Point of View

Airport Transformation: The Way Forward!

Airport-Transformation-The-Way-Forward

Airports have always played a significant role in the travel industry. The focus of airports has been on offering exceptional customer experience to travellers through best-in-class infrastructure. When the COVID-19 pandemic hit in 2020, the world was drawn to a standstill. Flights were cancelled, airports wore deserted looks, and there was curiosity about how the aviation industry would make a comeback.

The world is now returning to normalcy after the pandemic, and so are the airports.

Is there a future direction for airports, and what does it mean for travellers? This conversation with Priyod, Principal Product Consultant with IBS Group, focuses on the digital transformation of airports. 

How has the pandemic affected the airports, and what are the new focus areas for the future?

When the pandemic hit, flight cancellation was rampant, and airport revenue was severely affected. Passenger traffic in 2020 dropped by 60%, down to 2003 levels. Despite being squeezed out of revenue, airports had to invest in implementing contactless solutions for encouraging people to travel again. We are now very close to pre-pandemic levels, but the threat of airport revenue getting affected due to a similar event in future is still a big concern. So, airports are taking measures to strengthen existing revenue sources, create new revenue opportunities, and even explore revenue generation avenues decoupled from travel.

What kind of innovations do you believe airports will experiment with to maintain steady revenues?

One thing we learned from the pandemic is that airports must create multiple sources of revenue to achieve financial stability. Aeronautical revenue, collected from airlines through various charges for facilities and services arranged by the airport, is insufficient to keep airports running profitably. Today, the non-aeronautical revenue stream, generated through passenger-centric businesses such as duty-free, retail, food and beverage, and car parking, makes up about 40% of airports' revenue.

These B2C offerings in the airport are largely in-store services. But all large businesses today have strong digital presence and in e-commerce, people expect an Amazon-like experience. Airports are now recognizing this and are working on intensifying their digital presence to improve their market reach. Concepts like aerotropolis will allow airports to leverage their strengths in retail management and extend the e-commerce experience beyond passengers to local, non-traveling customers.

Another area waiting to explode in terms of possibilities is of eVTOLs (electric Vertical Take-Off and Landing). This domain is fast evolving and waiting for the right governance policies to grow into mainstream businesses. Airports will play a pivotal role in this space, and the business drivers are more likely to be local than travel-related.

Are airports also focusing on online customer experiences along with physical experiences?

Presently the mind space of a flyer is mainly focused on which airline to select for the journey. But they do not plan their time at the airport, which can easily be three-four hours. The time to reach the airport can be another couple of hours. There is a great opportunity here for airports to engage travellers through eCommerce. 

Presently travellers have little idea about what to expect at the airport as no proper digital channels are available. Moreover, after reaching the airport, it is all about rushing around, doing check-in, security, and immigration, making it to the gate, and then finding a seat to wait. After all these procedures, most travellers lack the energy to explore and indulge in the physical shopping experience. Even when they do, they confine themselves to the area in the vicinity of their gate, leaving out the vast number of shops in the airport unexplored. 

Here is where online experiences can come into play. Most travellers do not want to leave their seats, so why not bring the stuff to them just like modern e-commerce firms do in everyday life? Imagine airports are giving travellers the option to select and purchase goods online and get them delivered to their seats. It can create a lot of business for the airport and the concessionaires within the existing infrastructure. Many airports have embarked on this journey, while many others are planning their future roadmap in this direction. So we can expect a transformation in airport online experience in the upcoming years.

How can airports deliver better online experiences for younger travellers?

Traditionally affluent travellers with expensive tastes made up most of the passenger segment. But today, with low-cost airlines taking prominence, travellers from all strata of the economy are traveling for business and leisure. Young travellers are very much part of this new segment of air travel. With this changing demography, a wide variety of interests are at play here. It is no longer easy to say who likes to buy what. Hence, as airports expand digitally for better market reach to the digitally savvy, there should also be mechanisms to learn what customers like to buy, which price points appeal to various customers, and what kind of information they want.

This calls for innovation to transform airport e-commerce by bringing in data-driven intelligence and upgrading web and mobile channels to align with these new technologies so that sales is fine-tuned to accommodate the preferences of every customer.

Among these technologies, the most notable are artificial intelligence-based technologies such as personalization to recommend the right products, services, and offers to customers, dynamic pricing intelligence to attractively price the offerings, and bots that bridge information gaps in real-time for thousands of customers who interact with the platform.

How would digital transformation in airport retail and eCommerce help airports?

Millions of passengers travel through airports every year. No matter how frequently people visit an airport, they remain a stranger to the airport. Though customer centricity is at the heart of airport operations, there was never a focus on customer ownership or an attempt to cash in on the advantages that come out of it. Presently airports are run as facilities that provide necessary services for airline passengers. But clearly, there is a case for more. Airports have been doing hundreds of millions of dollars worth of business every year in the non-aeronautical stream. It is purely based on opportunities airports are uniquely placed to offer their passengers. This means there is a strong case for airports to start investing in knowing and growing their customer base. Hence realigning business strategy with a complementing digital transformation strategy will help airports to attract, engage, grow, and retain passengers as airport customers. It increases the revenue potential of existing infrastructure by leaps and bounds, not just by providing a very modern customer experience but also by positioning airports to sell their services through business partners such as airlines, hotels, and other travel companies. 

How prepared are you to work with airports in these new areas?

IBS has been active in the travel technology sector for over two decades and is constantly working with travel companies to elevate them as technology-driven organizations. The present transformation needs of the airports on technology and solutions from a broad sense are directly relatable to what we have been working with airlines already because airlines are far ahead of airports in crafting their business around their customers. Our airport domain expertise allows us to understand the needs of the airports, we bring valuable lessons from our experience with airlines, and we already have solutions that can build airports of tomorrow today.

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