Soft target The fight between airline brands for frequent fliers has become serious business in the airport lounge
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1 MARCH t 0 th ANNIVERSARY YEAR Soft target The fight between airline brands for frequent fliers has become serious business in the airport lounge BUSINESS INTELLIGENCE Why retail managers need a firm grip on flight and passenger data PASSENGER TERMINAL EXPO The top 10 things not to be missed at this year s conference and exhibition HEATHROW T2 A soft opening should ensure Heathrow s latest terminal makes headlines for all the right reasons www.
2 24 BUSINESS INTELLIGENCE SAUL WORDSWORTH insider trading The utilisation of business intelligence data that links operations with retail can make a crucial difference to non-aviation revenues Passenger Terminal World MARCH 2014
3 BUSINESS INTELLIGENCE 25 The airport retail experience is still in its infancy. You ve got a captive audience but they are bored so it s an opportunity to put in front of them things they might buy. Understanding more about the passengers who they are, where they are from, where they are going will increasingly enable retailers to target customers in a razor sharp fashion. So says Josh Kornfeld, founder and president of General Assembly, a world leader in future concept development. He may not have realised it but he was talking about the use of business intelligence (BI) within aviation retail the capturing and understanding of data that can be used to improve business decisions and increase revenues. As profits are being squeezed, optimising retail revenue is vital, says Betros Wakim, cofounder of AirIt, a leading player in the BI market. Airline consolidation, the reduction of routes, the MARCH 2014 Passenger Terminal World
4 BUSINESS INTELLIGENCE 27 high cost of operations, the constrictions of expansion and increased competition all mean that a full understanding of concessionaires performance is vital. BI is already happening in a lot of airports, but for the most part in an embryonic fashion. In % of global airport revenue, totalling US$46bn, came from non-aviation sources such as food and beverage, retail, car parking and advertising. Yet according to a 2013 report from world aviation specialist SITA, only 8% of airports have reached the data-quality requirements for their existing BI plans. Typically most airports today receive a monthly from concessionaires outlining that their sales for a particular shop are a certain amount, or some such, says John de Giorgio, CEO of Concessionaire Analyzer, a primary player in the BI market. The airport then plugs this data into an Excel spreadsheet and feeds it to the finance department for billing, followed by a limited analysis. With some exceptions, this is the general state of play today. The benefits BI is crucial in enabling airports to identify and understand the opportunities for developing the passenger experience while maximising revenue by more precisely tailoring products and services. Applied to retail, BI enables airports to understand passenger spending patterns and the effect of operational changes. Opportunities abound, including upselling per passenger, optimising the mix of product based on the passenger profile of particular flights and targeting bigger spenders. The key lies in the ability to view all retail data at an executive level as well as being able to filter it by flight, destination, terminal, product or shop category. One of the key features of a well-designed BI solution is the amalgamation of data from a large number of sources into a consolidated data set that can be easily sliced and diced to efficiently provide the data the business needs, says Alan Hamilton, senior aviation consultant with Lockheed Martin, another leading BI supplier. Almost all airports are looking to embrace BI to improve collaboration with airlines and airport tenants. In Edinburgh and Gatwick they are linking operational data to retail data in order to analyse spending At a typical airport twothirds of purchases take place within 60 minutes of boarding RIGHT: John de Giorgio, CEO of Concessionaire Analyzer (CA) BELOW: CA screenshot showing sales by flight analysis profiles, while other airports such as Copenhagen are using passenger-specific data to add further insight. In both cases retail BI is used to increase revenue by more precisely tailoring products and services to the passengers travelling through the airport and also identifying new revenue opportunities. This can be through working with certain brands to target advertising to a specific demographic or using proven spending patterns to launch new product lines. By understanding top product sales by airline, destination, season, time of day and so forth, the airport can correlate these trends with key data gathered from boarding pass scans. By combining these factors, passengers can be targeted using retail offers, targeted advertising and product samples. BI also provides the data required to assess the effectiveness of retail promotions and operational changes, such as relocating a retail outlet, changing gate allocations or amending the call-to-gate process. With all this data to hand it is important to avoid overload, remarks Hamilton. It may be interesting to review the breakdown of all food and beverage spend, but this would result in a reduced customer experience as passengers would be required to present their boarding cards for all purchases. Our own retail BI has shown that at a typical airport two-thirds of purchases take place within 60 minutes of boarding, and approximately half during the penultimate 30 minute period. Therefore the emphasis should be on encouraging passengers to shop and spend at a more relaxed pace. This can be achieved by targeted advertising and optimised retail layout, for example prioritising the products that are the typical big sellers for that airline, route or season. BI also facilitates the analysis of passenger reporting patterns and maximised dwell times in the retail area as well as optimised gate calls. Securing the data It is in the interest of airports, retailers and passengers to provide sales data as the airport can then give the retailer passenger spend profiling and forecast passenger data. In general the concessionaires are required to provide summary retail sales data on a regular basis. However this data is not generally provided in sufficient detail. Airports are now including the provision of the required retail sales data in the T&Cs between themselves and the outlet. Generally data protection is not an issue as BI is based on passenger classifications and doesn t maintain data on individual passengers. Legislation protects personal information and personal information is rarely involved. Data privacy, security and accuracy of data are vital for airports, says Ron Reed, SITA s director, Airport Portfolio MARCH 2014 Passenger Terminal World
5 28 BUSINESS INTELLIGENCE Buy before the airport Business intelligence data can be gathered from a number of sources, but advances in mobile technology and online resources have made obtaining and analysing data easier for airports. One example of how data can be obtained like this is through Singapore Changi Airport s new ishopchangi online portal. ishopchangi enables passengers departing from Changi Airport to buy products available at the airport before they travel. Passengers can purchase items through the online portal from two weeks to 24 hours before their flight, says Jeffrey Gwee, assistant vice president, Online Retail (Airside Concession Division) at Changi Airport. They collect their items on the day of departure from a centralised collection point in each of the terminals. Passengers can even buy goods from shops in Terminal 1 and collect them in Terminal 3, for example. Essentially the idea is to give passengers more convenience and it provides us with an opportunity to market our retail offering to people before they come to the airport for their flight. It also provides a new sales channel for our concessionaires as they can target time-strapped passengers who may not have had time to buy anything before. ishopchangi was launched in September 2013 and currently sells items including alcohol, cosmetics, perfume, chocolate, electronics and watches. Not all brands at the airport are involved in the initiative but as Gwee highlights, All the main concessions are on board. In terms of business intelligence, the new online portal is helping Changi Airport to gain more information on passengers with regards to their spending habits. We are currently further developing the business intelligence portion of this e-commerce portal to gain further insight about customer buying patterns. We plan to analyse this data to establish what things people usually buy and when. This will hopefully drive cross-selling and upselling, Gwee concludes. Gwee will be talking more about the ishopchangi portal at this year s Passenger Terminal Conference on Tuesday 25 March at 11.10am in the Commercial Development, Retail and Media session. Passenger Terminal World MARCH 2014 LEFT: Martha Hernandez, assistant VP of concessions at Dallas/Fort Worth (DFW) International BELOW: A retail concession at DFW Marketing. A sample of passenger movements is typically collected on an anonymous basis. The data does not reveal any individual information but shows an aggregation of traffic counts and flows. Improved negotiations Through its provision of evidential rather than anecdotal information there is little doubt that BI can be used to improve negotiations with concessionaires and airlines. This enables the airport and retailer to access the history of product sales and demographics and explore opportunities for increasing revenues. For concessionaire negotiations this means clarity on typical sales volumes, emerging trends or gaps in product offerings. Direct comparison between shop categories enables the operator to identify and address weak links, says de Giorgio. This in turn provides an opportunity to work with concessionaires and help improve their fortunes. BI can also enable airports and airlines to predict the effect of new routes on non-aviation revenues, thus directly influencing what either party can demand by way of typical landing fees. Dallas/Forth Worth When Dallas/Fort Worth (DFW) purchased its first BI solution a few years ago, the concessions team was one of the first to use it. Martha Hernandez is assistant vice president in concessions and oversees all leases and compliance. The system ties different pieces of information together then creates a dashboard so that you can evaluate the business quickly, she says. Most of us have ipads at the airport. This means that during a meeting you can see quickly which sections of the terminal are most profitable and which businesses are meeting their targets. We have finance tied in, air service development tied in, plus all our sales reporting from our concessionaires. Before BI we had to call up each department for that information. Hernandez believes that compared with other US airports DFW is ahead of the game. By enabling the team to quickly identify which areas require more effort they know who to speak with and when. It could be that at the end of the month we see that a couple of concessionaires are not meeting their goals, she says. Perhaps there has been a turnover in management, a change in customer service, perhaps it s a new outlet, perhaps it s not opening on time. We will identify the necessary trends and open a dialogue with them. Hernandez regularly uses BI to improve negotiations with concessionaires. If an outlet is losing sales she will look at the financials, see who is paying their bills on time, what their mystery shopper results are and ask: Is it just them? If it wasn t for BI we would certainly be spending a lot more time preparing for meetings and answering questions that come
6 30 BUSINESS INTELLIGENCE from the executives. We used to spend ages sourcing data that is now available to us at the touch of a screen. Manchester Airport It was seven years ago that Manchester Airport purchased its first fully fledged BI solution for retail. Since then BI has helped it determine trends and boost sales. It s hard to put a figure on the difference BI has made, says Richard Hill, head of retail for the Manchester Airports Group, covering Manchester, Stansted, East Midlands and Bournemouth airports. It s more about adding intelligence to business. We like as much insight into our passenger demographics and behaviour as possible so that we can deliver the right retail and catering offer in the terminal to meet passenger needs. We attempt to understand how they use the terminal, what their spending habits are, what they like to buy and what they are looking for. Then we try to ensure all our outlets have the right product for the right passenger profile. Manchester can be quite dynamic with some of its retail in terms of what products it positions in which stores at different times of the day. For instance if there is a high propensity for passengers from a certain destination to buy a particular liquor brand it will arrange for it to be placed at a high-profile location in the terminal. It s not about enticing people; it s more about making sure we understand what a like-minded person would look for and thus ensure we have the right capacity for that profile. This means ensuring we have a proper range of food and beverage as well as the right stuff when there is a cluster of passengers with a high spending propensity. Has BI transformed our retail environment? The decisions we ve taken have been led by the intelligence we ve gained from it. BI has a role to play in providing the foundation of information from which we can make informed decisions and thus lay our terminals out in a way that maximises that potential. Last word Business intelligence and analytics are quickly becoming key components to drive additional retail sales, concludes SITA s Reed. Rich data drives sales. I believe that in the next five years BI will be embedded in every aspect of our daily lives to customise our shopping preference and to enrich the travel experience. Passenger Terminal World MARCH 2014 We try to ensure all our outlets have the right product for the right passenger profile ABOVE: Screenshot showing sales by revenue stream from Concession Analyzer RIGHT: Helsinki s Quality Hunters discuss their ideas Crowd intelligence Beyond data analysis, crowdsourcing is another exciting new technology that airports can use to develop their services by collecting information, feedback and experiences direct from users. This is what Helsinki Airport had in mind when it established the Quality Hunters initiative in Quality Hunters is a model for community-driven service development where the most promising ideas provided by the community are selected to be developed further with the professionals at Finnair and Finavia, which operate the airport. The community is invited to share its views of what makes a travel experience great and identify points of improvement along the passenger s journey. The program is now in its third year. The Quality Hunters season two at Helsinki Airport resulted in a book swap, a free 24-hour art gallery and Suvanto an oasis of calm where you can work, charge your electric devices, relax and hide but still be present in the action, says Joni Sundelin, senior vice president, Finavia Corporation. Since then further ideas we have put in motion include rest and peace areas, and cabins for sleeping. To improve the quality of idle time at gate areas we have installed rocking chairs at a number of airports. Quality Hunters season three at Helsinki has to date gathered a bundle of 101 ideas that are currently being processed at Finavia s service development programme. The ideas come to us via the usual social media platforms such as Twitter, Facebook, blogs, as well as during workshops we organise for the most active members of the Quality Hunters community, says Sundelin. This time we have structured the programme to focus on five topics of the customer s journey at home, at the airport, on board and on arrival. We have left space for one final theme, to be decided by the people. Sundelin will be talking more about the Quality Hunters initiative at this year s Passenger Terminal Conference held in Barcelona, Spain on Tuesday 25 March at 12.10pm in the Commercial Development, Retail and Media session.
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