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This tropical holiday island once seemed like an unstoppable growth juggernaut for the travel retail industry, but Hainan has recently hit the buffers. Joe Bates also reports on the passing of a duty free legend

Hainan, China’s top duty free shopping destination, proved a lifesaver for the wider travel retail sector during the dark days of Covid. Strict pandemic travel restrictions virtually halted outbound Chinese international travel, but China’s most southerly island province blossomed into a leading duty free market, protected by the country’s zero-Covid policy and boosted by the generous duty free allowance for mainland Chinese shoppers.

Leading Scotch and cognac producers such as Diageo, Rémy Cointreau, Edrington and Pernod Ricard were quick to spot the enormous potential of Hainan at an otherwise challenging time for the wider travel retail business. They opened stylish boutiques and branded shop-in-shops with the likes of China Duty Free Group (CDFG), the leading duty free retailer in China and operator of the enormous CDF Sanya International Duty Free Shopping Complex, the world’s largest duty free store.

Now that China’s international borders have been open for nearly two years, however, the short to mid-term outlook for Hainan seems less rosy. Chinese travellers’ desire to travel further afield, the country’s faltering economy and a government crackdown on ‘daigou’ shuttle traders have combined to hit the island’s overall duty free sales, which fell nearly 30% over the first half of the year to RMB18.46bn (￡2bn), according to local Customs data. The number of duty -free shoppers also declined, dropping 10% to around 3.36 million.

According to Chinese travel research firm Fastdata, the number of outbound trips from China jumped by over 50.4% in the first half of 2024. It’s clear that many Chinese travellers are now embracing their new-found freedom, and regional APAC destinations such as Seoul, Tokyo, Hong Kong and Singapore are all benefiting from this exodus. The number of outbound Chinese travellers remains below pre-pandemic levels but rising quickly.

Hainan may be experiencing some headwinds, but the international big drinks players still seem fully committed. This month, for instance, The Edrington Group opened an experiential The Macallan shop-in-shop at the CDF Sanya International Duty Free Shopping Complex in Haitang Bay. The outlet boasts a wave wall design which imitates the curved shape of The Macallan Distillery’s roof and a copper installation inspired by the whisky’s small stills.

In terms of the product offer, the shop-in-shop features a broad range of The Macallan malts, including the travel retail-exclusive Colour Collection, limited editions such as The Harmony Collection and the upcoming Time: Space Mastery, a new time travel-inspired range of rare Macallan malt whiskies released to mark the distillery’s bicentennial. Guided tastings, personalised recommendations and a gift-wrapping service are other highlights of the new store.

Extensive offer

A month earlier, Pernod Ricard GTR also opened a branded boutique at the CDF Sanya International Duty Free Shopping Complex, again in partnership with CDFG. The 187sq m Maison Martell targets high net worth individuals and features a sensorial exploration zone, a tasting bar, a lounge, an Angel’s Share art installation and an invitation-only VIP zone.

Once again, the store’s product offer is extensive. High-end expressions on display include L’Or de Jean Martell – Reserve du Chateau Chanteloup, a collection inspired by Martell’s family estate in Cognac, L’Or Jean Martell – Zodiac Edition Assemblage du Dragon, a Chinese New Year-inspired release created from 1,400 eaux-de-vie, and Martell 70 Year Old Grande Champagne, a rare grande champagne cognac housed in a luxurious Baccarat decanter.

These high-profile store openings show that leading Scotch whisky producers and cognac houses aren’t about to abandon Hainan anytime soon.

With the Chinese government continuing to invest in the Belgium-sized island as a tourist destination through marketing campaigns, infrastructure investment, cultural events and Hainan’s free-trade port status, Hainan will continue to attract visitors despite its current teething problems.

Moreover, next year, the entire island is set to become a duty free zone and more duty free malls are planned, not least DFS, the travel retail arm of luxury giant LVMH, which has announced plans to invest in a 128,000sq m ‘seven-star’ luxury retail and entertainment site near the southern city of Sanya.

Beijing is determined to repatriate the Chinese duty free spending traditionally enjoyed by popular destinations such as Macau and Singapore.

When the Chinese government sets its mind on doing something, don’t bet against it failing. The ‘domestic duty free model’ employed so successfully in Hainan since 2011 is set to be replicated on the mainland with the announcement in August that new duty free stores were to open in eight Chinese cities – Guangzhou, Chengdu, Shenzhen, Tianjin, Wuhan, Xi’an, Changsha and Fuzhou. Outlets already trade in Beijing, Shanghai, Qingdao, Dalian and Xiamen.

Passing of Colm McLoughlin

Moving away from China, no round-up of duty free news from last month can avoid mentioning the sad passing of Colm McLoughlin, the erstwhile managing director of Dubai Duty Free, who only retired from the post he’d held for over four decades in May this year. Tributes have poured in from around the world praising the quietly spoken Galway man and his pivotal role in creating the world’s largest single duty free operation and its charitable arm, the Dubai Duty Free Foundation.

Dubai Duty Free’s current managing director, Ramesh Cidambi, simply described McLoughlin as a “great leader who built an award-winning retail business” at Dubai Airport. “He was a true friend,” he added, “who touched so many lives within the travel retail industry.”