What can airport operators gain from implementing a greater hospitality mindset? At a time when non-aeronautical revenue is at a standstill, knowing how to develop and enhance the passenger experience could be the key to increasing additional revenues at airports.
Airports offer similar services and processes to hotels such as check-in, restaurants, shops, lounges and waiting areas, however, few passengers will compare their airport experience to a stay in five-star hotel. Airport operators often fail to see themselves being part of the hospitality industry, preferring to focus on infrastructure and process management, optimizing efficiency and capacity of their operations.
There are some structural and historical reasons for this misalignment of vision between the end customers of airports and the airport operators. A major difference with hotels is that airports usually enjoy a monopolistic situation and passenger volumes having strongly increased in the last 20 pre-covid years, without a growth in the number of suppliers. Hence airports have naturally tended to focus their attention on managing the growth rather than creating it.
As companies, airport operators have usually five priorities in their activity:
While passenger experience is definitely part of the top five priorities, it rarely makes it to the very top.
Historically, with the ever-increasing number of passengers travelling through airports, large amounts of investment were needed to accommodate this expansion which moved the financial priority up the airport operator’s agenda.
In the last 20 years prior to the pandemic, non-aeronautical revenue (such as restaurants, shopping, car parking) has become a key source of income for airports, bringing fundamental changes to the way many airports operate. Worldwide, airports have gone from being places where you go to catch a plane to shopping malls with runways attached. As a passenger, you are often expected to walk through duty-free and wait for your flight in the shopping area to make sure that you have plenty of opportunities to increase the airport’s revenues.
While this has worked in the past, new trends such as the shifts to online shopping (which has only accelerated during lockdown period), demographic changes (for example Gen Z shop less at airports) and less competitive pricing at airports has brought the growth of non-aeronautical revenues to a standstill if not to a recession even prior to the pandemic.
So how can the airport industry continue to grow its revenues when travel resumes? As it is no longer possible to count on predictable increase in passenger volumes or expand commercial space to grow revenue, airports have to focus on putting the passengers in the right mood to spend their money. To achieve this requires the airport operator to take the lead to implement a hospitality mindset at the airport, aiming at offering a consistent service quality throughout the passenger journey.
Achieving the switch in priorities is complicated but definitely worth the time and money. Several research studies have illustrated that increased passenger satisfaction has a direct impact on the amount spent in restaurants and shops. Airports that have been able to improve satisfaction levels by 0.1 (on a 1 to 5 scale) have on average benefited from an increase of 0.8 USD in their non-aeronautical revenue per departing passenger. For a mid-sized airport, this represents annual recurring net-revenues of 10 million USD which is quite a significant impact to their bottom-line.
While most airports agree on the importance of passenger satisfaction, few will be ready to allocate sufficient funding and resources to allow improvements to be felt by passengers. Research has shown a positive return on investment on passenger experience, however, the investments need to be clearly allocated in the areas that matter the most to passengers.
The most successful airports in terms of passenger experience have put in a lot of effort to understand the needs of their passengers and realized that they didn’t need to be perfect at every step of the passenger journey. To improve passenger experience, they first identified the services that had the most impact on the overall airport experience, then used their limited resources and budget on hospitality-minded initiatives on these first priority services.
Airport services can be grouped in three main categories based on its importance to the overall airport experience:
To improve passenger experience, airport operators should first focus their efforts on the “Fundamentals”; only when passenger expectations are met in these areas one can focus on the next category of services. Two important areas in this category are “Cleanliness” and “Sense of Security” which take on a new dimension with the pandemic. While pre-covid, the focus was mostly on the general cleanliness of the infrastructure and the physical security checks, this has changed in the last few months. These areas now also include the compliance of the airport to hygiene measures and this will remain a key part of the passenger experience in the future.
After having met the passenger expectations in the first category, the priority then shifts to the “Key Processes” (i.e., processes related to the actual journey) to design and manage a stress-free experience. Only after optimal service levels are achieved in the first two categories of services should efforts focus on providing “Extra” services (shops, bars,eateries) adapted to the needs of the passengers, the available dwell time and individual budget.
A common miscalculation in new airport developments is to strongly focus on the “Extra” services (commercial development) which proves not to be as beneficial as expected as the fundamental factors and the key processes have not put the passenger into a spending mood.
Passenger experience remains one of the main areas that airport operators can deliver significant improvements and thus create additional revenues. This can be done, as illustrated by some leading airports, by understanding the needs of their customers, then identifying the key areas where to focus the efforts, and finally, becoming hospitality experts to create in these areas the airport experience that exceeds the passenger’s expectations.