Times have changed and revenue streams for airports are no longer all about the aircraft. Alan Dron asks suppliers how airports can best maximise their non-aeronautical revenues, from food & beverages, to lounges and retail, airports are transforming the passenger experience to increase income streams beyond aviation-related services.
This article was originally published in our June 2024 issue of Regional Gateway. To receive our magazines and articles, apply for your complimentary subscription today.
The secret to getting airport passengers to spend money, it seems, is to ensure that they are as happy as possible as they move through the terminal.
Happy travellers are more inclined to pick up that paperback at the news stand or that bottle of perfume in duty-free, or food and beverage from outlets. But how to get them into that state of mind?
E-commerce specialist Rezcomm realised some years ago that airlines were very good at forming relationships with their passengers, but that airports were being treated “almost as bus stops”.
Victoria Wallace, Rezcomm’s Chief Digital Officer.
The company’s Chief Digital Officer, Victoria Wallace, says:
“Rezcomm realised that we could do a great service for airports by building relationships with passengers, with a view to providing a better experience, a direct relationship and by encouraging them to support their local regional airport.”
Rezcomm developed a Customer Relationship Management (CRM) system in 2014 that used an automated e-mail system. Wallace explains that the revenue crisis created by the Covid pandemic subsequently sparked an epiphany among airports. Whereas passengers had previously just turned up at the airport’s front door and gone through the building “heads down”, airports realised they represented a guaranteed stream of customers.
“A lot of passengers aren’t really aware of all the opportunities they have when travelling, such as airport lounges,” says Wallace. “A lot of people labour under the misapprehension that they’re very expensive and only for business travellers.” Whereas an airport’s income previously tended to be split roughly equally between dealing with aircraft, parking and retail, a drop in aviation-related income meant airports were having to find new revenue streams.
This has involved turning the journey through the airport into an “experience”.
Passenger Incentives for Loyalty Points and Airport Benefits
One of the most popular devices for engendering loyalty is offering free airport Wi-Fi. If travellers sign up to the airport’s mailing list, they can be offered the incentive of a free coffee, or 10 per cent off their parking next time they use the airport.
“Airports want people to come earlier, to spend money,” says Wallace.
Rezcomm says it offers more than 200 tools to help airports with acommodating for passengers arriving ahead of time.
Rezcomm says it offers more than 200 tools to help airports with this – for example, by offering passengers help in preparing their trips, helping them to understand how the airport functions and helping them physically at the airport with improved wayfinding.
Wallace says: “We’ve identified over 35 opportunities throughout the customer’s journey for airports to contact them. That data acquisition journey is very important. An airport that does this, end to end, has many opportunities.”
Parking remains the most obvious and widely booked product.
“We know what they’ve bought, but also what they haven’t, and raise their awareness of other facilities.”
Airport lounges as an opportunity for revenue
Airport lounges represent another major opportunity for regional airports to raise money. Research points to them becoming increasingly popular, according to Stephen Hay, Global Strategy Director of Airport Dimensions.
Stephen Hay, Global Strategy Director
The company designs, builds and operates airport lounges, with around 50 globally. It is part of the Collinson Group, which operates several lounge access programmes, the best known being Priority Pass. Lounges bring airports revenues in two ways. The first is traditional rental space or revenue sharing, where more passenger throughput means more cash for the airport. The airport can also take a cut of revenue generated within the lounge. Research shows that passengers are more prepared to pay for a better experience across their journey.
“If you’re travelling with a low-cost carrier, for example, and have only paid £30 for your flight, people are very happy to pay for that good experience at the airport,” says Hay.
“Food and beverage (F&B) service is very important. It’s the number one driver of consideration of purchasing lounge access. People are seeking out that elevated F&B experience.”
Elevating the airport food & beverage experience
Away from the comfort of the lounge, however, F&B offerings are also improving on the main concourse.
They have growing importance as part of the airport experience – to the point where they are forecast to become even more important revenue sources than traditional ones such as duty-free.
However, this represents a shift, rather than a growth in revenue overall. One trend is for people to buy airport services in advance, such as parking or fast-track access.
“When people are booking or buying in advance, there are many more opportunities to engage with them and, for example, ask them if they’re booking fast-track, would they like access to the lounge as well?” says Hay.
He notes that one of the simplest ways to make passengers happy, research suggests, is to install more seating in concourses. Few things plunge travellers into a worse mood than having to stand around, surrounded by luggage.
Foreign currency’s contributions to non-aeronautical revenue
Most of us have bought last-minute foreign currency at an airport in our time.
Despite the increasing use of credit cards, airport forex desks retain an important revenue-generating role according to Sacha Zackariya, CEO of Prosegur ChangeGroup, which operates more than 200 branches globally.
Airport forex desks retain an important revenue-generating role.
“Since Covid, many airports have moved to a minimum annual guarantee (MAG) per pax model, which is much more fair than a straight MAG deal that was common in the past,” he says.
“Our client airports will also receive a percentage of our revenue (FX rate spread and commission earned from the transaction).”
However, he adds: “Currency services that are seen by consumers as unreasonably expensive will have a detrimental effect on the rest of the retail offer at an airport.
“High charges that leave customers with a bad taste will mean they are less inclined to spend in the airport´s shops and restaurants, so it is in everyone’s interest that the tenders ensure fair treatment of customers.”
Airports must play their part by giving forex outlets decent exposure, he says.
“Too often, FX companies are not given the exposure needed to serve [passengers] properly, despite paying more per square metre than any other concessionaire, excluding duty-free alcohol and tobacco.”
Zackariya notes that despite the rise of credit cards there are many reasons travellers prefer to exchange currency at foreign exchange branches.
“Many travellers take comfort in the certainty, safety and anonymity of cash,” he says. “No one wants to be stranded without cash in their wallet.”
Non-aeronautical revenue statistics and trends
In 2022, the last year for which statistics are available, suppliers working in sectors of non-aeronautical revenue accounted for 37 per cent of airports’ income.
Dimitri Coll, ACI World’s Head of Customer Experience, notes that retail was impacted by Covid, but by 2023 “some surveys were showing that travellers were keen to shop again – they’re back in the retail stores”.
He continues: “We’re seeing some evolution in products they want to buy. There’s still global brands, but there’s [also] still a need for local products.
“Now that you can buy everything everywhere, I want to buy something unique from airports.
“Globally, 24 per cent of non-aeronautical revenue is car park-related. Retail in 2022 was 17 per cent because of Covid, usually it’s more like 25 to 26 per cent. Food and beverage is about six per cent.
“In North America, market share is more related to parking. In Europe or Asia, it’s more about retail. In North America, it’s more domestic traffic, so there’s no access to duty-free.”
How can airports look to enhance their non-aeronautical revenues?
“The best return on [airport] investment is to focus on the customer experience,” says Coll.
“If you don’t have a restaurant or retail, then you need to have something to offer. Understand the customer profile.
That’s the first step. Then you can develop some services.
“The new trend is premium services. More and more passengers are prepared to spend money to have access to fast-track and lounges – they want to be more comfortable when travelling.
Wellington Airport showcasing its international lounge with lighting and modern space as a way to improve its non-aeronautical revenue
“They see the airport not as the starting point of something but as part of the customer journey.”
Coll tells Regional Gateway there are many ways to create a connection between passengers and the airport.
For example, multi-media installations or some form of cultural experience. Anything that gives an improved ambience.
He adds that more and more airports are installing facilities such as screens, music and lighting that help create a better ambience rather than simply a bland, functional space.
We hope you enjoyed reading our Non-aeronautical revenue feature from our June 2024 issue of Regional Gateway. You may enjoy reading these news stories:
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