Where Now for Airport Commerciality?

By: Alex Thompson, Founder, Totley Brook Ltd   •   Email: trunblocked@gmail.com

Globalisation has fuelled the need for business and leisure flights as new economic and opportunities drive geographical expansion for companies and new wealth empowers huge numbers of curious, well-funded travellers to visit overseas.

Airports, and particularly the global hubs serving flag carrying airlines with established codeshare partnerships, make hundreds of millions annually. Only capacity ceilings for the sought-after landing slots limits the take.

Revenues from retail rentals, duty free and airport advertising concessions have kept increasing as passenger numbers and footfall continue to grow, meaning the commercial position for airports has just kept getting bigger and bigger. The expression ”build it and they will come” rarely seemed as apt.

Recent events have, of course, changed all this radically. Travellers are locked down, business is on Zoom calls and most planes are grounded. Last month Heathrow expected only 10% of a typical April’s traffic, is operating one runway and functioning only two of its five available termini.

This is long term. The effects of traveller confidence and the way we do business will change inexorably. Companies with greatly reduced revenue lines will have to make discretionary savings; the tech-facilitating online conference facilities have already and will continue to improve steeply; and, in any case, leisure and business travellers fearing infection or the comparative quality and access to medical care when away from home, will be loathe to fly.

Fewer flights means revenue from landing fees will reduce. Rental revenues from retailers and other associated income will follow as passenger numbers and throughput reduce.

So how can airports adapt to these challenges and emerge better suited and more relevant to the new complexion their businesses face?

A mindset change of how airports are managed is needed. Transferring them from a transport facility into a venue that adds value to the consumer, becoming a key element of the journey experience rather than a necessity.

Alex Thompson, Founder Totley Brook Ltd. ''A mindset change of how airports are managed is needed''
Alex Thompson, Founder Totley Brook Ltd. ”A mindset change of how airports are managed is needed”

Passengers will spend more time at the airport because movement through will take longer, leaving them more disposed to visit facilities. There may also be an opportunity to attract non-travelling audiences to the venue by offering high spot attractions with sponsorship rights, such as Imax cinemas showing high quality, short form content or sports coverage ”landside” – so accessible both to flyers and non-travellers, who can also access its leisure, casual dining and retail facilities.

An airport with facilities attached is transformed into a recreation destination with aircraft. The well-developed public transport links and parking facilities that serve nearly all airports already makes this achievable.

Partnerships with stakeholders built upon data can inform how to map the course to a different and more relevant proposition. The airlines bring the consumer to the airport through the routes they offer. They have huge levels of passenger data on a general and first party basis. The airports, in turn, have insight into passenger footfall, direction and volume of flow. Working together, and especially in those termini that exclusively service a single carrier, to allow the airline to help shape the experience – so creating a commercial and operational partnership to improve the overall consumer experience.

A similar arrangement with retailers who may be prepared to create bespoke experiences for the airport and its customers is another possibility.

Whilst taking up a more inclusive attitude with some stakeholders, airports might also see opportunities to reclaim revenue-generating space.

JCDecaux and Clear Channel, for example, enjoy a virtual monopoly selling advertising space within airports globally. However, changes in technology and data by which digital screen advertising space is bought may mean these intermediaries are not adapting fast enough and so no longer bring the value they once did. Airports have the means to become media owners, or work with other digital screen partners better suited to their current needs. Footfall volume and time can be tracked via tech such as Crowdvision; flight arrivals and load figures through OAG and ACI datasets which, when combined, creates an extremely detailed and engaging currency from which audience impressions and when to show different advertisements can be measured.

The uniquely cosmopolitan nature of the impressions an airport delivers offers fantastic opportunities for international brands. Consider a spirits brand making a big push for their high-end, limited edition single malt whisky with the Asian consumer as primary target. When the flight from Beijing lands, product displays at that terminal can, for a period of time, have copy in Mandarin. When the flight from Hong Kong lands, the same copy could be in Cantonese etc. We are seeing none of this at present.

Were airports to sell their space through automated platforms directly to buyers, they could retain all the revenue whilst allowing their screens to be used more dynamically alongside other digital out-of-home campaigns being placed outside the airport.

With great changes also comes challenge. But also opportunity. The effects of COVID-19 are long term, but will travel adapt not disappear. Those airports that make brave but informed alterations can now prosper. Those that rely on or wait for a return to the status quo will be extremely challenged.