To a great extent, airports have to play the cards they have been dealt with when it comes to fine-tuning their retail operations. If you are Malaga airport, you’ll focus on souvenirs for foreign holidaymakers returning home. If you are Hannover airport, you will focus more on foreign business travellers returning home. And if you are Manchester airport, you’ll have a balance of goods for local holidaymakers and business travelers who are leaving home.
That’s a broad generalisation. But airports don’t have to be entirely passive in respect of their retail options. They can use big data as a way to optimise their retail assets for their current passenger profile, and even use big data to explore new opportunities and go some way towards balancing their traffic between the business and leisure sectors.
Airports can use big data from Milanamos to provide insights into their business and leisure passengers. But first, a few insights into those two sectors:
Focusing on the business sector.
According to the World Travel & Tourism Council (link below), business travel spending was forecast to grow by 4.7% in 2014 to $1,155.5bn, and rise by 3.7% pa to $1,661.1bn in 2024. (Forecasts for the leisure sector were $3,558.1bn and $5,451.2bn, respectively.)
As a general rule, business travelers are of more value to airlines and the local economy than they are to the airport. The website Expert Market (link below) has a very informative set of charts showing that business travelers are worth around $500 per day in spending power to the city they visit.
But business travelers spend less time in the airport retail area. While leisure travelers arrive early and spend time shopping as part of the holiday experience, business travelers tend to arrive ‘just in time’ for their flight. According to research by Candean (link below), people travelling on business between 1 and 3 times a year have a spending mix of 49% in the duty free store and 43% in the other, duty paid stores. It’s a matter of grabbing a bottle of spirits on the way to check-in.
Still, business travel is big business and attracts airlines. In the US alone, the Global Business Travel Association (link below) reports that it’s a $315 billion market. And Forbes magazine (link below) reckon that every for $1 a company spends on business travel, they will generate $9.50 in increased revenue.
Targeting ‘millenials’ as business travelers.
Demographics will be the subject of a future Milanamos blog post (please subscribe to our newsletter to be alerted) but here’s a quick note about ‘millennials’ as a passenger category. HVS (link below) report that millennials (people born between 1980 and 2000) “currently account for approximately one-third of US business travelers, but is expected to increase to 50% by 2020, while Baby Boomers will drop to 11%.”
Airports focusing on the ‘millennial’ demographic will probably also want to think about an airport app to encourage retail shopping as smartphones are ubiquitous in that age group. The New York Times (link below) has an interesting article about how business travelers now prefer to book their flights, hotels and taxis, rather than rely on the corporate travel office.
As a segue between the business and leisure sectors, the organization Priority pass (link below) state that the UK’s frequent flyers will take an average of 5.8 business trips and 3.5 leisure flights this year. These figures probably apply to countries with similar profiles to the UK.
Focusing on the leisure sector.
According to the World Travel & Tourism Council (link below), leisure travel spending was predicted to grow by 4.3% in 2014 to $3,558.1bn, and rise by 4.4% pa to $5,451.2bn in 2024. (Forecasts for the business sector were $1,155.5bn and $1,661bn, respectively.)
Naturally, holidaymakers will have different spending needs depending on whether they are leaving home or returning home.
An interesting study by Questor Insurance (link below) showed that UK consumers spend about £500 ($750) per person … before they even go on holiday. That is about the same again as they will spend on the holiday itself!
If airports could position themselves as shopping malls, they could capture some of that global expenditure $3.5 trillion market on the day of departure.
Regarding shopping as the tourist leaves their holiday resort, the UK Daily Mail newspaper (link below) reports that holidaymakers spend an average 20% of their holiday budget on gifts and sourvenirs. Over half (55%) of people interviewed said they leave buying gifts until they get to the airport shop. This means tourists could be spending around $500 billion worldwide on ‘last minute’ souvenirs and gifts.
Using big data for retail optimization and balance.
Milanamos helps airports to have a very granular view of their passenger profiles and retail opportunities.
Big data from the airports own apps, airline data, local demographic data and even mobile phone records can provide a wealth of information for airport managers.
Milanamos; big data tools can help hub and regional airports to identify income opportunities. Specifically:
– demographic research can attract new carriers.
– predictive travel helps with route planning.
– multimodal transport improves service for travelers.
– demographic and traveler analyses give retail insights.
World Travel & Tourism Council
Priority Pass. Changing demand from frequent flyers.
HVS : Segmenting Millennial Travelers Business vs. Leisure.
Expert Market : Business travel costs around the world.
New York Times. Business travelers book their own resources.
Global Business Travel Association. US spends $310 billion in 2015.
Forbes. What today’s business traveler wants.
Canadean. Global Business Travelers’ Airport Retail Trends, 2013–2014.
UK Daily Mail. 55% of holidaymakers buy gifts at the airport.
Questor Insurance. People spend £500 before their holiday.