The average amount spent by a passenger in an airport varies hugely by destination. Developing an understanding of the total commercial value of a passenger, taking account of both aeronautical and non-aeronautical revenue, can lead to a more strategic approach to route development and operational decision-making.
The chart below shows net retail income per passenger for Heathrow and Gatwick. Both airports have seen an increase in net retail income per passenger year on year. However these top-level figures mask a wide variation in spend between certain passenger segments.
Many larger airports will have access to very detailed commercial data by scanning boarding cards, at least in duty-free shops if not in all other commercial outlets. Even smaller airports should request this information from duty-free operators as it is extremely valuable in understanding the total value of a passenger to the airport.
From this data the differentials between destinations can be compared. At a typical regional UK airport it is not unusual for a non-EU destination to experience a duty-free spend per passenger nearly 20x that of the lowest spending EU destination.
These differentials are not unique to the UK. There will no doubt be other airports around the world which will see an even greater differential between their lowest spending destinations and their highest. Aeroport de Paris presented the following chart to their investors in 2010, showing a variation from €1 through to €69. The highest spending markets were identified as Russia/Ukraine, Subsaharan Africa, China and Japan, with the lowest likely to be domestic French routes.
A Heathrow Airport report reveals that “Chinese passengers are responsible for around 25% of luxury spend at the airport despite representing only 0.7% of passenger volume”. International gateways such as Heathrow or Paris are able to offer high-end luxury products which most regional airports cannot. Smaller airports lack direct connections to most of these niche long-haul routes.
Whilst these smaller airports will not be able to access these lucrative long-haul markets, they still experience clusters of higher spending customers. For example, long-haul charter passengers, whilst very seasonal, will generate a much higher than average spend on car parking and in duty-free than a regular domestic business passenger. Segmentation can go beyond destination into journey purpose, time of day, size of group or other passenger characteristics, all of which can influence the time spent at the airport and the likelihood of commercial activity.
We would recommend that all airports:
- Secure live spend data by passenger segment from each commercial operator.
- Use the understanding of average spend/passenger by flight to feed into route development and operational strategy.
- Optimise the commercial offer to target the most lucrative passenger segments, working closely with retailers and other partners.
- Use customer data from pre-booked car parking or setting up a loyalty programme to cross-sell other services and develop a direct communication channel between the airport and the passenger.
Aviation Economics has a range of commercial airport experience from advising on car-parking booking strategies to forecasting long-term trends in non-aeronautical revenue. Aero- and non-aero revenues are intrinsically linked and our balanced approach enables us to give the whole picture to our global airport clients.
By Nick Harper Connect on LinkedIn