Transforming Airport Business Models
In speaking with several industry colleagues, we had the feeling that the agendas of the upcoming airport conferences this fall seem to have a common theme. Many sessions are devoted to the creation of new non-aeronautical revenues. But, we feel that the sessions unfortunately focus on ‘more of the same’ – the same topics repeated. In fact, we’re reminded of the maxim, “If we do nothing different, why do we expect different results?” What’s really not being addressed is the transformation from an old business model to a new one.
The creation of new non-aeronautical revenues is the top of mind of today’s senior airport management, with the goal to facilitate lower airport operating fees. What is needed is a complete re-thinking of the way airports develop new non-aeronautical revenues and what changes are necessary to address the real opportunity to transform the current airport business model.
Non-aeronautical revenue from parking, real estate, retail, advertising, and food-and-beverage providers has been part of the airport’s revenue mix. Recently, however, declining airline economics have required airports to become more reliant on non-aeronautical revenues, with many airports deriving more than half of total revenues from such sources.
Traditionally, airports grew non-aeronautical revenues simply by increasing retail, parking, and utilizing the airport real estate. But in order to transform the current airport business model, airports need to adopt a customer-centric approach focused on enhancing the passenger experience. Since the airlines have control of today’s passenger relationship, airports need to develop a strategy to engage the passenger in their end-to-end travel journey. In fact, the airports need to consider the passenger as a ‘customer.’
In creating a successful ‘customer’ journey strategy, three key airport initiatives can be considered as success definers: customer insight, customer engagement and airport innovation.
In an Edinburgh conference presentation, we focused on the customer engagement initiative, listing five key elements of customer engagement. This is the beginning of the new airport business model.
- Your customers are engaged through social media
- Your customers are talking – are you listening?
- There is no perfect engagement model – just do it
- Technology is best way to engage your customers
- Failure is defined as ‘no customer engagement’
In terms of airport customers, ‘positive passenger experience’ is not well understood. But suffice to say that it is NOT unsolicited, general ads or promotional programs and it NOT easily measured by theASQ surveys. What airports need to understand is that it begins with engagement, a dialogue. This implies a two-way conversation. And it may be measurable in part, by a Passenger Experience Index.
Passengers or ‘customers’ have an increased expectation for personalized services. As the airport business model evolves, these can be tied to a retention system built on airport spend. An integrated passenger experience will become the key differentiators for airports, raising the appeal and the opportunity to generate a higher non-aeronautical revenue stream.
Airports now have the opportunity to focus on passengers as ‘customers’. This is a real opportunity for airports to transform their current airport business model that will result in increased non-aeronautical revenues.