengers. “Chinese are now our biggest


departure customers as we get a lot more Chinese visitors now. It started in 2016,” continues Belmonte. “The average foreign visitor stay


in the Philippines is 10 days though a few tourists stay longer and spend more.” Meanwhile, in addition to Manila


Airport, which is the Philippines’ major international gateway, DFP also operates duty free shops in Cebu Airport, the country’s second largest international gateway. DFP’s sales in Cebu reached


around US$14m in 2017, recording a 40% increase over the previous year following a rise in departure and arrival sales. «


FEBRUARY 2018


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