INNOVATIVE APPROACHES IN MAXIMISING COMMERCIAL REVENUES AIRPORTS COUNCIL INTERNATIONAL BY:- SIDHARTH MOULI ASSOCIATE GENERAL MANAGER DELHI INTERNATIONAL AIRPORT P LTD

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Table of Contents Page No.

I. Introduction…………..……………………………………………………………….. 1

II. Significance of Non Aeronautical Revenues...……………………………………….. 1

III. Sustaining Growth through Strategic and Tactical Levers of Innovation…………… 2

IV. Strategic Theme1 – Innovative Structuring Options…………………………............. 3

V. Strategic Theme – 2 – Diversification through Non Traditional Revenues….............. 6

VI. Strategic Theme – 3- Creating a ‘Sense of Place’ through brand leverage………….. 9

VII. Strategic Theme – 4 – Upskilling Internal Talent to Deliver Innovations…………………. 10

VIII. Tactical Theme – 1 – ‘Airportainment’ – The future Mantra…………….…………. 11

IX. Tactical Theme – 2 – Using Technology to create Seamless Interface…………… 13

X. Innovation Centricity in an Organisational Culture…………………………………… 14

XI. Recommendation and Conclusion………………………………………………………. 15

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I. Introduction

It is my endeavor to share through this report my understanding on what the changing landscape in context of commercial revenues means for major airports across regions and highlight areas of opportunity that exists along with skills required to leverage towards it sustainable growth. I have studied and presented how airports can go beyond traditional approaches in maximization commercial revenues by exploring innovative Strategic and Tactical levers. In doing so there are multitudes of strategic and tactical opportunities that arise and this potentially could contribute to an overall increase in Income/Passenger upto 12-15% in case of large airports (>40 mn.) and upto 25% in case of Mid Size to Regional airports with huge propensity to grow.

I wish to demonstrate through this report, significance of holistic implementation in Strategic and Operational initiatives. Commercial Managers need to choose those initiatives which provides for a sustainable framework in their context for which I hope this report can form the foundation. The qualitative and quantitative information and references used in this report are as a result of my understanding of the sector and interaction I had had in past with various senior officials of airports across regions and their vision for growing commercial revenues through innovative approach. This, amalgamated with the experiences of airports from my region, this report should serve as a reference document for airport managers in proving them framework for maximizing commercial revenues through innovative solutions.

II. Significance of Non Aeronautical Revenues

Airports around the world are focusing significantly to grow their contribution from non aeronautical revenue streams. Ability to directly control and optimize revenues from these sources is primary reason for airports to shift their focus towards them which has resulted in a healthy mix of revenues for airport across regions from non aeronautical sources. Historically duty free, food and beverage, advertising, parking and space rentals have made significant contribution within the commercial revenue vertical.

*Source: Moodie Report 2011 / #Arthur D Little Study 2008

50% 52%60%

50%

7.50

%

11.5

0%

6.90

%

8.50

%

European Asia Pacific American Middle East

% of Airport Revenues

3 Yr CAGR

33%

23%

17%

8%

8%

5% 3% 3% Duty Free

Space Rental

Car Park

Car Rental

Hospitality

Specialty Retail

Advertising

Currency

Limitations Confronting Growth

· Challenges of space limitations – challenges to improve retail density beyond certain extent

· Decline in passenger numbers – optimizing footfalls · Structural issues – limits category maximization in

totality

Aforementioned threatens sustained growth in the traditional revenue sources, hence a need to adopt innovative approach in addressing these concerns and ensuring continuance of growth.

Traditional Approach in Growing Commercial Revenues

1. Improving Retail Density: - Increasing retail footprint has a maturity level and saturates around 1200# sqm./mn. departing passenger resulting in Sales/departing passenger of USD 26

2. Category Optimization:- Richness in offering, premiumness through brands, higher margin categories

3. Optimizing Footfalls:- Marketing and communication drive

How far can airports go with these initiatives alone?

. Non Aero Business as % of Total Commercial Revenues – Global Average 2011*

Contribution within Non Aero Business-Global Average 2011*

There is an upper limit to avenues of maximizing revenues with traditional approach due to inherent challenges. Innovative approach in exploiting ‘Strategic’ and ‘Tactical’ levers are key to future upsides..

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III. Sustaining Growth through Strategic and Tactical Levers of Innovation

Below are the key challenges that confront sustained growth in non aeronautical revenues for airports. Some of the solutions to these challenges can be addressed through ‘Strategic Initiatives’ and some of them through ‘Tactical/ Operational Initiatives’.

Pushing Strategic Levers – Providing Long term Solution

Key Challenges Solution Opportunities

Solution to most of these challenges provides for an opportunity for airport to leverage. Whilst most of these opportunities are unique it opens up multitude of innovative means in structuring and tapping into unexplored avenue of commercial revenues. Whilst the Strategic Initiatives have longer term implications for the organization, those that of tactical have short to medium term impact yet needs to be constantly evolved based on the issues at hand.

Pushing Tactical Levers – Setting Path to Purchase

Key Challenges Solution Opportunities

I have attempted to study each of the opportunities in details in the subsequent sections of this report with practical solutions to various challenges we encounter at airports with recommendations.

Dependence on Concessionaire

Dependence on Passenger Volumes

Need to Differentiate

Upskilling and Employee Engagement

Innovative Structuring Options

Diversification through non Traditional Revenues

Creating a ‘Sense of Place’ through Retail Brand

Upskilling Internal Capabilities

Strategic Levers

Need to enhance passenger engagement thereby increasing commercial spends

Need to create a mutually beneficial Airport Eco System

Improving quality of operational processes

Creating an ‘Airportainment’ Drive

Technology to create a Seamless Interface

Process Innovation

Tactical Levers

Strategic levers supports innovative thought process by going beyond conventional dependencies and Tactical levers provides for path to purchase solutions through strong consumer engagement ..

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IV. Innovative Structuring Options

Transcending Value Chain

In today’s context we are seeing airport operators willing to transcend traditional concession model and willing to explore innovative structuring options to maximize value. I have analysed to show the benefits of exploring some of these structures which would enhance value to the airport depending on its risk appetite, scale and macroeconomic context that it functions.

Other Hybrid Models

Choosing Right Model for Right Businesses

It is worth noting that any one model is not suitable across the board for all commercial businesses the airport operator has to take cognizance of following factors a) Need for Control b) Risk Appetite c) Need to scale up d) operational expertise e) airport /company life cycle f) Core competence

Airport Concessionaire

Expectations

- Planning and development of overall commercial mix

- Provision of critical pax information /MIS

- Support in approvals

When does it work? - Airport operator is extremely risk averse - Limited bandwidth for airport - Highly regulated context

Challenges /Expectation Mismatch - Pricing, promotions, staffing and investment plans - Transparency in reporting - Need for control (from airport operator) - Landlord tenant approach

- Ongoing operations, staffing, inventory, pricing and promotions

- Reporting and account meetings

Airport Operator Concessionaire

Expectations

- Sharing risks and rewards (incl. Capex and dividends)

- Support in approvals and permissions

- Ensuring long term sustainability

When does it work? - Airports willingness to share risk and upsides - Investment in management bandwidth - Need to leverage beyond a single airport - Bids during volatile environment

Benefits / Upsides - Higher revenue as well as profit sharing through

dividends (due to visibility of books) - Future valuation from equity for an airport - Scalability in case of an airport conglomerate – learning

back end operations before decision on self operations

- Focus on day-day operations

- Participative management with airport

- Willingness to share control

Airport + Concessionaire Joint Venture

SPV Stake Sale Concessionaire forms SPV and Airport has option to buy out at set value based on set conditions being/not being triggered Merits:-Airport can take over based on pre set criteria and performance standards

When does it work? - Airport has critical mass to deal with vendors across

categories - Category expertise – buying, visual merchandising,

pricing, execution or need to develop such

Benefits / Upsides - Full rewards of top line consolidation as well as

profits - Future valuation from equity for an airport - Scalability across other airports/projects

Airport Direct Operations Management Contract

Concession is owned by the Airport by supply and operations are undertaken by expert (concessionaire) for a fee. Metris: - Control and risk with airport yet concessionaire is incentivized through share of revenue/PAT

Supply and Operations Contract Similar to above and relevant in business where negotiation with buyers at global level is critical like duty free and fashion

Joint Venture Model Third Party Concession

Self Operations Model

Strategic Theme 1

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Strategic Canvas for Airports

Operational Expertise

Innovative Monetization Options

Besides forward integration, an airport needs to explore following ways of innovatively structuring income which is relevant across any of the aforementioned models. Even in traditional commercial verticals whether retail, hospitality or travel services, below mentioned can be explored:-

Options Application Relevance

Traditional Approach

Revenue Sharing backed by a Minimum Guarantee

Upsides sharing and downside protection Across airports

Fixed Rental Guaranteed value with no upside sharing based on performance

Where future revenues of concessionaire may decline / shorter tenure of concession

Innovative Alternatives

Options Application Relevance

Securitization of Future Incomes

Future income linked upfront security deposits which could act as quasi equity

Relevant for airports developing newer infrastructures

Sweat Equity Support for mobilization, regulatory approvals and initial incubation and secondment of specialists

Tightly regulated markets where airport operator is also a regulator

Trigger Based Incentives - Traffic - Renewal /Expansion - Profit linked

Linking incentive based on trigger of certain future events

Where there are future business upswings are not predictable at current stage but is anticipated

Exclusivity Bonus Incremental income based on exclusivity across categories or locations like airside, landside, terminal etc.

Airport which have differentiated consumer profile across terminals, locations enabling a need to pay premium for exclusive access across consumers

Expense Sharing Marketing initiatives undertaken by airport for promotion of concessionaires can be sponsored by concessionaires for the airport

Airport with limited internal accruals and need to have a controlled Opex

Levering Business Specific Nuances

Specifics like fixing carriage charges, exchange rate margins, airports can further enhance revenues

Across airports

Model Suitability

Concession a) Limited bandwidth b) Risk averse c) Development constraints

Joint Venture a) Moderate risk appetite b) Desire to get into value chain Bids during volatile market

Self Operations a) Need for full control b) in house operational expertise c) complete risk appetite

Management/Supply Concession

a)Need for control and ownership b) Lack of complete operational expertise

Extent of value chain participation

Risk

Control

Upsides

Scalability

Recommendation on Structuring

Management Contract

Self operations

Concession Model

Joint Venture

In house consulting

Airports based on their core competencies need to evolve innovative structures and be willing to evaluate alternative revenue models best suiting its profile and risk appetite.

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New format – security channel //bollards/Q managers, horticulture, in toilet, dustbins, defibrillators & lot more

Theme based – fragrance /vanity zone, festivity partnerships, kids arena, women’s boulevard

Brand engagement – brand lounges, experience zones, branded floor walkers

Sponsorships (for visibility) – cost of maintenance, baby strollers, play areas, staff uniforms, POS machines

Beverages – soft beverages, juices, water, coffee bean, energy drink, hard liquor and beer

Music/Video –ambient audio and video playing rights. Imagine an Airport Radio Channel with your favorite RJ playing songs of your choice

Tobacco – rights to visibility in smoking zones in tandem with rights to sell in select locations

a) Leverages unique position

of airport operator holding

retained rights on selection

of exclusive brands for a

said category

b) Creating exclusive supply

arrangements with select

brands for a premium value

c) Exercising choice to select

/ premium partners

a) Creating non

cannibalizing newer

formats beyond traditional

advertising (ATL) and

promotions (BTL)

b) Creation and monetization

of theme based

environment

c) Creating unique brand

engagement platforms

d) Associative sponsorships

V. Diversification through Non Traditional Revenues

In this section, I have attempted to list down various revenue streams which are non conventional and bespoke in nature. Diversifying into such unconventional sources of revenues is pivotal for airports to alleviate their risk of complete dependence in traditional revenue sources.

Whilst various airports globally are at different stages of exploiting such revenues, I have tried to broadly classify them into one or more of below prototypes:-

Theme How does it work? Going beyond routine

B

R

A

N

D

I

N

G

P

O

U

R

I

N

G

Strategic Theme 2

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Bespoke– ‘Do it yourself Zone’, with Culture as USP (imaging being invited to a grand Indian wedding, mock of course!) followed by food, retail etc, theme based engagement

Seamless/Cohesive/Information-led concepts – OEM sponsored aircraft simulators, aviation museum (let’s say exclusive airport Ripleys!), airport library

Popular Segment – Motion sensor gaming 7D theatre, flash mobs

Departure essentials – Postal/courier, business centre, photo kiosk, shoes shine, insurance, e-pay, tailor, health check-up, (how about a teeth whitening!), stationary, beauty care (nail bar!)

Arriving /transit essentials – shower, snooze pods, concierge / travel guides, water heating zones (for mothers with infants), laundry service, post card, photo kiosk, shoe shine, grocery, luggage care, salon, collect on return and order for departure (collect whilst you depart)

a) To provision taken for

granted essential services for

passengers

b) Airports can collaborate with

sponsors to monetize one or

more of these services

c) Provision of essentials are a

pre requisite to induce further

spends for a passenger

Showcase – Art Gallery (leading to high value purchase by art lovers), Exhibitions

a) Converts dwell time into

passenger spends especially

in a transit airport

b) Significant contributor to

Airport Service Quality

(ASQ) and passenger

alignment

c) To position as a seamless

experience rather than a filler

d) Location is key

e) Collaboratively leading to

revenue generation

Aforementioned initiatives are envisaged to be undertaken collaboratively with partners who are able to envision providing high quality experiential offering to passenger resulting in revenue maximization.

Essential services are most ignored by airports as they need not necessarily provide for higher revenues, but are essential services for passengers. I have highlighted few of them above

Theme How does it work? Going beyond routine

C

O

N

V

E

N

I

E

N

C

E

E

N

T

E

R

T

A

I

N

M

E

N

T

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Meters and greeters– Information centre, Messaging zones, Photo Placard, Food and Beverage, Convenience, Gifting, incl. floral, Grab & go concepts, Slumber rooms, Car wash & accessories, welcome desks (exhibition)

Staff Community – Canteen (discounted and hygienic), salon, laundry, locker rooms, discount stores and end of season sale (of outlets at airport), staff shuttle

Catchment /City – ‘Aerotropolis’ led development, public amusement zone, discount stores, airport landside exclusives (of brand at airport offering exclusives). Empanel Airport Citizens (members from influence groups like NGO, Doctors, Lawyers, Media, Entrepreneurs) who can be your goodwill

a) Huge opportunity catering

to completely different

segment including:-

· Meters and greeters

· Staff – airport, airlines,

ground handlers,

cargo, regulatory

agencies etc

· Catchment

b) De-risking option to reduce risk from passenger volatility

In any airport, the segment of non passengers including employees, meters and greeters, catchment population play a crucial role in making the airport stakeholder profile complete. It is extremely important segment in an O&D airport especially since meters and greeters vary anywhere between 2:1 to 1:2 in certain airports.

Total staff employed across agencies is significant in volume and vary anywhere between 1000-1500 in number per million passengers depending on the region, size and functionality. The requirement of the staff is quite unique and led by need for essentials as listed above. Catchment audience is also determined by whether airport is key for any landside entertainment or experience being created at airport. This is led by distance of airport from central business district and evolution of airport zone as Aerotropilos.

Sustainability of Non Traditional Revenues

In practice, most of these revenues do not get quantified and monitored as separate revenue streams by airports as they are invariably bundled into one or more of existing verticals, thereby resulting in lost focus /incentive for airport managers to maximize such revenues. However given its importance and potential revenues, it is pivotal to assign responsibility of achieving targets from non traditional revenues to dedicated manager within the commercial team.

Some key pointers to be kept in mind whilst designing these revenue streams:-

- Interspersing with core concept:- it is pivotal to intersperse these concepts with core concepts rather than deploy them in silos. This is key for these revenues to sustain

- Across Touch Points:- it is important for airports to plan certain streams especially those around convenience across various airport touch points for passengers as well as non passengers.

- Communicate effectively:-It is important to also communicate some of the bespoke services effectively through effective signages and other mediums

- Dedicated Resources:- dedicated team to conceive, execute and manage these new revenue streams on ongoing basis

Theme How does it work? Going beyond routine

N

O

N

-

P

A

S

S

E

N

G

E

R

S

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Airport

VI. Creating ‘Sense of Place’ through brand leverage

Need for an Airport to create own Identity

People travel through an airport more out of necessity than out of choice. However they would spend money at airport only out of choice. This is the very reason why an airport operator should think of creating an individuality in order to differentiate itself from rest and strongly participate in passengers mind space. There is also a compelling need for airport being the anchor body to create an umbrella brand which exemplifies brand values it wishes it customers to perceive of it.

When the brand mantras are amalgamated its manifestation makes wonderful business sense to customers

Leveraging Airport Brand to Maximise Value

It really merits for airports to completely leverage its brand by communicating to its audience its differentiated position. Some of them could include

- Design and Planning:- airport brand and its value becomes fulcrum of retail design philosophy and elements thereby having capability to maximize value through enhancement of spends

- Engaging Concessionaires: - binding retailers by best practices and processes. Unified brand guidelines to be practiced by all at airport including colour palettes, logo and tagline, visual elements like carry bags, flyers etc to ensure uniform visual appeal to passengers

- Effective Communication of Competitive Advantages:- multitude of offering, value for money, price advantage, depth of categories, service disposition, manpower quality etc

- Create multiple touch points: - across airports and beyond to influence the life of passengers right from their journey from their homes to the aircraft when they depart. Airport Loyalty programme is a powerful tool to incentivize loyal consumers

- Translate high recall and dwell time to share of wallet

Retailers/ Quality, Price

Airlines/ Connectivity

Regulatory /Service Quality

Internal Stakeholders/

Customer focused

Manifestation of expectations into Brand Values

Stakeholders & Consumers

Why a Single Airport Umbrella Brand ?

- Public perception influencer - Removes clutter in consumers’ minds by

communicating unified airports values - Translating expectation (or so perceived) into brand

values - Brands value to guide physical manifestation in

form of Designs, layout, offering, pricing, quality, mix etc

Most important from perspective of enhancing non aeronautical revenues as multiple retailers across airport are bound by airport brand mantras

Airports have to clearly register in consumers mind as to what it stands for and having an airport brand manifests this clearly through values and helps it differentiate from rest..

Strategic Theme 3

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Step – 3 - Training and Development – Domain knowledge through category, sales trainings, analytics, contract management, service quality programme along with individual development plan and potential career pathing. Being complex and people driven environment, team dynamics exercises plays a key role.

Step – 4 - Industry Orientation – Programmes like ‘Back to floor’ where airport staff gets to work at the outlets for a day in a month, undergoes rigorous training for a category attached to a brand along with expert interaction significantly helps groom people.

Step – 5 – Periodic Review – Periodic reviews to assess individual’s delivery and addressing areas of improvement are of importance. This builds need to be structured and progress led and nurtures aspirations.

Step – 6 - Reward and Recognition (incl. incentivisation) – Target driven for both quantitative and qualitative delivery. Programmes like ‘Sponsored Education Tour’, Spot Reward for delivery beyond ordinary is to be done on an ongoing basis.

Step – 7 – Mentoring and Coaching – Voice of Employee (VOE) is critical. People have the need to be heard especially in an airport organization which is fraught with high attrition rates in comparison to many other sectors. Given this, periodic mentoring/coaching programmes to nurture young talent is the required as best practice for an airport organization

Step-1 - Sizing and Goal Setting – Airport should identify right size, right positions and right job descriptions for its entire staff based on its strategy. Airport direct staff /Mn. Passengers vary anywhere between 25 to 45 depending on manpower strategy.

Step – 2 - Competency Mapping – Having determined the size of the team and their roles, next step is to assess the competency of existing members and their fitment to roles carved out for a position. Identifying gaps leads to training needs.

VII. Upskilling Internal Talent to Deliver Innovations

Employees play a pivotal role in bringing ‘Soul’ into an airport and realizing desired commercial results. It becomes imperative for commercial staff to be adequately upgraded and engaged. Being a service led industry, it is all important to have special focus given to people development and talent management. Below are some areas which any airport should consider undertaking as an engagement exercise to enhance its staff contribution:-

Innovative Approaches in Maximizing Airport Social Value: - Airports are a regions growth engine and have high responsibility towards the location where it operates. Below highlighted are few innovative means by which an airport can aim at maximizing social value besides maximizing shareholder value. :-

Area Initiatives Benefits Social Empowerment Initiatives

- Vocational training and recruitment from local community - Supporting self help groups to ready them for employment

Addresses manpower concerns in longer term basis for self, vendors and stakeholders

Community Development - Housing colonies for employees - Schools for children of employees - Job fares for employment across concessionaires - Mobile medical unit /healthcare for airport community

Reduces attrition of key employees. Builds stronger connect with the airport

Knowledge Park - Aviation university - certification programmes, visiting industry experts, simulators, training facility

- Aviation library – research papers, seminars, expert sessions - Aviation museum – can be in association national space

organization for showcase and an engagement zone for family

Nurturing R&D within industry and developing future talent

Strategic Theme 4

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Airports shall endeavor to enrich the passengers experience by engaging actively across these elements even if some of them are basic in nature, but creates impression in passenger’s minds

VIII. Airportainment – The Future Mantra

Need to Create Consumer Engagement at Airports

Passengers coming into the airport go through a stressful period during check-in, security and immigration after which they enter the commercial zone. Airport should endeavor to moderate the stress levels of passengers by engaging with them across various touch points. Globally we have seen that airports where consumers have been engaged actively have achieved enhanced commercial revenues.

Higher the airport gets on the engagement matrix listed above; more is the passenger involved with the airport and receptive to the commercial offering. Moving beyond hygiene factors like information, signages, communication on offers, airports should evolve to provide experience to passengers across touch points in their journey.

Transcend Information all the way to Experience

Given the daily stress in one’s life, passengers are too busy in their own chores to pay attention to the nuances which an airport wants them to take note of. They crave for simplicity in processes which many a times is overlooked. With changing times and options at hand, they are more demanding than ever and hard to please. Having that said they are well informed and discerning with openness to experiment with new things. Given these descriptive, addressing below areas innovatively becomes imperative to draw their spends in the stores:-

i. Basic Information ii. Good Ambiance during their dwell iii. Quality and hygienic food iv. Presence of an overall ‘Theme’ or mood

Having regressed the overall ASQ score for an airport with the top influencers for passengers, I get to understand finally it is the above, which matters the most to passengers to instantly influence their behavior whilst they are at their airport and for them to form perception.

Creating the ‘Airportainment’ Drive

Importance of Consumer Engagement

- Create and sustain the ‘Happy Hour’ period through their journey

- Hold passengers in departure lounge before they head straight to the boarding gates

- Lead footfalls into stores, thereby conversions - Perception and hence ASQ implications

Hygiene/ Information

Communication

Engagement

Experience

Consumer Engagement Matrix

Airportainment

Gourmetainment

Ambiancetainment

Holistic Engagement Model

Infotainment Themetainment

Tactical Theme 1

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- Holds passengers in retail area with awe

- Leaves feeling rejuvenated and refreshed

- Instills high spirits leading to enhanced spends

- Creates sense of place - Breaks monotony of travel

and one with ambience

Experience the Ambience a. Décor with grandeur in retail areas

dynamic and in sync with seasons, flavors and themes.

b. Interactive walls, graphics in tune with global standards

c. Design principles, colors, motifs, elements to add life to the airport

d. Mnemonics of the city e. Ambient Music – an airport radio

channel!

Experience led Information a. Treasure hunt in form of airport map

leading to discounted offers inside outlets

b. Break monotony of a mundane process for instance security channel by installing a ‘Virtual Assistant’

c. Free games /music downloads across information kiosks

d. Virtual stores and trial rooms where through a magic mirror and an upload through social media before the purchase. Virtual catalogue of airport offers also ensuing

e. KYA – ‘Know Your Airport’ contest to incentivize correct answers with goodies. Imagine an ‘Who wants to be an Airport Millionaire show live at the airport

- Simplifying information thru engagement for passengers

- Incentivisation to engage in self use info touch points

- Ensuring passengers do not miss out on critical information

- Informed buy decisions facilitated

- Encourages passengers to know their airport and its features better

- Passengers are drawn to food court

- Increased involvement in cuisine

- Airport becomes thought leader with celebrity association adding credibility

- Reduces fear/concerns of eating in a foreign country

Experiential Gourmet a. Celebrity chef – how about hosting

airport master chef! b. Cooking contest and live competitions

at food courts c. Connoisseur certifications d. Wine, cheese and food tasting session e. ‘Make your taste’ concept with a la

carte mix of spices with ingredients personalized

f. Digitally enabled food table with self booking facility, and also can charge your i phone!

g. Theatrics in service - story telling thru food!

‘Airportainment’ (terminology which I have stumbled upon) is an experiential drive initiated by airport which involves creating a strong affinity of passengers with the airport environment and its offerings which eventually results in sustained share of their wallet and mind at the travel destination.

Experience Manifestation Benefits

Ambiancetainment

Infotainment

Gourmetainment

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- Passengers are one with the airports flavor of the season

- Inventory /offerings of outlets to be reflective of the theme

- Involvement leads to incremental spends by time and value

- Repeat audience induced - Airport as preferred transit

destination - Strong perception builder

and ASQ influencer

Experiencing the ‘Themes’ h. Creating flavor of the season and could

be one of the following:- - Theatre – where passengers are

made to play characters, do role plays to make environment lively. Coffee with your favorite celeb!

- Sport of the season – Passengers could walk on a track leading to podium near their gates

- Culture – airport offerings reflecting the unified theme of culture and regional flavor

i. Airport Social Responsibility - awakening message/CSR Drive – for instance ‘Save women child’ with special offers for girl child for the month

Harnessing Airportainment to Maximise Revenues

Airport shall target to achieve the following:-

- Use Airportainment drives to build speed breakers in retail areas before passengers reach the gates - Let passengers experience products before they buy - Airportainment to be levered at a catalyst undertaken tandem to enhance a core category

conversions

IX. Using Technology to create Seamless Interface (besides innovative revenue streams!)

Touch Point Technology Interface Elements Experience/Objectives Value to the Airport Home/City 1. Web

2. Mobile Website 3. Mobile Application

· Welcome email from the airport

· SMS alert from the Airport regarding flight timings, other alerts

· Mobile App with route finders, weather prediction and retail exclusive and offerings

· Book and Collect

Information and convenience upto experience, engagement factor, revenue source through advertising

Kerb side 1. Drop point 2. Parking with Pods/cabs 3. E-transit 4. RFID enabled Baggage

Carousal 5. Last minute electronic

message board

· Efficient traffic management · Increased utilization of

parking facilities · Faster passenger movement · To create an emotional

connect

More parking revenue, capacity utilization, higher dwell time, Creating brand endorsers

Experience Manifestation Benefits

Themetainment

Tactical Theme 2

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Check-in 1. Self check-in counters 2. Digital guide of the airport 3. Virtual Assistants 4. Biometric Cards for frequent

users

· Passenger Empowerment. · User friendly and being with

you all the time · Interruption free journey · Owning up of the airport · Brand ambassadors

Passenger Experience, smooth check-in and hassle free transit, more dwell time, more non aeronautical revenue

Security Check

1. NFC enabled trays 2. Ultra sonic Digital screening

gates 3. Smell therapy

· Communication and propagation of offers

· Relaxation and soothing for passengers

Communication, seamless journey path, stress free environment

Retail space 1. Virtual shopping – no inventory, virtual trial rooms and usage of delivery mechanism to homes

2. Jukebox 3. Virtual tour of the destination 4. Internal wifi enabled chat

room 5. Smart sensory panels for

advertising.

· Innovative and different offering

· Stock free stores with huge inventory and options

· Opinion leadership by the airport through chat room

Airport branding, Increased Revenue, Increased ‘Happy Hour’, Innovative ways of advertising

Boarding gates

1. Touch screen panels with seats for both information and purchase

2. Good bye digital wall 3. Retail Pods - dial a product

from gates to be delivered before you depart

· More options and higher visibility

Incremental revenue stream, Centralized inventory

Arrival 1. Electronic placards 2. Image screening

of chauffeurs 3. Last minute pick up - virtual

store for convenience items

· Passengers friendliness , convenience

Stepping into the future

X. Innovation Centricity as Organisational Culture

Instilling innovative thinking amongst people in an airport organization is imperative given the dynamic nature of aviation industry. To deliver sustained results, employees should be nurtured in thinking creatively about every aspect of their work and the processes that they follow. They need to be encouraged and incentivized to voice their ideas openly. Not all innovations need to be aimed at revenue generation, but can support improving overall process flows resulting in rationalizing costs, enhancing service standards, improving work quality amongst others.

Recommendation

- Nurture employees (self and stakeholders) to inculcate innovation culture

- Set-up work groups to execute effectively - Measure effectiveness - Forums to share best practices - Incentivize towards continual efforts

Innovation Centricity

Idea Incubators –generate/share ideas

Innovation Workgroups –

execute shortlisted ideas

Thought Leadership Forums

–present and propagate in forums (internal or external)

Measure Consumer/Market

Outreach –surveys/feedbacks

Internalize Feedback –analyze

outcomes

Innovation as an Organisational Culture

Budgets

Reward & Recognition

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XI. Recommendation and Conclusion

In order to assess the impact of various initiatives suggested in this report, I had interfaced with airport managers to understand their estimates of potential growth with implementation of such innovative options, corroborating it with my individual estimates.

Value Enhancement Measure

Considering that each of the non- traditional revenues mentioned in this report will be exploited in totality by airports, the potential that it throws open provides for an upsides of upto 12-15% in case of large airports (>40 mn.) and upto 25% in case of Mid Size to Regional airports with huge propensity to grow (primarily studied for purpose of this report and others extrapolated from that) from current income levels depending on the size and region (profile of audience and economic levels) on nominal estimates. Incremental Income/Passenger (global average ~ USD 10) can be upto USD 1 to1.50/Passenger for mid sized airport from the region.

Not just the commercial revenue maximization, the Airport Service Quality Measure (ASQ) score as result of effective consumer engagement has a positive implication due improvement passenger connect with the airport.

Closing Remarks

It is pivotal for airport managers to integrate strategic and tactical levers to achieve a holistic result in maximization of commercial revenues. Upskilling people and inculcating innovation culture in an airport organization is key to sustenance of growth. Use of technology to create seamlessness in passenger journey is imperative in current context. Ability to think about non traditional revenues and structuring options with dedicated teams to drive the same towards delivery and results is cornerstone for success.

*(inc. meters & greeter, airport staff and catchment excl. pure real estate like hotels and office space). #Base for Traditional Revenues assumed for this exercise is Retail, hospitality and travel services excluding non traditional areas mentioned in this report.

Value Driver Impact Measure # (Reference airports studied for below data is 25-40 mn in size from Asia Pacific).

Non Traditional Revenues

Upside Revenue Potential of 5%

Non Passenger Revenues*

Upside Revenue Potential of 5-7%

Airportainment Drive

Upside Revenue Potential of 8-10% Penetration Increase of:- · Retail -8-10% · F&B – 10-15% · Services – 5-8%

Technology led Innovations

Upside Revenue Potential of 1-2%

Airport Brand Upto 50% of marketing budgets being sponsored by in-house/third party brands

Employee Engagement

Reduction in attrition upto 25% (in-house research)

Social Value Employment generation of 1000-1500 employees /mn. pax (direct + indirect) + multiplier factor