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First Steps on the Path to Airport Digital Revenue Growth

July 19, 2022
Author Daniel HallerDaniel Haller
Delivery Success Lead, Omnevo

“We know we must digitalize at some point…” “We’d like to, but we can’t do it right now…” ”We haven’t got the resources...” “We need more people and more time… ”
As digitalization drives ever deeper into every aspect of daily life, airports may be running out of time to bite the digital bullet.

The past three years has seen most airports treading water on the digitalization of their Non-Aeronautical Revenue and their development of omnichannel experiences for the customer. Many airports cite the global crisis as a reason to leave their revenue digitalization plans on hold, but they should bear in mind that this is a high-risk strategy - the crisis has reduced the timeframe available to them and increased the long-term threat to their revenue streams.

Despite the intensity of current financial pressures, airports cannot simply ‘park’ the customer experience and wait for the good times to return; the customer may well have left by then (and we don’t know what/when the next crisis will be). Customer behavior has surged dramatically to the online world and Travel Retail’s traditional retail formats and sales strategies built on impulse motivation risk being seriously undermined by a mouse and a mobile phone. The customer is surfing the digital tide while airports cling to a revenue model that is declining - and the risk is that the gap between customer expectations and the airport experience will eventually shatter the relationship. 

It's what the customer wants…

Seamless digital experiences that give hugely expanded choice, tailored options, personalized offers, expanded services, versatile delivery options, etc. are now considered the norm. Domestic retailers are frantically adopting strategies that blend physical and digital. As digital interaction embeds ever-deeper into their lives, consumers are effectively using their best digital experience to set their expectations across other brands too – including their airport experiences. 

Customer profiles and behavior in Travel Retail are shifting too. Millennial (born 1981-1996) and Gen Z (born 1997-2012) passengers now account for 75% of global traffic (rising from the pre-pandemic figure of 66%), and they behave very differently to the older age groups that have traditionally been the core retail audience. Digital is the only viable route to reaching – and keeping - these crucial targets, especially among the high-spending Asian passenger profiles.  Once you lose them, it’s almost impossible to win them back.

Developing a comprehensive omnichannel platform is hugely challenging and is an investment that, even with a positive vision, many airports simply insist that they cannot undertake right now - but the digital imperative simply cannot be ignored.  

Pioneering airports, such as Frankfurt, Heathrow, Singapore Changi, and Auckland have developed various scales of digital platforms to enhance their retail and ancillary services experiences, creating greater choice and more personalized experiences for the customer but often also integrating far stronger service elements, such as home delivery and convenient on-airport collection points. These digital options are particularly effective in addressing the consumer’s rising preference for pre-ordering goods and services, but it is also important to understand that a digital platform does not replace the airport retail experience. These digital platforms can complement the in-store experience and support the airport and its retailers in developing a much strong relationship with the customer, including enticing them to visit in-store activations and product promotions. 
 

Break-away from tradition

The core issue airports face is that a digital e-commerce offering is only really appealing if the physical retail offering is also attractive. If you have homogenous stores, such as ‘News’ and a core ‘Duty Free Shop’, with relatively standard products, the cost of launching and operating a digital marketplace solution is difficult to justify as many airports do not have enough critical mass of visitors onto their website. If the retail experience is diverse and exciting, a digital marketplace solution for all ancillary revenue streams can strongly boost penetration between on- and offline revenues.

Also, if the shopping offer is built upon the traditional focus on last minute impulse purchases, it simply doesn't enhance the customer experience. As a partial step forward, some travel retailers are developing stronger retail experiences, especially including more experiential and immersive in-store digital activations created in partnership with leading brands. They also support the customer’s service needs with ‘Reserve & Collect’ options.  

These in-store strategies can certainly help strengthen the in-store experience, but the hard truth is that the customer wants a comprehensive, seamless digital experience that blends digital and physical. So, real value is only added when an airport has a range of top brands and shops, including vital luxury elements, that can be consolidated into a digital marketplace solution. The retail experience can then be shifted away from an emphasis on impulse and last-minute purchases of the usual duty free bestsellers towards a more experiential encounter that embeds digital communication with the customer.

Digital steps forward

Digitalization is a rapidly expanding fact of daily life for travelers and even airports currently unable to implement an omnichannel platform must move towards meeting their customers in the digital world. A step-by-digital-step approach could begin, for example, by creating clearer, simpler processes for ancillaries such as parking. Too often, third-party ancillaries result in a confusing customer experience as outsourcing to third-party vendors leaves the airport with no control or feedback on the customer. The airline ends up relinquishing a significant degree of customer communication and control.

For any airport that wants to develop its digital capability ahead of investing in an omnichannel platform, a strong starter step is to invest in a CRM solution to be able to capture a useful range of information on their customers via the airport Wi-Fi etc. The next step I would recommend is digitalizing airport parking through yield-management and e-commerce and more flexible dynamic pricing offers. For example, this could start from a simple but expandable powerful platform can be integrated with the CRM and later expanded to integrate with existing services, such as parking and loyalty programs (e.g. from partner airlines). These are relatively easy digital moves that would raise both the customer experience and revenue performance but also provide a core platform from which the airport can later quickly expand its future digital capabilities at will.

As the post-COVID recovery accelerates, some airports have opted for ‘digital drop-in’ advances rather than seeing to implement the full scale and complexity of a comprehensive e-commerce solution. This includes smaller scale digital e-commerce platforms (such as serving a specific terminal rather than a ‘whole airport’ solution), automated vending services and a surge of digital innovations in F&B. This also incorporates smarter partnerships with retailers in driving innovations that support a revenue recovery this year but also provide a ‘test bed’ to inspire future innovation and performance.

These are all positive responses, but the reality is that these small-scale initiatives cannot ever capture the potential of a fully engaging omnichannel approach, as seen at airports such as Heathrow, Frankfurt, and Singapore Changi. It’s the depth, quality and seamless 24/7 convenience of the personalized digital experience that drives customers to utilize digital channels, driving sales both digitally and in-store and deepening the relationship with the customer.

For airports that aren’t yet able to make the digital leap, each digital initiative edges them closer to meeting the customer’s digital needs, and closer to NAR recovery. However, to be truly effective, these initiatives need to be used as the foundation for the airport to go on to develop a comprehensive, long-term digitalization strategy. Making that strategy a reality is a challenge but it’s perfectly achievable and these first steps certainly make the journey easier.  

In a follow-up blog, I will outline the challenges, roles and processes involved in developing and launching an omnichannel platform for any airport ready to make that journey. 
 

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