We spoke with Professor Georg Fundel, managing director at Stuttgart airport, to find out more about their approach to non aviation related revenues
Car parking, duty-free shops, boutiques, restaurants… All of these business types fall under the heading of non-aviation related revenues, and in the world today you would do well to make the most of your opportunities in this area.
With the stringent security rules at airport facilities today, passengers are arriving earlier to catch their flights and therefore generally have more time to kill in the terminal building. To provide a good offer to these customers makes perfect sense, as they can boost your earnings exponentially – to ignore the possibilities would be a missed opportunity to say the least.
Historically, parking made up the majority of these revenues, but with off airport businesses taking away this stream to a large extent, airports must improve their offers in other areas.
Stuttgart Airport is a facility that is well positioned to comment on these revenue streams, providing as they do a wide range of shops and services in their terminal building in order to capitalise on passenger dwell times.
Professor Georg Fundel
The eruption of the Eyjafjallajökull volcano in Iceland a few years ago has shown European airports that without passengers there is no revenue. Air traffic and business at the airports came to an almost complete standstill for up to seven days, causing great financial losses.
In Germany, airports do not only work as an Airport Authority or Landlord, but on a large scale are offering handling services for passengers and aircraft. Therefore, in Germany, at most airports the ratio of Aviation vs. Non-Aviation Revenues is not 50:50, but about 65 aviation vs. 35 percent non-aviation revenues.
The more services an airport provides, the smaller the proportion of non-aviation. Therefore, it cannot be concluded that this airport is not up-to-date, it just has different production structures.
In order to operate an airport successfully it is important to operate profitable businesses in both business segments (aviation and non-aviation), because the pressure on the handling revenues is enormous. At the same time, because of today’s tight security requirements, we have the opportunity to reach a relatively affluent clientele with a relatively large time budget. That is why our passengers, once they get behind the security checkpoints, feel more comfortable the more attractive stores and shops there are. This works even better within large hub airports, because there the time spent is significantly longer. Point-to-point airports too in recent years have changed much for the better, both their in store and restaurant concepts.
The largest revenue block of non-aviation revenues are parking revenues. In this area the internet has changed the world somewhat, at least in Germany. Today more and more offers of “Parking at the airport” can be found – really meaning “Parking off airport.” These companies poach in the parking area – and that means the revenues of the airport. This leads to a considerable outflow of parking revenue and again shows the attractiveness of the passenger as a paying customer. And that means the airports have to react.
How can we encourage passengers to spend more money? Quite simply, the more attractive the businesses you have at your airport the higher your revenues will be. Shops and restaurants, for example, are an essential part of any terminal building. Therefore it is necessary to develop visually attractive and thus inviting shops, offering high-quality brands and with a trendy appearance. The times when a business model can work for 10 years with the same appearance are over. At least every three to five years, shops and retail outlets should be investing in lighting, merchandise presentation and display cases. Even the product range will need to be revised constantly. At the airport, you do not expect average or goods off the rack, but something special. If, in addition, one succeeds to present local products that may even be popular nationwide, then that makes the trade unmistakable in a certain way.
There is also a correlation between supply area and product competence. The more the trade gets a chance to expand in terms of area in the terminal, the more the customer gets the impression of a certain competence. Therefore at many airports – including in Stuttgart – waiting areas mingle with trade. Walk through concepts are certainly an answer that many perceive as a nuisance, but will catch every passenger’s attention.
The combination of trade and catering can also be fruitful. When I’m having a good lunch or a glass of champagne and am able to see the good presentation and wonderful range of goods, then I am more ready to buy. Therefore, we in Stuttgart combine retail and hospitality in the best possible way.
In addition, customers today expect regular special offers. These lead to customer contact and thus offer a chance to sell more and achieve a higher receipt per customer.
Internet trade in Stuttgart is still at its very beginning. One possibility is that the customer at the time of departure orders goods and receives them upon arrival. That way the customer doesn´t have to carry the goods with them on their journey. This gives them a chance to use their time budget at departure, whereas usually they would be in a hurry on arrival. Via the Internet we are able to inform the customer about products and special offers. If a customer has little time, he or she can bypass the shops if there are goods that can be purchased via the web.
Regarding the passengers: for them this development in non aviation related revenues is great, because it means more competition and less instances of companies monopolising the space within the terminal. This inevitably leads to better performance at an ever better price-performance ratio. Those airports that accept this challenge and develop good solutions have the chance to achieve appropriate revenues. We at Stuttgart Airport consider ourselves ready for this challenge. Restaurant wise we are the only airport in Europe to present a gourmet restaurant with a Michelin star and commercially we have a broad mix with local but also national and international brands.