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Airport Retail

The impact of technological and market developments on airport revenue streams

Imagine you drive to the airport using car-sharing. There, the next driver will instantly take over your car. After that, you simply drop your suitcases at the automated baggage drop off outside the terminal building as you have already checked your bags in at home. Neither searching for a parking space, looking for the right check-in counter nor queueing is required.

You pass through security control; the process is smooth as you are recognized via facial scan which takes you only a few seconds. At the gate, a bag with a brand-new suit is waiting for you, which you virtually tried on and ordered yesterday via the airline’s pre-shopping app.

A scenario from the far future? No – multiple players are already working on turning the scenario into reality. Is your airport prepared for the major changes in revenue streams these developments implicate?

Use of car-sharing has grown outstandingly during the last decade

From about 1.000 car-sharing vehicles in Germany in 2011, the fleet has grown to over 17.000 vehicles today. Worldwide, more than 6 million people are using 100.000 car-sharing vehicles. It is estimated, that more than 35 million people worldwide will be using car sharing by 2020. Surely this only applies to people living in urban areas, but the number of parking spaces needed at airports will be affected by this development.

Innovative technological developments will reduce the amount of space needed for check-in and security processes

GDS provider Sabre developed a prototype for a check-in process via facial scan, making check-in counters superfluous. Rimowa’s electronic baggage tag enables the self-check in of baggage, which can be dropped off at the airport without any waiting time. Dubai International Airport will test a new facial recognition technology to eliminate queueing at entry checks. Currently, it is only a few airports resp. airlines using the new technologies, but surely others will follow once the functionality is proven.

LCCs will push the reduction of take of-, landing-, handling- and transportation fees

Low cost carrier have reached an average market share of 36% in Europe, in some countries such as Great Britain they are reaching up to 45% market share. This leads to decreasing revenues through take of-, landing- and handling fees, as can be clearly examined by the example of LCC Ryanair, which benefits from 50% reduced fees at Frankfurt airport compared to traditional competitors. In addition, LCCs demand fewer transportation services, as their passengers board and deboard the planes by stairs and walk to the terminal building instead of using buses.

Three major revenue streams of airports are in danger

Airports will experience shrinking profit through less demand for parking space due to increased use of car-sharing and reduced necessity of check-in counters because of automated baggage tags, self-drop off, and self-check-in. In addition, profit from takeoff, landing- and handling fees as well as transport services such as buses bringing passengers to the aircraft will shrink due to further LCC growth.

What implications does this have for the airports? What other revenue streams can they rely on and develop?

Airports will depend much more on retail profit

Most airports started to reinvent their business model during the last years, as they are generating more and more direct revenue with passengers via retail, food, and beverages. For some airports, the non-aeronautical revenues make up for over 60% of the airport’s total revenues, and retail is often the most important driver.

London Heathrow and Amsterdam Schiphol have been known as “shopping malls with runways”, because of the popularity of their shopping and dining offers. Dubai International Airport already has a very good reputation for its retail offers, but it keeps on investing in innovative concepts to further increase the airport’s attractiveness. Frankfurt Airport claims to operate the biggest shopping mall in Germany.

But while some airports already made great efforts to build up the retail revenue in the recent years and keep on investing, there is still great potential for other airports. Especially for smaller airports which are often operating in a deficit, investments in the retail strategy are likely to pay off.

Airlines have recognized the great potential of the growing travel retail market and want to get a slice of the pie

Airlines are also pushing their retail strategies and set themselves ambitious targets, such as “selling like Amazon”. They have good prerequisites to become an important player in travel retail: They dispose of travel-related customer data, are serious senders, benefit from existing vendor relationships and may determine the content of the in-seat screens. The further development of onboard internet will open up new opportunities for airlines to participate in the travel retail market and to claim a part of the retail revenues for themselves. But so far, the smart use of data for individualized offers and the development of the fulfillment structure are still in an early stage.

If airports want to operate profitably in the long run, they need to increase their share in retail revenue. But how to do that best?

  1. Development of innovative concepts for released check-in areas An airport needs to be much more than a place where planes take off and land with standard shopping and dining opportunities. Released check-in areas offer great potential for innovative retail concepts and event offers to turn an airport into a getaway destination even for people not traveling.

  2. Deepening of the partnerships between airports and retailers The collaboration between airports and the airport retailers is often limited to discussions about remuneration schemes. But both sides could improve their revenues if the partnerships would be enlarged to the definition of passenger flows, allocation of retail space, shop design and aligned communication.

UNEX is a retail expert

UNEX has profound experience in business model optimization. Our key focus is on customer experience and changes in market conditions.

  • We analyze the current state of your digitalization process, your loyalty program, and your shop structure to uncover optimization potential.

  • In an innovation process alternatives to the current setup are identified and evaluated.

  • Business and implementation plans are developed for the most promising options.

UNEX has the know-how to raise the full potential of your retail strategy in order to generate long-term value and enhance your competitiveness.


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