experience and learnings from a european perspective · (parking, grooming, etc.) via airport or...

Experience and learnings from a European perspective

Shanghai, 13th October 2016

Digitalization of airports

Dr. Martin Streichfuss Head of Transportation Competence Center, Roland Berger

2 2016-10-13 AIS2016 - Digital airports_EN.pptx

2

The ongoing digital transformation creates significant business opportunities for airports – Our learnings from Europe

A Features of the ongoing digital transformation

Aviation has been at the forefront in adopting new technology – A new transformation is underway driven by digitalization

Airports are key drivers in the industry – Often they do more than other players in the value chain

B Digital opportunities for airports

Opportunities exist along the entire passenger value chain – From mobility to boosting non-aviation revenues

Multi-modal mobility concepts, digitization of shopping through mobile payments and the use of e-stores, flow monitoring via Wi-Fi and Bluetooth are only a few examples for innovations

C Realization of digital opportunities

Airports need to operationalize these opportunities – "Digital" is often not a core strength

A new way of thinking and acting is needed – Tools like Design Thinking, Rapid Prototyping and Hackathons are instruments from the start-up industry that can be used by airports, too

Agenda

Introduction

Source: Roland Berger


Aviation has been at the forefront in adopting new technology – Again, a transformation is underway driven by digitalization

A wide view on digital aviation

Transformation today Current drivers

> Airline and airport cost structure optimization

> Traditional non-aviation revenue potential mostly realized

> Airline yields are at best stable in a growing market

> Push for differentiation and product innovation

Cutting-edge yesterday

> Navigation and landing aids

> Global distribution and booking systems

> Yield and revenue management systems

> Electronic tickets

> GPS-aided and RNAV navigation

Multi-channel retail

Wayfinding

Real-time tracking of cargo

Augmented reality apps

Location based services

Permanent tag luggage


1 Features of the digital transformation


This transformation is driven by growing passenger demand and the availability of new technologies

Key digital drivers


Continued global air passenger growth

Changing, more digital passenger demands

Growth of new travel technologies

Source: Boeing, SiTA, Criteo, Roland Berger

World

4.8%

Domestic Asia

6.2%

Domestic China

6.2%

Expected pax traffic growth '15-'35 p.a.

Tablet

39%

Laptop

46%

Smartphone

83%

Share of air pax carrying a device

Hotel

33%

Travel packages

15%

Air

24%

Share of mobile bookings1)

1) Apps not included, 2nd half 2015


Airports are key drivers in this changing industry, taking a stronger position and doing often more than other players in the value chain

Digital roles in the aviation value chain


Airports

> Clear advantage for digital investments due to own land-based infrastructure

> Existing direct relationship with retailers, passengers and airlines – Central role in aviation value chain

> Financial strength for investments

Airlines

Retailers Ground handlers

> Limited distribution of in-flight internet so far reduces digital potential on-board

> Hence dependence on players on the ground, e.g. airports or retailers

> Lower willingness to invest in passenger experience, often due to low profitability

> Digital first movers due to pressure from online retail – Threat to business model

> Physical stores still remain strong asset and core business with most attention

> Dependence on airports and their infrastructure

> Traditionally not a highly digitalized industry – Dependence on infrastructure and ground equipment

> High degree of manual labor with standardized processes and work

> Low maturity indicates strong potential


Digital trans-

formation


Airports are uniquely placed to tackle the challenges that accom-pany the digital transformation – It's a new business model

Challenges to be addressed by airports


Ever shorter horizons

> Long-term-planning cycles often prevail, as airports were pure infrastructure providers in the past

> Now, digitalization pinpoints the need for continuous innovation and re-thinking of own initiatives

> Indeed, technological progress will even be faster in the future, e.g. driven by AI

Building of scales

> Only few airports are large enough to tackle technological innovation in house

> Yet, digitalization means collaboration: airports and tech companies, but also among airports

> By joint initiatives, e.g. a joint app, airports can gain scale and decrease implementation risks

Digital passengers

> Customers have never been as informed, demanding and tech-focused

> Especially lucrative transfer passengers lose loyalty and look for best value for money

> Airports need to re-gain those customers by offering a holistic modern experience

Commercial rationale

> Digitalization is not a self-fulfilling prophecy – investments need to make commercial sense

> All measures shall be carefully examined for revenue potential or cost synergies

> Digital initiatives need to be benchmarked with classic investments, e.g. retail space enlargement



The digital transformation thereby creates opportunities along the full value chain – From mobility to boosting non-aviation revenues

2 Digital opportunities

Overview of digital opportunities

Connecting more passengers to the

airport

Pas

sen

ger

mo

bili

ty

> Better connectivity to airports with multi-modal transport services

> Higher customer satisfaction with real-time inform.

> Additional revenue potential with new transport services, e.g. Uber, ride sharing

Pushing duty free retail into online

channels D

igit

al r

etai

l

> More personalized multi-channel re-tail offers for pax

> New digitalization of entire shopping experience at airport

> New attractive service offerings possible, e.g. VIP services

Building win-win partnerships with

airlines

Air

line

coo

per

atio

n

> So far limited ex-change of custo-mer data both air-ports and airlines can use

> Tailoring service offerings along the entire value chain possible

> Possibility of sharing risks in the development

Making best use of the infra-

structure

Op

erat

ion

s

> Automated data exchange to improve efficiency

> Existence of new technologies for cost intensive areas, e.g. FM

> Potential to optimize pax flows to maximize time in areas with revenue potential



Key drivers

As passenger mobility changes, goal for airports is to participate in the new revenue streams and to get access to more customers


Pas

sen

ger

mo

bili

ty

Opportunities for passenger mobility

> Growth of transport options that avoid airport concessions

– Didi Chuxing, uber

– Ride sharing

> Potential of robo-cabs within a few years, reducing need for car parks

> Growth of long-distance bus networks with high granularity

Airport Curb-side access fees to participate in increasing arrivals by non-conces-sioned cars or robo-cabs

Station

Departure fee for non-con-cessioned cars picking up passengers

Multi-modal train and bus station with wide and frequent connections to the hinterland


1

2

3


Sale of VIP services (parking, grooming, etc.) via airport or partner site, collection of goods purchased online / in town, discounts depending on airport entry time

Retail is a key revenue source for airports – Digitalization presents both risks and opportunities, e.g. personalized multi-channel offers

Key drivers

Dig

ital

ret

ail

> Increasing compe-tition from online retailers with price leadership

> Cooperation with airlines and retailers, in place circumventing the airports

> Firm demand for multi-channel, e.g. shopping both online and offline with same retailer

> Increased demand from passengers for personalized services

Opportunities for digital retails



Entertainment options that switch seamlessly between airport and airplane

Digitization of shopping experience along NFC touch points, QR codes, pop-ups, mobile payments and extended use of e-stores

Airside

6 7 9

10

11 VIP

1

Landside

2

3 5

✓

4

8


Airport and airline cooperation is mainly focused on operational aspects – Significant opportunities for non-aviation, digital revenues

Key drivers

Air

line

coo

per

atio

n

> Growing push by air-lines to participate in digital retail

> E.g. via in-flight internet, making use of long client contact

> Growing interest by airports in airline customer data for personalized offers and personal shopping

> Targeting of passen-gers for retail sales currently still excludes lounges

Opportunities for airline cooperation



Leveraging customer touch points jointly

Buying airport retail products through in-flight-app, picking up at landing

Exchanging customer intelligence in order to tailor service offering

1

2

Lounge shopping: Purchasing airport retail products in airline lounge

3


Use digital data to improve the airport's operations' efficiency – Decreased costs and higher passenger satisfaction

Key drivers

Op

erat

ion

s

> Operations often already optimized for non-digital levers, e.g. regarding staff costs

> New technologies are now available to increase efficiency of operations and lower staff costs even more

> Also, increasing interest in passenger data to influence navigation in the terminal, e.g. to increase ancillary revenues

Opportunities for operations



Airside Landside

Process automation with digital luggage tagging; security solutions with e.g. automated suspects identifications

Flow monitoring with Wi-Fi, Bluetooth or imaging based as well as geo-localization

Intelligent building management with real-time energy and utilities management

Data based asset mana-gement and preventive maintenance

Customer engagement with digital and interactive displays

1 3

4

5

2


Key question is how to operationalize these opportunities – New approaches from start-ups

Requirements of digitalization and suitable formats


3 Realization of digital opportunities

Quicker development

Stronger customer focus

Increased openness

More daringness

> Adapt to the "fast past" in the industry

> Act quicker, develop solutions faster, e.g. early prototypes of solutions

> Put yourself into the position of the customer and understand pain points

> Involve customers in the development and the test of products/solutions

> Regard new ideas and approaches as potentially valuable

> Consider solutions from competition and other industries as well

> Be brave enough to try out novel ways to approach problem solving

> Come up with new and different approaches and solutions

Design Thinking

> Systematic approach to deal with innovation in multidisciplinary teams

> Generates ideas and approaches for new products and services

Rapid Prototyping

> Testing of products in early stages with limi-ted resource input and quick adjustments

> Early-stage market exposure

Hackathons

> Collaboration of transversal experts to deliver creative outside-in solutions to a certain task

> Needs willingness to share confidential information (data)


To master the transformation, many airports partner up to design a product portfolio along the customer and operations journey

Target product portfolio (example)

Flight from destination

Customer and operations journey

Planning Booking Journey to airport

Stay at airport

Flight to destination

Journey Journey home

Follow-up

Involvement options

Acquisition

Outsourcing

Joint-Venture

Own deve-lopment1)

Startup-contribution

1) Possible profit sharing for other airports

3 Realization of digital opportunities

Travel portal

Find a Travel-Mate

Community

Airport commute platform

Apps to track baggage location

"Food to go" home

concepts

Service for frequent travelers, storage of clothes incl. cleaning

Travel portal

Lounge shopping with airline



Mastering digitalization: Take the driver seat – Focus your activities around the customer – Do not lose sight of business case

Guiding principles

Leverage your

central role

Build around the customer

Ensure return on

invest-ments

> Clear advantage for digital investments due to own land-based infrastructure

> Existing direct relationship with retailers, passengers and airlines

> Financial strength for investments

> Global passenger growth in aviation will continue, particularly in Asia

> Passengers of the future will be more digital and more demanding

> This creates opportunities along the entire travel value chain

> Digitalization yields potential both on for additional revenues and cost efficiency

> Initiatives need to be planned and thoroughly challenged for return on investment

> New paradigm of continuous innovation and shorter investment cycles is needed



Your contact

Martin Streichfuss

Senior Partner

Global Head of Transportation Competence Center

CONTACT Roland Berger Dreischeibenhaus 1 | 40211 Dü sseldorf | Germany Tel.: +49 211 4389-2193 [email protected]

Zhanfu (Jeff) YU

Principal

Co-leader of China Transportation Competence Center

CONTACT Roland Berger 20/F Tower A Gateway Plaza, 18 Xiaguangli, Dong San Huan North Road, Chao Yang District | Beijing 100027 | China

Tel.: +86 136 5116 4091 | +86 10 5954 1669

[email protected]

mailto:[email protected]

mailto:[email protected]

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