Heathrow Airport forecasts further slide in commercial income; Retail Director Fraser Brown sounds upbeat note about recovery - The Moodie Davitt Report

UK. Heathrow Airport has updated their forecasts for traffic and financial results for 2021. Retail income is expected to reach 189 million. This is a drop of -19.2% relative to 2020 which saw a strong start to the year.Despite the terrible consequences of COVID-19 which saw some long-term partners leave the airport, Fraser Brown, the Retail Director, has expressed optimism about the future of the travel retail industry once traffic returns. (See below).According to the June Investor Report, retail revenue per passenger grew +18.6% year on year to 10.58. It is expected to rise to 8.79 in 2021. It means that combined, the total aeronautical income and retail income per passenger will be 37.26 (under an airports base scenario for recovery), which is below the 2020 figure 39.84.According to Heathrow, the Investor Report predicts that passenger traffic will drop by 2.7% to 21.5million this year. This is due to the ongoing impact of COVID-19, and the gradual expansion of the UK's green list.The total revenue is expected to rise by +3% to 1,210 millions in 2021. The annualized benefits of cost savings initiatives in 2020 and revenue protection initiatives will help to boost adjusted EBITDA by +23% to 332 million.Over the past year, the financial implications of closing stores and restaurants led to exits by partners like John Lewis, Thomas Pink and Mulberry. Carluccios and Casual Dining Group also experienced exits. Dixons announced its departure from all international airports.Thomas Pink has been replaced by Saint Laurent in T2. The new bookstore will also take over the Mulberry site. Brown said that the airport plans to open most of the Casual Diner Group locations. Airport Retail Enterprises, an Australian F&B specialist, partnered with Big Smoke Brew Co in May to open a new craft beer- and food concept in T2. Right now, the Dixons spaces are being offered for sale. Orlebar Brown, a swimwear brand, will join T5 as a new entrant. Other high-profile names will follow soon.Fraser Brown spoke to The Moodie Davitt Radio (the complete interview will be available later in the week). He said that it has been extremely challenging from both a retail and food & drink perspective. However, the conversations that we have about new brands and openings mean that once we return to normal Heathrow and a normal travel landscape, we will have a vibrant retail travel business.It is important to remember that even in difficult trading environments, brands that look at the medium-to-long term can see, just like we do, that the travel retail business will rebound strong and that they are willing to invest now.Brown stated that Dixons contract was due to end by the end the year so we were going to tender anyway. There are eight Dixons stores in Heathrow, spread across four terminals. Additionally, there is some vending at the gate areas. Tender evaluation is currently underway so we can't speak about it.However, I can tell you that we were impressed by the quality of the bids we received. This confirms our confidence in travel retail's medium-term prospects. We will challenge anyone who succeeds in transforming the retail of the category and providing the best experience for our customers.Keep an eye out for the complete interview, which will be available in the coming days.