Capitalising on Non-Aviation Revenue Streams
Capitalising on Non-Aviation Revenue Streams
The dynamic and ever-growing world of aviation demands smart strategies for sustained growth. If you look at airports, in particular, non-aeronautical revenue streams have emerged as vital components for financial sustainability and growth. This is not just to diversify the revenue streams but also to improve passenger engagement at the airport through improved experience. Technology is playing an increasingly critical role in delivering personalized and memorable airport passenger experiences.
This blog explores the importance of non-aeronautical revenue, the various streams available, and the innovative use of technology in maximizing these opportunities.
The Significance of Non-Aero Revenue
Traditionally, airports depended heavily on aeronautical revenues derived from landing fees, passenger service charges, and other airline-related income. However, non-aeronautical revenues have grown in prominence over the years to increase the revenue per passenger on ongoing basis, with constant enhancement of passenger experience. Covid-19 was disastrous for airports with post-pandemic industry Debt-to-EBITDA ratio of 13:1, in contrast to the pre-pandemic average of 5:1 (ACI 2023). This reiterated the importance of focusing on non-aeronautical revenues, post-pandemic, to bring the airport business back on track.
Non-aeronautical revenues, encompassing retail concessions, parking services, property leases, and advertising, have proven to be lucrative. In 2022, non-aeronautical revenue accounted for about 40% of total airport revenues globally, with some airports generating up to 50% from these sources (ACI World Insights). Following are some of the key drivers for improving non-aero business:
Non-aeronautical revenue provides a diversified income stream, reducing reliance on aeronautical income and partially mitigating the financial risks associated with fluctuations in passenger traffic
Non-aeronautical activities often have higher profit margins compared to traditional aeronautical services. This can significantly enhance the overall profitability of airports.
Airports have evolved from being a point of arrival and departure to being a hub of premium experience, shopping and entertainment. This has increased the passenger engagement and hence the per passenger revenue at airports
Non-aero revenues contribute to the long-term growth and sustainability of airports, enabling them to invest in infrastructure and service improvements without solely depending on aeronautical revenues
Non-aeronautical revenues help in the optimal utilization of retail spaces, parking facilities, and real estate, making these assets more productive for the airport business
Key Non-Aeronautical Revenue Streams
Retail and Duty-Free Concessions
Retail and duty-free shops are significant contributors to non-aeronautical revenue. In 2023, retail concessions alone accounted for 26.4% of non-aeronautical revenues at airports worldwide (ACI World Insights). Airports are leveraging these opportunities by bringing in analytics-driven deep personalization. Airports are also using e-commerce platforms and passenger journey apps to enable passengers to pre-order products online and collect them at the airport, thus driving higher sales and enhancing customer satisfaction.
Food and Beverage Services
Food and beverage services are another critical revenue stream. By offering pre-order options through mobile apps or websites, airports can reduce wait times and increase overall sales. This not only improves the passenger experience but also boosts revenue. The range of F&B brands at global airports is increasingly offering a diverse array of options, particularly for the discerning traveller, seeking a premium experience.
Health, Wellness and Lifestyle
Travellers look for options to relax and rejuvenate amidst their hectic, stressful schedules. Airports offer the option to pre-book lounge, spa, wellness services which elevate their experience during the journey.
Parking and Transportation
Parking services remain one of the most stable non-aeronautical revenue streams. Advanced parking reservation systems allows passengers to book and pay for parking spots in advance, ensuring a seamless experience.
Property and Real Estate Development
Developing airport-owned land for commercial purposes, such as offices, hotels, and logistics centers, can provide substantial long-term revenue. A well-structured development plan, supported by market analysis and regulatory approvals, is essential for maximizing these opportunities.
Advertising and Promotions
Airports are prime locations for advertising due to the captive audience of travellers. Leveraging data analytics, airports can offer targeted advertising that matches passenger demographics and preferences. This approach not only boosts advertising revenue but also enhances passenger engagement and satisfaction
Top airport executives are increasingly aware of the need to increase non-aero revenues. Lim Peck Hoon, Executive Vice President of Commercial at Changi Airport Group, emphasized the importance of non-aeronautical revenue by stating, “Together with its retail partners, CAG shares a vision and commitment to be the best in class, with a mission to deliver a high-quality travel retail experience. To grow Changi Airport’s commercial business, CAG adopts a holistic strategy, which includes attracting quality concessionaires to operate at Changi, continuously adjusting and improving our retail mix, providing support to our concessionaires by creating a conducive retail environment at the airport, and organizing various shopping events and promotions to drive spending at the airport” (Airport Technology).
Enhancing Non-Aeronautical Revenue with Store Sense
GrayMatter is focused on elevating airport businesses by delivering innovative, digital solutions that make a difference. Store Sense, GrayMatter’s proprietary product enhances non-aero business by enabling on-time, accurate billing by the airport to concessions, productivity gains by automation, concessionaire performance assessment through insightful analytics and impactful promotions for retailers through an in-built campaign platform. Before I get into more details, have a look at what Store Sense could achieve for OPAIN, Colombia.
On-time Billing with Zero Revenue Leakage
Accurate and timely computation of income shares between retailers and the airport is crucial. Store Sense extracts sales data from point-of-sale systems in real-time, processes product category-wise income computation as per the contract rules. This ensures on-time, accurate invoicing by the airport to the concessionaires. Add to it the manpower saving due to automation of the entire process of revenue reconciliation and income computation
Insightful Analytics and Reporting
Store Sense offers detailed analytics on concessionaire performance, helping airports identify top-performing retailers and areas for improvement. This enables airports to make informed decisions on inventory management, layout adjustments, targeted promotions and contract renewals, driving higher sales and better revenue management
Effective Promotions Platform
The system also provides an intuitive, easy-to-use platform for promotions, allowing airports to collaborate with retailers on targeted marketing campaigns. Personalized offers and discounts can be delivered to passengers based on their purchase history and preferences, driving higher engagement and sales
Enhanced Passenger Experience
By integrating Store Sense across concessions, such as retail, F&B and parking, airports can offer a seamless and personalized experience to passengers. This holistic approach not only boosts non-aeronautical revenue but also builds passenger loyalty and satisfaction
Conclusion
Capitalizing on non-aero revenue streams is essential for the financial health and growth of airports. By diversifying income sources with the help of innovative digital products like GrayMatter’s Store Sense, airports can enhance their revenue potential while providing superior services to passengers. As the aviation industry evolves, the focus on non-aeronautical activities will continue, as a driving force for the future.
