SubscribeIn recent years, there has been a dramatic increase in the focus on non-aeronautical revenues at airports.
There are various reasons for this:
a) The world’s airlines are no longer able (or prepared) to continue to pay ever-increasing charges levied by airports.
b) The strong growth in low cost carrier airlines has led to airports receiving lower income from that sector than from full service carriers.
c) The cost of infrastructure development in airports is high and, with difficulty in growing operational income, airports must generate more revenues from non-aeronautical activities.
d) The increase in airport privatisations, with private-sector companies taking much more interest in the generation of revenues and, of course, increased profit.
In most airports, the majority of non-aeronautical revenues come from commercial activities i.e. shops, catering, advertising, car rental etc.
In 2001/2, BAA (one of the most commercially successful airport groups in the world) generated 49% of its total revenues from non-aeronautical activities. Its retail operations contributed almost 75% of the total non-aeronautical revenues. BAA’s planned capital expenditure over the next five years is £4.99 billion. With low cost carriers now accounting for almost 21% of its total passengers, it is clear that the revenues from BAA’s commercial activities are more important than ever. (Source: BAA Annual Reports)
Most other airports are now pursuing commercial revenues more aggressively and this has led to a dramatic increase in the importance of non-aeronautical revenues at those airports. It has also significantly affected how terminal developments are carried out.
In the (not too distant) past, terminal expansion was often approached by an architect being appointed, a design being finalised and the terminal being constructed. As some point (usually too late) in this process, someone thought about the commercial return from the terminal and commercial planning input was provided. As a result, the full commercial potential in the terminal was never realised. However, commercial revenues are now too important to be an afterthought. In the terminal planning process today, the commercial planning is an absolutely fundamental part of the terminal planning process and one, which architects ignore at their peril.
Although I am a terminal commercial planner, I do NOT subscribe to the much-quoted notion that airport terminals should be shopping malls. They are not. They are operational facilities designed to process passengers from kerbside to aircraft as efficiently and as safely as possible. However, the provision of well planned shops and catering outlets are vitally important in ensuring that the airport generates sufficient revenues for the development of adequate infrastructure to meet the demands of these passengers – and other terminal users. They are also, of course, a fundamentally important customer service.
The terminal planning process (assuming a new terminal) for the best commercial outcome should work as follows:
a) the terminal planning team meets to discuss the requirements for the building. (The commercial team must be involved in these early meetings)
b) a basic outline of the development should be developed, in sufficient detail to go for outline planning permission. (At this point, either an in-house architect will be involved or an external architect appointed)
c) the commercial requirements within the building should be specified i.e.:
- the location of commercial activities
- the size of these activities
- the type of activities (type of shop, type of catering outlet etc)
- the amount and location of back-up space/services
- the location and numbers of service elevators for commercial activities
d) based upon the forecast passenger numbers for the terminal in year 1 of operations, sales and revenue estimates are then prepared for the commercial plan and retail mix proposed.
The process is really quite straight forward – or should be. However, airport terminals are complex structures and many organisations have specific requirements for space and facilities. This puts the commercial space under pressure from the day the terminal opens. That pressure grows as the passenger numbers increase over time and more operational space and facilities are required.
It is vitally important, therefore, that when the commercial space is planned for year one, it is also clearly specified how the commercial space should be expanded in the medium and long term. In a recent project which we have just completed for a new airport, our commercial space plan is specified (in all areas) for year one and right out to 2030 when the terminal reaches capacity.
In this case, the airport operator knows what the commercial plan is from day one and, as traffic grows, can take the appropriate action to develop the commercial activities within an already agreed plan.
The expansion of an existing terminal presents other problems. Generally, the terminal in question will NOT have been designed to optimise commercial return.
It will also have well established tenants and an established passenger flow.
To successfully improve an existing terminal, it is again essential that the commercial planning function is involved from the outset and, in this case, it is vitally important that the existing commercial operations are not adversely affected by any works related to the terminal expansion.
In both expanding an existing terminal and planning anew one, the selection of the retail mix is vitally important. The retail mix (the shops and the catering) should reflect the best of local, regional and national offers. Assuming they are well located, open and attractive, they will be successful.
Many airports are now strengthening their Commercial departments to focus much more on non- aeronautical activities – particularly retail. Many of these airports, particularly in Europe, have sent their Commercial managers on a course (now in its sixth year) at Cranfield University, which is run jointly with Concession Planning International Ltd.
The course, over three and a half days, covers all the major areas of commercial management, including concession contracts, concession planning in terminals and has sessions on retail, food & beverage and advertising. Over 100 delegates, from airports all over the world, have attended the course to date. (More information on the course can be found at the university website: www.cranfield.ac.uk/soe/cpd).
