The profitability puzzle: How Shilla Duty Free is driving growth with a focus on experiences, loyalty and sustainability

The Shilla Duty Free has been seeing encouraging signs of recovery, with revenues climbing and passenger demand strengthening across its key travel markets. The company is investing in experiences, loyalty and sustainability to secure long-term growth amid shifting dynamics.

Hotel Shilla, parent company of The Shilla Duty Free, reported in its second-quarter results that the travel retail division grew sales by +2.1% year-on-year to US$614.9 million, highlighting strong performance in this area. Airport duty free revenues led the way, rising +6.4% in line with growing passenger levels. This growth partly offset a -3.2% decline in downtown duty free sales, where recovery has been more gradual.

Despite topline growth, the business posted an operating loss of US$8.2 million, compared to a US$5.1 million profit recorded in the same period last year.

"While Korea duty free is recovering toward pre-pandemic levels following the endemic transition, the recovery pace remains sluggish due to reduced purchasing power resulting from the global economic downturn and shifts in tourism trends from shopping to experiences," a representative from The Shilla notes.

Even so, the company sees strong reasons for optimism. Passenger numbers are climbing, and policies such as the temporary visa waiver for Chinese group tourists create opportunities to stimulate spending. "We expect business conditions to improve gradually," the spokesperson adds. "We plan to continue efforts to enhance performance by strengthening targeted marketing aligned with changing tourism trends and customer needs, as well as reinforcing product capabilities that lead consumption trends."

Elevating experiences

Today's customers respond to elevated experiences that create a sense of place and occasion. In response, The Shilla Duty Free has launched a series of strategic activations designed to capture new segments and drive engagement. "Our ultimate goal is to deliver a differentiated duty free shopping experience," states a representative, emphasizing the importance of these investments in setting the company apart from its competitors.

At Singapore Changi Airport, The Shilla partnered with Penhaligon's on a "sense of place" animation inspired by the city's lion emblem, offering travelers an airport-exclusive tote bag as a gift with purchase. The "Make Travel Magical with Shilla" campaign brought Disney's Mickey Mouse and Friend to the airport, giving travelers a "Catch & Win" game, themed photo sports and limited-edition Disney gifts with qualifying purchases. Permanent concepts such as the Beauty&You store in Hong Kong and exclusive collaborations such as Hennessy Paris x Loewe further demonstrate the company's commitment to deliver memorable, immersive retail experiences.

The Shilla Duty Free continuously introduces new products aligned with evolving customer needs and trends. "Securing profitability remains a critical priority, and we will continue our ongoing efforts to enhance profitability across multiple areas," states The Shilla Duty Free's representative. They will also maintain their sales activities to develop new revenue channels.

Long-term loyalty

The Shilla also links profitability to loyalty and sustainability, using both as foundations for a resilient business model. The S.Rewards membership program exemplifies this strategy. Customers earn up to 0.5% of purchases as Rewards Points, redeemable like cash, while seven membership tiers, from Bronze to Black Prestige, deliver perks such as lounge access, priority pickup and discounts with partners including Expedia, My Real Trip, SSF SHOP and Yellow Balloon. This multi-tiered approach strengthens customer retention and builds long-term value for the company.

Parallel to these efforts, Hotel Shilla has intensified its ESG initiatives. "We have officially declared our commitment to ESG management and established an ESG committee to ensure systematic implementation of ESG practices," the spokesperson says.

The ESG strategy rests on four pillars: Sustainable Shilla (healthy growth), With the Shilla (collective advancement), In the Shilla (employee well-being), and The Green, The Shilla (environmental commitment). By embedding these values in governance and communication, The Shilla Duty Free maximizes corporate value while appealing to an increasingly conscious consumer base, proving that purpose and profitability can thrive together.