With recovery in tourism industry around the world, global inbound duty free spending has been rising and is set to reach USD 117 billion this year and further to USD 168 billion in 2027, says a report by Euromonitor International.

After falling by 67 pc from its peak due to the pandemic, global inbound duty-free spending registered a 112 pc growth in 2022, and is forecast to reach USD 117 billion in 2023, says global consultancy and market research firm Euromonitor International.

According to Euromonitor’s ‘World Market for Duty-Free’ report, global duty-free sales will return to pre-pandemic levels by 2025, with overall spending on duty-free set to reach USD 168 billion, about 15 pc above its pre-pandemic levels across both domestic and international spending.

The report says that benefitting from a return-to-travel boost, duty-free shops are now increasingly expanding in city centres, targetting not only domestic consumers but also international travellers. It says that Asia Pacific’s domestic duty-free sales are forecast to reach USD 81 billion by 2027, dominated by China, accounting for 87 pc of the regional total. It adds that Australia, South Korea and India top the list of the highest spending destinations per arrival on inbound duty-free shopping. According to preliminary research from Euromonitor International, India’s inbound tourism spending recorded USD 12 billion in 2022 and is expected to reach an estimated USD 28 billion in 2023.

“Travel is back and powering forward. The easing of travel restrictions and the industry’s strong rebound are opening up opportunities for duty-free as travellers’ interest in revenge travel and shopping abroad is high. Passengers at major airports have been contributing strongly to sales, especially for luxury and premium brands. Europe is home to a wide variety of luxury brands that are appealing to China and Gulf states travellers,’’ says Caroline Bremner, Head of Travel and Tourism Research at Euromonitor International.

Euromonitor says that India is another source market to be explored in the coming years. India has seen a quick recovery in outbound travel to pre-COVID-19 levels. The leading source market for arrivals in India is the United States, followed by Bangladesh and the United Kingdom in third spot.

Euromonitor says that shopping is a key part of travelling for Indian consumers as 39 pc of Indian respondents agreed that they pick travel destinations based on the quality of shopping, significantly higher than the global average of 21 pc and Asia Pacific’s average of 22 pc. India is also expected to be one of the top spenders in outbound duty-free in 2023, with a forecast 13 pc CAGR in outbound duty-free shopping over 2023-2027.

Euromonitor says that the VAT rate in Asia is typically around 10 pc, being as low as 5 pc for Taiwan and up to 18 pc in India. Hong Kong is an exception, with no VAT or sales tax at all. With shopping being an integral part of daily lives and during travel, Asia Pacific travellers are keen to shop duty-free for discounted prices.

“APAC as a region leads in terms of duty-free shopping as China remains as a key source market. Duty free players are shifting their attention to alternative source markets, as governments gear up to groom their own domestic duty-free consumption through relaxing restrictions and exploring potential of setting up their own duty-free zones. With the current strong rebound in travel amongst APAC markets, businesses should shift towards providing immersive in-store experience as experiential retail will be key to attracting increasingly sophisticated Asian consumers,” says Prudance Lai – Senior Analyst at Euromonitor International.

It adds that in the Middle East, the UAE has benefitted from its relatively open approach to travel and tourism during the pandemic, plus its two main hubs of Emirates’ Dubai and Etihad’s Abu Dhabi, as well as the added uplift from the recent football World Cup held in neighbouring Qatar. Dubai and Abu Dhabi are magnets for luxury brands and shopping. With the UAE as a leading shopping destination in the region, inbound duty- free sales registered USD 3.1 billion in 2022.

“The success of global duty-free sales is essentially linked to tourism flows. While the outlook for duty-free players is positive, a sharper focus on operational efficiencies for sustainability, creating immersive retail experiences that blend the virtual and real world, and meeting consumers where they are, through online channels, will be critical for future success,” adds Bremner.