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22nd Annual Southeast Chapter
American Association of Airport Executives
Airport Finance and Administrative Conference
General Session V: Revenue Trends at Airports
Presented by:
February 28, 2011
Julie A. Mattlin, MAC Consulting
Ken Currie, InterVISTAS
Non-aeronautical revenue sources are among the most important to an Airport, and have the greatest growth potential• Aeronautical revenues
– Airline, Aircraft, and Passenger Handling Fees
• Aviation concessions
– Fueling, Catering, Maintenance, and Cargo Facilities
• Terminal Concessions
– Food & Beverage, Retail, Specialty
• Automobile Parking
• Rental Car
• Advertising
• Landside Real Estate
1
Double digit percent increases in revenue per enplanement numbers from 2005 to 2009
2
Source: ARN , FAA, airport data
Average Revenue Per Enplanement
Terminal Concessions Rental Car Parking Airline
Hub Size 2005 2009 2005 2009 2005 2009 2005 2009
Large $1.86 $2.20 $1.58 $1.82 $3.26 $3.84 $8.64 $12.1419% 15% 18% 41%
Medium $1.22 $1.40 $2.05 $2.62 $4.50 $5.42 $7.88 $8.8315% 28% 20% 12%
Small $1.00 $1.23 $2.57 $2.92 $5.93 $7.08 $6.95 $6.7123% 14% 19% -3%
Food and beverage and retail concession revenues grew by 30% over 10 years
3
Source: Federal Aviation Administration
$1.3B
$1.0B
Medium hub airports had the largest percent increase over the 10 year period
4
Source: Federal Aviation Administration
32.9%
29.2%
31.1%
Sales have increased by 36% and concession revenue by 19% over past 5 years with minimal enplanement growth
5
Top 46 performing U.S. Airports for Sales
Source: ARN and FAA
19.4%
35.7%
Top 10 U.S. airports’ sales have increased by 56% and sales per enplanement by 27% over the past 6 years
6
Source: ARN
Top 10 Performing U.S. Airports
2005 2010
Airport Total SalesSales
per enpl Airport Total SalesSales
per enpl
PIT $72,200,000 $10.88 JFK $295,680,194 $12.90JFK $167,442,916 $8.97 PIT $47,800,000 $11.90DCA $66,194,151 $8.32 SFO $207,888,742 $11.17HNL $79,665,943 $8.24 MIA $176,882,510 $10.48EWR $130,912,557 $8.22 EWR $171,468,755 $10.26ANC $19,267,859 $8.17 LAS $205,667,483 $10.15PDX $52,981,585 $8.13 PDX $64,993,559 $10.04SFO $122,166,287 $7.93 BOS $127,462,250 $10.03SAV $7,368,408 $7.60 IND $37,021,108 $9.90PHX $148,512,447 $7.60 RNO $19,504,571 $9.77
Total $866,712,153 $1,354,369,172% Increase 56.3%
Avearge $8.41 $10.66% Increase 26.8%
Maximizing non-aeronautical revenue requires comprehensive business planning, programming and implementation
Plan andprovide
facilities
Operate & maintain
the facilities
Deliver thecustomer
experience
Monitorcustomer
experience
Establishcustomer
relationships
Understandcustomer
expectations
Focus on understanding and planning for customer needs and expectations.
Focus on delivering customer service and pursuing service improvement.
Business Planning
Result: optimal revenue based on market conditions and customer expectations.
Management must embrace the “market model”rather than the “infrastructure model”
Maximizing terminal concessions revenue requires special attention: Retail is Detail
• An airport is not just a ‘processing factory’ of passengers and cargo; it is also a ‘people business’: a concentration of emotions, desires and travel stress.
• Airport retail can underperform if not treated as core business by the airport. Tailor-made retail requires careful and timely planning.
• Airport’s must respond to quickly-changing consumer desires.
8
Basic rules of successful terminal concessions concepts• Departing passengers are brought together (as a critical mass) in a
central area or square.
• Retail shops and restaurants are constructed on at least two sides of the square
– This allows passengers to be exposed to shops all the time.
– “Pinball Effect”: a dialogue of impulses and experiences “bouncing” the passengers from one shop to another.
9
There are four preliminary steps to turn vision to implementation
10
Get set Analyse Develop Implement
Financial goals
Conceptual ambitions
Criteria and constraints
Local partnership
Demand analysis: airlines + consumers, passenger research
Supply analysis: current partners, benchmarking, trends & developments.
SWOT Options generation
Choice of options/ scenarios
Concession plan: retail mix, local flavour, conceptual design, performance, identity & branding, organization
Financial modelling
Detailed design, Technical specs
Business Plan, Action programs
Tender & contract
Review
Non-Aeronautical Revenue Trends
• Customer-centric terminal concession programs– A shift from “main street” branding to “local branding”– Ensuring street pricing to avoid monopoly pricing– Creation of the “food to go” concept– The increased use of carts and kiosks– Service concessions becoming a larger percent of overall
concession mix• Leveraging of the “Airport City” concept• Development of consolidated rental car facilities• Increased commitment to “going green”• Expanded parking amenities
11
Airports with modern retail management and configuration earn 80% or more of their retail food & beverage income airside.
12
Old Concept New Concept
A shift from “main street” branding to “local branding” is consistent with the airport’s role as the gateway to a market
13
50%25%
25%
Source: 2010 ACI‐NA Benchmarking Study
Airport bars have evolved from places for “those who must” to attractive respites on the concourse
14
SEA
JFK
With the elimination of most in-flight catering services, food-to-go is an essential element of meeting the travelers needs and wants
15
BHM
FLL
SYD
In addition, services have become an increasingly important element of the airport experience
16
The 2010 ACI Concession Winner is an excellent example of applying these concepts
Vancouver International Airport
Artwork, water features, aquariums, and unique interior design and architecture all work together to create mini “town squares” around which food & beverage are focused.
17
Airport Cities concepts are a natural extension of airports controlling surrounding lands so that they are used in ways accretive to airport activity
Airport City• Integrated development of
airport and real estate• In the heart of the airport
Airport authority driven (planned)
• Infrastructure node
Aerotropolis• Separated real estate
development• Near the airport• Private developmentAirport Corridor• Integrated real estate and
infrastructure development • Between airport and city• Partially government planned
18
Airport Cities Concepts are always unique to the circumstances found in each airport and market
19
Airport Cityelements
Vision
Airport Master Plan
Multi-modal infrastructure
Phasing
Business models
Mix
Economy
Land use plan
InvestmentEarly adaptersRevenues
Strategy
Marketing
Partners
Airport Cities concepts allow you to control additional links in the transportation value chain
Implementation
Development of Consolidated Rental Car (CONRAC) Facilities has occurred at over 50 airports nationwide
20Source: Auto Rental News
Consolidated rental car facilities provide numerous benefits
• The concept is “green” because– The number of buses on the
airport curb is reduced– Rental car facilities are not
duplicated by each company– Typically requires less land
• Financed by rental car activity through CFCs
• Gives the airport greater control over rental car company activity
• Reduces the amount of space needed for rental car companies in the terminal
21
OAK
FLL
PHX
There are several items to consider when negotiating a Customer Facility Charge (CFC)
• All rental car companies using the airport must collect CFCs• All rental car companies using the airport must pick up and drop off
customers at the facility• Require a security deposit or letter of credit in lieu of a security
deposit• CFCs should be held in trust and submitted monthly• Consider contingent rent
22
The amount of the CFC varies depending of the method of assessment
23
Over $1.1 billion stand alone CFC debt transactions in past 14 years
24
DFW $140 mil
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nashville$66 mil
Orlando$62.8 mil
New Orleans$96.5 mil
Denver$78.6 mil
Houston$151.2 mil
Phoenix$260 mil
Anchorage$62.8 mil
Rhode Island$48.8 mil
Atlanta$211.9 mil
Airports have an increased commitment to “Going Green”
• Sustainability– System that meets current needs
without compromising the resources available for meeting future needs.
• Renewable waste• Recycling• Example Indianapolis
– Tenant Improvement Manual– Materials shall follow LEED– EnRoute Spa
25
EnRoute Spa constructed its tenant space using the “green concept” at IND
• Natural cork flooring• Recycled acoustic
ceiling• Bio wheat countertops• Energy efficient lighting• No toxic chemicals
26
Expanded Parking Amenities is critical to maximizing revenue in this largest revenue source at the airport
• In order to maximize revenue, airport operators must have an appropriate inventory of parking products
– hourly, daily, long term
• Each product must distinguished by
– Convenience to the terminal
– Amenities such as valet, frequency of shuttle operation and other services
– Prepayment options and reservations via the internet
– Links to frequent flyer programs, etc.
• Dynamic pricing to constantly match with demand
• Management of cross-elasticities of demand between parking products
27