Travel retail has played a vital role in supporting growth in the beauty category. International airport hubs in the region have given brands exposure to nationalities such as the Indians and the Chinese who, in previous years, did not have easy domestic access to many labels. In numerous cases, they still don’t, which is why airport stores thrive in emerging markets: they have the brands consumers crave.

Travel retail is, first and foremost, a strategic brand-building channel for beauty. Multinationals like L’Oréal, Estée Lauder Companies, and LVMH have been proactive in internationalizing their portfolios using airports. In the Middle East, state-owned Dubai International Airport in the United Arab Emirates (UAE) has been the mainstay for travel retail sales. Its core retailer, Dubai Duty Free (DDF), generated record revenue of $2.16 billion in 2023, of which perfumes generated 17% or $374 million. This makes perfume the biggest product category for the retailer, significantly ahead of liquor in second place.

The Landscape Has Evolved

However, conditions for beauty have changed. Pre-pandemic, the cosmetics segment was the third-ranked category by DDF with sales of $233 million in 2019. Last year that had collapsed to $108 million. The main reason was that skincare-obsessed Chinese travelers were banned by their government from international travel during the Covid-19 crisis. The ban was lifted about 18 months ago, but the Chinese, who are partial to luxury lines, are still largely missing at many airport hubs, including Dubai.

This year, DDF’s Chief Operating Officer, Ramesh Cidambi, is predicting total revenue of $2.19 billion, more or less in line with increasing traffic at the Emirates hub. Indian travelers, the retailer’s biggest buyers, are increasingly affluent and are partially fill- ing the gap left by the Chinese. Beauty is also a leading category in other Middle East hubs like Hamad International in Qatar, where a Dior Spa opened in May; and Abu Dhabi International, also in the UAE, whose new Terminal A opened in November 2023, setting a new benchmark for beauty in the region.
Then there are the smaller airports of Bahrain, Beirut, Kuwait, Oman, and Sharjah, to name a few, where beauty has a substantial (usually the biggest) share of revenue. In part, this is due to the fact that liquor is frowned upon in several Middle East markets and mostly bought by transfer or international passengers. However, local interest in beauty has become a strong purchase driver. Historically, the region was driven by fragrances, but skincare and color are in greater demand in the social media age.

Saudi Arabia Comes Knocking

One of the fastest-growing markets for travel retail beauty will be Saudi Arabia. The kingdom has a long-term plan to diversify away from oil income and into tourism, among other sectors. This means the construction of new airports and the expansion of existing ones. Associated with this is the build-out of new airport retail stores bringing further opportunities for beauty brands in a market where liquor sales had been prohibited for decades, though this is expected to change, gradually.

Saudi’s plans are backed by some serious investment, both governmental and private. The country’s air- port projects have attracted global travel retailers like Ireland’s Aer Rianta International, Lagardère Travel Retail from France, and, most recently, Germany’s Gebr. Heinemann, all experts in beauty retailing.

Heinemann has greatly stepped up its focus on the Middle East and Africa region. It opened an office in Dubai last year and has set up new distribution deals in the region with retail plans also pipelined. In Saudi Arabia, Heinemann is preparing a 7,000-square-meter (7,534-square-feet) duty-free offer in Jeddah, the first phase of which will open in July 2024. Co-CEO Raoul Spanger comments, “We had planned to grow in the Middle East Africa region in 2023 and won the concession at Jeddah Airport and signed the contract for the stores aboard Aroya.”

Aroya is the first cruise ship of Cruise Saudi, a recently established cruise company, that aims to capture a slice of this market and is forecasting 1.3 million cruise passengers to Saudi Arabia via sea by 2035.

Fiona Glen, Head of Projects at beauty consultancy, The Red Tree, puts the average age of Saudi Arabia’s 36 million population at just 32 and digital consumption at 82%, one of the highest in the world. This means experimentation and newness will appeal in the airport retail environment. Meanwhile, expats make up 75% of the population in the UAE, making it a melting pot of cultures. Airports are therefore a place to create brand awareness as this large segment will travel regularly to see family and friends.

Regional Pulling Power

Luxury travel retailer, DFS Group, owned by luxury conglomerate LVMH, is also throwing its hat into the Middle East ring, which might mean stiffer competition across the channel for retailers but more choice for brands. In March, DFS Group Chairman and CEO Benjamin Vuchot made it very clear that the market was a major target. He said, “We are eager to grow our presence in the Middle East. The region offers immense potential. By establishing a stronger foothold and leveraging our expertise in the luxury retail sector, we aim to capture a significant market share and forge long-lasting partnerships in the Middle East.”

In terms of current Middle East travel retail locations where beauty brands might want to list, Dubai Duty Free is the holy grail but not easy to enter because of the competition from other brands. For international travel retail operators, the listing process will, most likely, be centralized via their headquarters, with regional distribution dependent on internal decision-making.

The chart at right shows the biggest airport locations for passenger traffic in 2023 in the Middle East (excluding Turkish gateways). Well ahead is Dubai International with nearly 90 million travelers, followed by Qatar’s Hamad International with 46 million, and Saudi Arabia’s King Abdulaziz International Airport in Jeddah with 42.7 million.

Airport Expansion Plans

Competition is fierce, and the Gulf States are abuzz with record-setting airport development plans.

Saudi Arabia’s King Fahd International Airport wears the crown as the largest airport in the world by area with 780 square kilometers (about 300 square miles). For context, that’s bigger than the neighboring country of Bahrain. As if that is not big enough, the Saudis currently have a new six-runway airport under development on the King Fahd International site set for completion by 2023, with an eventual capacity for 185 mil- lion passengers per year.

Not to be outdone, Dubai’s leadership has approved a $35 billion plan to build a new passenger terminal at the Emirate’s Al Maktoum International Airport, which also goes by the name of Dubai World Central (DWC). The new airport will be five times the size of the current Dubai International Airport, cover 27 square miles with 400 aircraft gates, five parallel runways, and employ innovative aviation technologies for the first time in the aviation sector. In addition to its projected capacity of 260 million passengers annually, it also aims to have a capacity of 12 million tons of cargo per year. The new plans will also double retail space from the current 40,000 square miles. Work is set to commence immediately, with the first phase of the project expected to be finished within the next 10 years. When completed, it will be the largest airport in the world.