Urban-Air Port Thought Leaders - The Board of Advisors Speak Out
#006 Keith Hunter
The former Qatar Airways, Qater Duty Free (QDF) Senior Vice President - tells us what’s on his mind.
Urban-Air Port retail partner Paul & Shark showcase their product at AirOne
Non-Aeronautical Revenue - Is Back!
Whilst it is to the relief of Travel Retail that people are starting to fly again and that travel in general is bouncing back to pre-Covid times, the fact remains that the traditional travel industry, and Travel Retail in particular, still face some daunting challenges, especially with a rapidly evolving customer profile.
Airport shopping habits in the past three and a half years have encouraged retailers to consider a brand-new playbook. A steadily rising passenger spend disappeared overnight when the pandemic hit, and after the much-needed relief of some good old ‘revenge buying’ when restrictions were lifted, spend subsequently sank 29% in 2022 (vs 2021) and has continued to decline ever since. Whilst some would argue that revenues overall are back to the levels seen in 2019, this success actually masks a sharp rise in Travel Retail pricing, brought about by general cost increases, expensive rents and compromised supply chains. Accordingly, individual spend has declined in real terms as the customer, expecting better prices than the high street, can sometimes find more competitive alternatives elsewhere. One industry report (2023 Kearney Report for TFWA) stated that “50% of travelers do not perceive travel retail prices as competitive vs domestic retail” and that “33% of travellers do not buy because travel retail product assortments do not fit their expectations”. The value proposition of airport retail is no longer meeting the needs of savvy consumers who are finding neither the price nor the range to compete with online and high street options.
Covid exposed the fragility of ‘bricks and mortar’ retail in airports and the high street.
In lockdown, retailers had no option but to close their doors completely, so the demand for online shopping and home delivery soared to stratospheric levels and the demand for this convenience has continued. In response, Travel Retail has recognised that it needs to find a digital solution to complement its physical offerings if it is to remain relevant. Covid ensured that the digital habit is now not only the preserve of the younger generations, but many airports and their retailers continue to struggle to deliver the key elements of a digital customer experience through omnichannel retailing.
Beyond the obvious bruises caused by Covid that adversely affected the passenger experience, Travel Retail should have then seized the opportunity to get its house in order. Most thought leaders opined that the airports and their retailers would use lockdown to ‘reset’ the (broken) travel retail model, especially where onerous contracts and high rents and MAGs were concerned, or even by encouraging relevant collaboration between service providers, but sadly, for the most part, this has not happened. In some locations, retailers have argued that these contentious contractual elements have exacerbated the pricing concern, stifling enterprise through their inability to fund innovation, and preventing the introduction of ‘unproven’ new brands, thereby impeding the delivery of the type of customer experience needed to beat external competition.
Whilst it would be fair to say that efforts are being made to improve the overall travel and shopping experience, there are other bugbears that remain, such as lengthy queues at bag drop and security, confusing signage, and too many Apps to download in airport (with sometimes patchy Wi-Fi). When you add this to a general customer perception of a lack of product and range availability, as well as affordability, it is obvious why ‘waiting to buy when you fly’ might be losing its charm in the customer’s eyes.
Urban-Air Port F&B partner Compass Eurest prepare the lunch offer
Airports and service providers need to address these complex challenges and will also need to find ways to avoid passing rising costs onto the customers, such as reducing the CAPEX required for expansions and refurbishments through more efficient space usage. OPEX will also need to be reduced through smarter digital and automated solutions; costly and complicated sustainability targets will also need to be rationalized in collaboration with all partners involved. We need to be more adept in monitoring and addressing changes in the evolving passenger demographic by capturing, sharing, and utilising relevant data.
“Such revisions to the customer base include the emergence of the Gen Z traveller, who (according to current studies) have an average attention span of only 8 seconds, but who, according to m1nd-set’s 2023 research, will be the largest travelling consumer group by 2028, with over 1.2 billion flying annually.”
Knowing this, we need to ensure we are able to communicate through a medium that captures their attention long enough to effectively engage them with the physical and digital offers available.
Considering the fact that non-aeronautical revenue is responsible for anywhere up to 50%+ of an airport’s entire revenue, how Travel Retail providers now refine the communication of their commercial offer, both physically and digitally, will be instrumental to their and airports in general future success.
Collaboration is key, specifically between the airports, airlines, retailers, brands, and marketing & digital campaigns. The effort is clearly worthwhile, as air travel continues to boon: the Sunday after the recent Thanksgiving holiday was the busiest day ever in US airport history with 2.9 million people screened at the airport and over 51,332 scheduled flights. The demand has never been greater.
With opportunity in abundance and a definite need for additional efficient transportation that complements existing options but incorporates sustainability expectations, Urban-Air Port embraced the challenge to deliver an infrastructure solution that will not only meet but will also exceed the requirements of Advanced Air Mobility (AAM). It will also address the demands of a new breed of traveller who expects a more connected, intuitive, seamless, and environmentally responsible travel experience.
Non-aeronautical revenue will be just as important within the new AAM sector as it was in traditional airport retail: it will help to counter operational costs enough to facilitate affordable air taxi travel for all.
Brand showcase with Urban-Air Port partner Bottega Spa
“Accordingly, we have developed the beginnings of a commercial ecosystem that will be controlled through an App, under the banner of Urban-Air Choice (UAC). ”
This solution will address the challenges of traditional and cumbersome Travel Retail models by embracing the aforementioned stakeholder collaboration and targeting the potential for greater commercial opportunity with frictionless direct marketing capabilities and exceptional brand exposure on an e-commerce platform. It will aim to connect all users to products and services more efficiently, with easy access that enables them to control almost every aspect of their journey and travelling needs. With eyes firmly on customer convenience and experience, this approach will work in tandem with physical and interactive display spaces within Urban-Air Ports, encouraging customers to engage with an ever-increasing selection of retail brand, food & beverage, and service partners, as well as with the check-in and boarding services of Urban-Air Port and other potential AAM solutions.
Connecting customers to UAC through one App (negating the need to download multiple Apps by offering a single basket) will eliminate some of the key, previously discussed, challenges for current airport customers. UAC will also have a reach far beyond a single location, seamlessly linking entire networks of passengers, and ultimately even reaching across international borders. Unlike the limitations of traditional Travel Retail, the UAC solution aims to give customers the ability to control when, where, and how they shop, to take advantage of additional services, have their goods delivered at home or on the move, and all whilst they earn relevant rewards and offers through a loyalty programme. UAC will facilitate access to a potentially limitless collection of brand and service partners, including sustainable alternatives that enable a guilt-free shopping experience, whilst ensuring customers are offered fair and competitive prices that are not inflated to counter high rents.
“The digital efficiency of UAC will allow offers and services to evolve with the passenger demographic, avoiding the inconvenience of the physical and operational limitations experienced in the traditional airport offer being passed on to the customer.
Their needs will actually come first. ”
