The Travel-retail Industry Grapples With a Conversion Debacle

CANNES, France – Headwinds and tailwinds keep converging and buffeting the travel–retail industry as it navigates confused seas.

The $70 billion-plus retail channel, led by fragrances and cosmetics, is on the front line of geopolitical and socioeconomic change, including swiftly shifting consumer demographics, desires and buying patterns.

“You’re sitting right on the nervous system of globalization,” said Rudolph Lohmeyer, senior partner at Kearney Foresight, addressing attendees at the opening of the TFWA World Exhibition & Conference. That took place in Cannes from Sept. 28 to Oct. 2 and was fittingly themed “Explore New Horizons.”

“There is no doubt that we are in a moment of profound disorder,” said Lohmeyer, who foresees it lasting three to five years.

“We are as an industry facing strong tensions — geopolitical headwinds and trade issues,” Philippe Margueritte, president of TFWA, underlined in his keynote speech. “Business uncertainty is the worst poison for all of us. It delays investments, affects our teams and — more importantly — affects the consumer spending. What is undeniable is that we are all affected and must adapt strategically.”

Numerous key travel retail fundamentals remain strong, however, including people’s innate instinct to travel and explore. Air passenger numbers are therefore expected to double in the next 20 years to 18 billion annually.

“What’s exciting for us as an industry is that this remains one of the most qualified consumers that you can target, because these are people that have the disposable income to travel internationally,” said Matthew Growdon, president, Asia-Pacific and travel retail worldwide at the Estée Lauder Cos. “We get to speak to them in an environment which is typically quite elevated — beautiful retail environments.”

But it’s not guaranteed that such a rise in footfall will equate to growth in travel-retail spend.

“One of the biggest lessons post-COVID is the decorrelation between the passenger growth and the retail sales growth,” said Margueritte. Between 2019 and 2024, passenger spend has declined at a compound annual growth rate of 4 percent, while from 2023 to 2024, it’s estimated to have dropped 5 percent, a recent Kearney study shows.

“What we thought was purely conjunctural starts to be structural in our business,” Margueritte said.

He therefore called for a retail revolution.

“A great deal of effort is now being made to create a stronger sense of place, more excitement, more hybrid propositions,” the executive said.

“Because the environment has changed, it has forced us and all in the industry to truly reinvent the wheel here,” said Olivier Dubos, senior vice president and general manager of travel retail worldwide at the Estée Lauder Cos. “In a way it’s good, because we are building a much more sustainable growth platform for the future than before, when it was really concentrated around the Chinese.”

Margueritte believes artificial intelligence brings an extraordinary opportunity. To wit, he invited to the stage Ameca, a humanoid robot powered by AI and developed by Engineered Arts. With a sleek female form, facial expressions and darting eyes, she fielded questions in English, French and Mandarin.

“The slower growth in retail sales compared to passenger numbers is attributed to several factors,” Ameca said. “This is due to the end of post-pandemic revenge buying, rising inflation, unfavorable exchange rates and economic slowdowns, particularly in China. Additionally, high airfares have negatively impacted discretionary spending, despite passenger volumes rebounding.”

Compounding woes, travelers do not remain captive audiences in airports like before.

“The time people spend at the airport is shorter,” said Valentina Colombo, managing director of Bulgari’s perfume business unit. That’s due largely to more streamlined check-in processes. Today versus 2019, dwell time in Asia-Pacific airports has dropped from 60 minutes to 44 minutes, for example.

Cell phones are travel retail’s greatest competitor. Overall, 75 percent of passengers’ downtime in airports is not spent shopping. Yet data indicates that 45 percent of shoppers say in-store experiences drive purchases. That percentage is even higher for Gen Z and Millennials, author and consumer expert Bobby Jones said during the opening conference.

“How do we make travel retail more engaging than the scroll?” he mused. “More meaningful than the discount? And particularly for a new generation of younger travelers, who are looking for different experiences, who are expecting more.”

That’s especially true for Gen-Zers, who will account for 30 percent of travelers worldwide in 2028.

Conversion was the hot topic on stage and throughout the halls of the Palais des Congrès, home to the TFWA trade show, which drew 7,999 visitors and 482 exhibiting brand owners.

The stakes are high for the beauty industry, which in duty-free and travel-retail stores generated $11 billion, down 5.5 percent, in first-half 2025 versus the same prior-year period, according to preliminary Generation Research data. Overall, the channel rang up $36.2 billion, up 0.7 percent in the same timeframe.

“If we want to leverage fully this appetite for travel and solve the conversion issue that we have, we need to reenchant this channel by bringing the level of experience up,” said Emmanuel Goulin, L’Oréal’s outgoing president of travel retail, who introduced his successor, Eva Yu, in the group’s tent during a press conference.

“The opportunity is what is the proposition that we put in front of the consumer that they are interested in, that will create the dwell time, whether it’s an experience, the product assortment, the category, the brand,” Growdon said.  

At TFWA, L’Oréal showed examples of how it intends to turn airports into entertainment destinations. At the Yves Saint Laurent kiosk, for instance, one could chill by listening to music through a headset then download the tunes via a QR code. The brand also published some city guides, created by local brand ambassadors. There was screen playtime involving a makeup look being tried on virtually, and Libre women’s scent being offered in a 10-ml. travel size.

L’Oréal has over the past year reinvented nearly all of its travel-retail exclusive offers and is mixing categories. With Qatar Duty Free, for example, it exported Lancôme’s Café de la Rose, otherwise only found on Paris’ Avenue des Champs-Élysées, to the airport in Doha.

“It’s our duty, especially for L’Oréal as a leading company in the travel-retail sector and a pioneer in this industry, to be sure that we manage to develop what we call a seamless, memorable customer journey,” said Baptiste Beau, general manager of L’Oréal Luxe, travel retail worldwide.

Executives agree an abnormal macro context is becoming a new normal for travel retail, which makes it difficult for advanced planning. Agility is key to moving forward.

The Estée Lauder Cos. has reorganized itself in the space, with two large hubs now in Singapore to serve Asia and in London for the Western Hemisphere.

“We’ve taken resources out of our New York head office and put them into these nodes that can be more focused on execution and those granular opportunities,” Growdon said.

“We want to always gain more agility,” said Antonin Carreau, global director of beauty at Spanish travel-retail operator Avolta. “We are remaining agile on pricing and assortment, to adapt to different dynamics, to currency fluctuations, to the tariffs, which we are adapting to on a day-by-day basis.”

Bulgari, for one, has not changed its supply chain or pricing for fragrances due to tariffs yet.

Meanwhile, regional regulations keep shifting, too, and competition is intensifying overall.

To be agile, resilient and for speed to market, Avolta is strengthening collaborations with brand partners, including on the supply-chain side of the business, to be regionally specific.

Taking a region-by-region stance is important.

“The dynamics in each of the markets are very different,” said Britta Hoffmann, director of purchasing for perfumes and cosmetics at German travel-retail operator Gebr. Heinemann.

That includes passenger mix, currency challenges, inflation and cost of living, among other local market issues.

“Every region has a bit of its own challenge,” Hoffmann said.

Avolta has staged numerous exclusive launches and pre-launches to gain traction with regional travelers.

“We have continued, because of the variety of our geographies, to pay attention to localized collaborations that relate or connect with a sense of place,” Carreau said, adding those resonate well with local consumers plus tourists traveling to a specific destination. “We have a global category, strategies and priorities, and the local adaptation of certain activations is absolutely important.”

The Estée Lauder Cos. has customized some of its hero products based on location, such as Advanced Night Repair with a New York theme.

Clarins is implementing a local strategy, launching initiatives such as an explorer collection. Seventeen different countries’ sets with related illustrations will be launched this month, following a successful pilot in Taiwan. These highlight a location’s landmarks, nature or fruits, and cannot be purchased anywhere else.

“What we try to do is to connect more with the emotional [side] of the consumer,” said Sandrine Tesniere, marketing director of global travel retail at Groupe Clarins.

The company will continue to create localized activations and campaigns, which tap into gifting and self-gifting — and sense of place.

“The experience has to be local,” said Katalin Berenyi, general manager of the Clarins brand, adding people want to live an experience. “But they want to consume probably less and better.

“Everything is changing in this shifting environment, and consumption is fundamentally changing,” she continued. “This is our main preoccupation: to understand where the movements are going and how we can be where the consumer is the way he or she wants to consume.”

Newness is key to upping the wow quotient and luring consumers into travel-retail stores. Heinemann executives have taken note of the worldwide rise of K-beauty, for instance, and realize time is of the essence.

“Instead of just looking at a trend and monitoring it, then maybe work on answers, we need to look at it and develop an offer for it,” said Hoffmann.

So in just a few weeks, the operator negotiated with three Korean beauty brands — Laneige, Cosrx and Innisfree — that are entering its stores shortly. These will help target a younger consumer, with lower price points, as luxury skin care remains a harder sell in the channel.

“Our retail concepts need to be more agile,” said Hoffmann, who has an eye on other emerging categories, too, such as wellness, health and pharmacy brands including CeraVe and La Roche-Posay.

Heinemann recently brought in German indie color cosmetics label Kess into the Düsseldorf Airport’s Test & Learn area, where new brands are rotated in every three to six months. “It was super successful, one of the fastest [growing] makeup brands from Day One,” Hoffmann said.

At Heinemann, the luxury niche fragrance offer keeps expanding, including to the recently opened Jeddah Airport in Saudi Arabia.

“Overall, we see a rise of the niche fragrance brands — the haute parfumerie,” said Carreau, adding indie cosmetics brands are also on the up. He noted another area of opportunity for the long-term is beauty’s premiumization and personalization.

For Bulgari perfumes, the focus in travel retail is on key cities, explained Colombo. Bulgari will be refurbishing its locations in the Munich and Frankfurt airports in the next few months, after a recent revamp in Madrid.

“We are in a journey of brand elevation with Bulgari,” she said. That includes homing in on core products and distribution.

“So fewer things and better,” Colombo said.

The design for Bulgari’s fragrance stand at TFWA nodded to the brand’s hotel aesthetic.

Hair care is another rising category on the travel-retail landscape. Oribe, which is not yet in the channel, had a stand at the trade show for the first time. The brand, which is now in 24 domestic markets in Europe, the Middle East and Africa, is gaining critical mass.

“It’s really about learning, understanding the travel-retail side,” said Clifford Mc Ewan, associate director of EMEA at Oribe. “For us, it’s a big learning curve and understanding what that opportunity represents.”

That is huge — and complex.

“Together, we have to be much smarter now to steer the business,” Hoffmann said, speaking of the channel at large. Looking to the future, she sees consumers behaving in more extreme ways, such as seeking happiness or relaxation, high luxury fragrances or lower-priced products, for instance.

“Everything which is in the middle is super tough,” Hoffmann said, adding all of this informs category development. “It is also not easy because, of course, we can’t just take the middle out and only work in extremes.”

A chronic issue stymieing travel retail is that data is still rarely shared among stakeholders. Really moving the needle necessitates a constant data feed on traffic, actualized traveler profiling and product offer. Shared reliable market data can help build industry strategy.

“This industry has been working too much in silos in the past,” Goulin said, referring to the “travel pentarchy,” including the brand, retailers, airline, airport and digital ecosystem. “By activating this pentarchy in an efficient way, you can really bring the passenger experience to the next level and make a difference.”

He said over the last 12 months that’s been put in motion by L’Oréal in Singapore, Doha, Buenos Aires and now in Heathrow, and it helps conversion.

Executives see strong opportunities in the Middle East, as well as in China, which is still struggling, weighted down by Hainan. That Chinese duty-free shopping island, which is negatively impacting skin care sales, remains an important market with more than 100 million visitors yearly.

“People are traveling to Hainan not only to go in the shopping malls and purchase products, including beauty products, they want also to experience things,” Beau said.

So, with retailer CDFG on Hainan, Lancôme opened a Domaine de la Rose, which gives an experience of its estate in Grasse, France, in the shopping mall, for instance.

The Estée Lauder Cos. keeps investing heavily in Hainan, launching numerous pop-ups there for its brands including Estée Lauder, La Mer and Jo Malone London’s latest Raspberry Ripple Cologne. The company has also equipped the stores with services.

Other demographics are emerging in travel retail.

“We are seeing a big rise of Indian travelers now through various corridors,” Growdon said. Singapore is among them.

“We are definitely strengthening our capabilities in these emerging countries,” said Dubos.

In the first half of this year, beauty travel-retail and duty-free sales in the Asia-Pacific region declined 13 percent, Generation statistics show.

Chinese travelers do not behave like they did pre-COVID, executives say. “There’s a lot of domestic consumption,” Growdon said.

They keep traveling a lot in China and predominantly in Asia today. Visa-free group tours from China to South Korea just restarted.

“It’s too early to say what’s going to be the size of the prize here,” Dubos said. “We are definitely doubling down on our leadership in Asia and China.”

The European beauty travel-retail and duty-free market remains dynamic, up 7 percent, with all beauty categories registering gains and the largest increase from fragrances, according to Generation. Within that category, luxury niche brands are the winners.

Beauty sales in the channel in the Middle East and Africa zone were up 10 percent, led by fragrances, while in the Americas, the business increased 4 percent. There, perfumes and skin care posted upticks, while makeup was down.

“In the West, we have been capturing a lot of opportunities, strengthening the partnership with the major players like Avolta, Lagardère or Heinemann,” said Dubos. That included exclusive launches, for example with Tom Ford.

The Estée Lauder Cos. also restarted its relationship with Duty Free Americas and will open in the operator’s entire network by the end of 2025.

Travel retail is burgeoning on cruise ships, unanchored to any specific geography and where passenger traffic is growing by 9 percent year-on-year, to reach 37.7 million in 2025, according to the Cruise Lines International Association.

“In this particular case, we have repeat purchases,” Dubos said. “Some of the most beautiful ships are equivalent to the most beautiful malls.”

Clarins just opened a store on the Virgin Atlantic out of New York. It could include spa services in the future. “We are exploring all of these opportunities,” Tesniere said.

Travel retail holds many silver linings.

“Despite today’s external volatility and challenges, we do see a very strong resilience of the category,” Carreau said. “And for ’25 and beyond, continued growth ahead.”

“The future is bright because all the major KPIs are good,” Beau agreed.

A new era has dawned. “Travel retail is no longer in recovery,” Jones said. “It’s in reinvention.”