Interview: Colm McLoughlin, Dubai Duty Free

Colm McLoughlin is one of those people you could talk to for hours. Humble, friendly, and bursting with tales of old Dubai, he is amongst the most interesting and likeable businessmen in the UAE today. Sat behind his desk in the rustic Duty Free offices, adorned with old photos, he explains how he became chief executive of the world’s largest duty free operation. He says that Dubai, which was a very different place then, was in need of a duty free operation in order to increase airport revenues and promote the country. “The Dubai government through the department of civil aviation did a contract with the Irish civil aviation to set up as duty free here for them, and I came here as part of the team of 10 people,” he says. “Right at the beginning, HH Sheikh Mohammed, who was the defence minister at that time, knew he wanted Dubai Duty Free (DDF) to be the best in the world.”

Irish-born McLoughlin was, of course, only young when he made his move to the Gulf state. Previously employed as general manager for Shannon airport in Ireland, he only expected to stay for half a year. “I came here for six months,” he says, “and that six month term is now 28 years.”

In a bid to show how much DDF has changed during the period, McLoughlin has two sets of figures at the ready. In 1984 (the firm’s first year of operation), DDF made AED70m in revenues, had 100 staff and saw just 3.5m people through the airport. Last year, it took AED4.6bn, had 4000 staff and saw 51m passengers travel through. Asked how it feels to be at the helm of the company’s booming operations, and how his job has changed over the years, McLoughlin says it’s not really much different from before. “I claim that in the 28 years I’ve been here, I have never been promoted,” he says. “My title changed a few times, but it’s the same job.”

What has changed for McLoughlin, and for the rest of the team, are the kinds of challenges DDF has had to deal with. In the beginning, major obstacles for the team included the lack of tourism and infrastructure, and the task of getting to know the Middle East and the way that business is done here. “It was challenging [when we first started]. We were the first people in this region to do a duty free in that sort of style, and tourist numbers were very small,” McLoughlin explains. “Prior to [duty free] there were a number of small souvenir concession shops, and alcohol was sold through a hatch in the wall.”

He adds how, at that time, many of the companies, buildings and attractions which today work alongside DDF to attract tourism, did not exist. “Back then we were one of the very few [companies]. Emirates still hadn’t been born, there was no Nakheel, there was no Emaar, there was no Metro, there was no Palm Jumeirah, and there was no eight-lane highway.” Today of course, with a spate of tourists transiting through or holidaying to Dubai every day, not to mention a well established collection of duty free shops and a vast amount of modern infrastructure in the city, DDF is more concerned with issues such as security and baggage weight. “Security has become an issue at [all] airports over the last number of years,” McLoughlin says. “Because of security we have to pack alcohol into a box and load it as cargo on the airplanes if people are going to New Zealand or Australia.”

As for weight restrictions, McLoughlin says this impacts the amount of hand baggage passengers can take on planes, which in turn can deter people from spending in duty free shops. “There is always talk about weight on airplanes, and that is always a consideration,” he says. “As an example, if you go into Europe and you’re travelling with Ryanair and have a shopping bag from duty free, [the airline] will take that as your hand baggage, so they’re restricting people [from buying].” At the same time, certain products in DDF may also come under threat in the future, in view of changes to lifestyle choices. “There is always ongoing discussion among the World Health Organisation (WHO) about the sale of tobacco. In our case, cigarettes account for between 9 and 10 percent of total sales, so if ever there was a rule not to sell cigarettes it would be a business problem.”

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But despite experiencing some difficulties from time to time, nothing really seems to stand in DDF’s, or McLoughlin’s way. Not only has the firm experienced year-on-year growth, but it has also won 250 awards during its lifetime and recorded extremely high profits when compared with other airports around the world. According to McLoughlin, where large hubs such as Heathrow, Amsterdam and Singapore sell to just 16 or 17 percent of their passengers, DDF sells to almost 50 percent. Revenues per customer have also continued to soar - the average $5.5 spent in 1984 having shot up to $47 last year. McLoughlin says the healthy growth is a reflection of the business model, as well as the growth of Dubai.

“Dubai has changed tremendously,” he reflects. “[When we started] the population was about 200,000 people, it’s now close to 2m. The airport was one building and people in Europe didn’t really know where Dubai was. Today I am chased around by European suppliers who want to do business with Dubai, and the aerospace industry alone accounts for 28 percent of the city’s GDP.” He adds however, that the relationship his company and the emirate is not one way, and whilst Dubai has most certainly contributed to DDF’s growth, DDF has also played a part in supporting the city. “At the beginning DDF was one of the few doing advertising for Dubai. We built the Irish Village, we built Century Village, and now we’re about to build our first hotel, so all the time we have been involved in our own small way in promoting Dubai and that has been an important contributor. I remember several years ago Dubai airport won an award, and 90 percent of respondents said it was because of DDF.”

Other efforts include building the tennis stadium, sponsoring horse racing in Europe, and backing initiatives such as Dubai Summer Surprises and the Dubai Tennis Championships – now part of the international sports calendar. In addition, DDF was one of the founding sponsors of the World Cup at Meydan; yet another attraction which McLoughlin says helps bring traffic to the city. The firm is currently in the process of building Jumeirah Creekside hotel, to accommodate passengers staying close to the airport. Looking ahead, DDF’s biggest challenge is to successfully expand its offerings in line with airport growth. By the end of next year, the retail giant is to employ approximately 1000 new recruits to staff outlets at Dubai Airport’s third concourse, which will house Emirates’ A380 superjumbo fleet and include some 8000 square metres of retail space. The department, which will sell everything from perfumes and cosmetics, to jewellery, confectionary and electronics, will take DDF’s staff numbers to nearly 5000. “We are going on a big recruitment drive towards the end of this year for concourse three,” says McLoughlin. “That’s expected to open at the end of 2013 and [we’ll need] about 1000 extra staff.” In line with existing sales figures, the plan is to expand the retailer’s cosmetics offering within the new concourse, catering for surging demand among travellers. “Our single biggest category at the moment is perfume, and yes, it is bigger than gold. So we are talking there about duplicating our perfume and cosmetics [section].”

Three years later, he says, concourse four will open. The new section, being developed in partnership with Dubai Airports and costing AED28bn to construct, will have 8000-9000 square metres of retail space, which DDF has also been asked to oversee. By that time, McLoughlin expects sales of around AED10bn, and a headcount of 8000 staff. Looking even further ahead, DDF will also be responsible for the duty free segment of the Al Maktoum International Airport. Speaking about the venture, McLoughlin says it will be a big job, with 63,000 square metres of retail space needed, and thousands of product offerings, but that it is “very exciting” for DDF. The other focus in the coming years will be to accommodate a flood of Chinese tourists to the region. McLoughlin says Chinese business is becoming very important, with tourists from China among the biggest groups holidaying to the UAE currently. “There is a lot of Chinese travelling, Chinese purchases are increasing all the time, and a lot of them are buying luxury products. If we look every day at the top 10 or 12 individual sales, invariably two or three of them are to Chinese passengers.” To make the most of Chinese spending, DDF is hiring more Chinese staff, with 200 new recruits starting at DDF in January, not to mention introducing Chinese signage and encouraging its non-Chinese workers to learn basic phrases. McLoughlin says this has always been the business model for DDF. “I remember ten or fifteen years ago we had a lot of Russian people coming here, and we made sure we had phrase books in the duty free in Russian language, we made sure we had some Russian equipment, we did some surveys to see what products the Russians were looking for and we made sure to have them in stock,” he says. “We’re doing the same with Chinese. If other airlines come with other groups of people we will do the same thing.”

But what about European customers? Many Dubai retailers, fearing a slump in European travel next year due to the ongoing eurozone sovereign debt crisis, have already pledged to drop prices to account for ailing numbers of European shoppers. McLoughlin says he is not worried. “We have found over the years that European tourism has continued to grow, so I’m not worried. Also Emirates is starting direct flights to Ireland this month. There is a lot of Irish tourism coming here and that’s bound to increase. The more direct flights and the more services that [the airlines launch] the better we will do.”