CHINA. Hainan Meilan International Airport Company reported a -27.03% decline in franchise revenue (see table below) to RMB 237.4 million (US$33.4 million) for the first half of the year ended June 30. The airport company said the decline was due to an (unspecified) decline in duty-free sales and advertising revenue.

The decline in franchise revenue resulted in a -4.5% year-on-year decline in non-aeronautical revenue to RMB 545.6 million (US$76.6 million) in the first half of the year.

Passenger numbers rose 20% year-on-year to nearly 14.5 million, with domestic traffic (critical for duty-free offshore business) up 17%. International passenger traffic recovered to 85% of 2019 levels.

Total revenue increased by 7.8% to RMB 1,149,277,255 (US$161.4 million). The group reported a net loss of RMB 248.05 million (US$34.08 million).

In a note, Goldman Sachs Investment Research commented: “Although the company did not disclose its DFS revenue figures, assuming similar trends in duty-free and duty-on (duty-paid) business, this means that duty-free revenue per passenger declined by -39% year-on-year to just RMB 71 (US$9.97 = 33% of FY2021 average), similar to the weak DFS spending recently seen at Shanghai International Airport.”

Hainan Meilan Airport Company said total offshore duty-free sales in Hainan fell 29.9% year-on-year to about RMB 18.46 billion (US$2.6 billion) in the first half of the year, due to a 10% drop in the number of shoppers to 3.36 million and a 35.9% drop in the number of transactions to 19.8 million.

The airport company attributed the declines to an increase in Chinese outbound travel to Southeast Asia and other countries. This has led to a “serious” dilution of island shopping, it said. “At the same time, changing tourist consumption habits have led to a significant decline in offshore duty-free sales across the island.”

The province’s visitor numbers rose 10.9% to 51,087,800 in the first half of the year, while total tourism revenue increased 19.8% to RMB 109.739 billion (US$15.4 billion).

These positive figures underline the challenges facing the island’s duty-free industry amid what appears to be a sustained consumer trend towards non-shopping-related holiday spending. 🏝️