Duty-free shopping
Under the category of service to tourists, mention should also be made of duty-free shopping facilities, although the subject has been discussed elsewhere in this text. The purchase of duty-free goods at air ports, on board ships and aircraft, or at specially designated duty-free ports has exerted strong attraction for tourists for a very long time. Introduced during the first half of the twentieth century, mainly to satisfy the demands of travellers on the great ocean liners, it was extended to aircraft in 1994. The first airside duty-free shopping arrived in 1947 , when the Irish parliament passed the Custom-free Airport Act, giving Shannon the world’ first duty-free shop. Since those days, duty-free purchases of spirits and tobacco in particular have been effectively marketed by airports and carriers alike, and the profits and sales of such items have always been substantial, accounting for large shares in the profits of many companies. Airports have achieved up to half their total operating profits through such sales, while ferry companies in Scandinavia have obtained up to 70 per cent of their income in this manner.
This has led in some quarters to criticisms of profiteering but airports reply to such criticism by claiming that without these profits, they would be forced to increase their landing charges; this would have a knock-on effect on carriers, which would then be forced to raise their fares. Without the benefit of duty-free shopping, transport fares to ten to rise appreciable: estimates typically point to increases ranging from 10 per cent to as high as 30 per cent. BAA in fact reduced its estimate of increases in charges to airlines using its airports after expanding its retail shopping outlets and forecasting rapid increases in duty-paid sales (rising congestion at airports, requiring earlier check-in time and flight delays all tend to enhance sales in airport shops)
Tax harmonization in the European Union led to the withdrawal of duty-free privileges for travel between Member States in July 1999. The impact of this regulation on travel industry sectors has still to be assessed, but it is evident that many companies were badly hit by move; to take one example, Eurotunnel alone saw a 72 per cent fall in its retail revenues in the months following the ending of duty-free sales. As a result, fares on cross-Channel ferries and Eurotunnel service were raised sharply, and companies redirected their marketing efforts to selling duty-paid goods, often at French prices, which substantially undercut those in Britain. How this new regulation is affecting travel patterns between EU and other European countries is not yet clear, although some destination switching is certain to have occurred as passengers face higher fares on some routes which other can still attract the duty-free consumer. Countries such as Tunisia, Malta and Turkey are likely to have benefited from the change.