Few companies reflect the meteoric rise of Dubai as a tourism destination as well as Dubai Duty Free (DDF). Established in 1983, the state-owned airport retailer has grown from being a $20m business with 100 staff, to a world leader with sales of $1.6bn last year and more than 5,600 employees. In 29 years, the company has doubled its sales figures six times and expects to double them again by 2018/19.

When the duty-free operation opened, just 3 million passengers a year were using Dubai airport and Emirates airline had still to be founded. Today, Dubai International airport ranks among the busiest in the world, handling 57.6 million passengers in 2012 – a figure expected to rise to 98 million by 2020.

About 161 airlines now use the airport, serving about 260 destinations.

DDF has done more than expand with Dubai, it has had a direct influence in steering the growth of the emirate and its hospitality sector.

Marketing Dubai

“We were expected right from the beginning to help promote and market Dubai, which we have done in various ways over the years,” says Colm McLoughlin, executive vice-chairman of DDF. “We started a tennis tournament 21 years ago and it has become one of the premier tennis tournaments in the world.” DDF built the Dubai Tennis Stadium and the surrounding entertainment complex in Garhoud.

The retailer has played a leading role in developing the notion of Brand Dubai, as the sponsor of the Dubai World Cup, the Dubai Desert Classic golf tournament, the film and shopping festivals, and of horse races overseas. It spends about 3 per cent of its turnover on promotion, marketing and sponsoring events.

McLoughlin was one of the original group seconded to Dubai by the Irish Civil Aviation Authority, which was contracted by the Dubai government to set up the duty free operation. He also sat on the steering committee that established the Department of Tourism and Commerce Marketing, the body tasked with promoting the emirate.

DDF has also helped finance the expansion of Dubai International airport and the growth of the aviation sector, which today accounts for 29 per cent of the emirate’s gross domestic (GDP) product and sustains more than 240,000 jobs. DDF alone accounts for 2 per cent of GDP. The retailer (which is now part of Investment Corporation of Dubai) is the lead financier of the construction of concourse 4.

“Rather than just hand the money over to the government, our revenues have always been ploughed back into expanding the airport, but this time with concourse 4, things are being done more formally,” says McLoughlin. In the wake of Dubai’s debt restructuring, questions had been raised over the emirate’s ability to raise further funding. With the commercially successful DDF approaching lenders, few problems are expected, particularly as it has a clear map for future revenue growth. With the further expansion of the airport, the firm is targeting sales of nearly $3bn a year by 2020 and expects to employ about 8,000 staff.

DDF operates 18,000 square metres of retail space over three terminals. Concourse 3, which opened in January 2013, added 11,000 sq m, as will concourse 4, due for completion in 2016. Following the opening of concourse 3, the capacity of Dubai International has grown to 75 million passengers a year. Concourse 4 will boost capacity to 95 million.

DDF will also operate the retail outlets at Al-Maktoum International, which is planned to be the world’s largest airport with a capacity of 160 million passengers, five runways and 64,000 sq m of retail space upon completion. Cargo flights have already begun at the airport in Jebel Ali, but commercial flights are unlikely for several years due to the ongoing expansion of the existing airport.

Resilient model

DDF’s success hints at an underlying resilience in Dubai’s economic model and its ability to bounce back from adversity. The company saw sales continue to grow during the 1990-91 Gulf war, after the 11 September 2001 terrorist attacks on the US and during the global financial crisis.

“We did feel it, but our spend per head didn’t go down,” says McLoughlin. “We do two things here fairly well in comparison with other airports. One is our spend per head continues to increase every year – our average spend is $47. The other is our penetration. If you [look at] Heathrow or Gatwick they sell to 17-18 per cent of departing passengers, we sell to 49 per cent.”

Although a recruitment freeze was imposed, DDF was not forced to lay off staff and sales growth quickly accelerated to 11 per cent in 2010 having fallen to 3.6 per cent in 2009.

Strong sales growth is forecast for 2013 following the opening of concourse 3. The first quarter of this year saw DDF recruit 1,053 new staff to operate the new retail spaces.