How to Boost Airport Revenues After a Summer Slowdown
[This is a guest post by Laura Jackson.]
For many airports in the U.S., July is the busiest travel month of the year. Airports are filled not only with business travelers, but with families taking summer trips while children are out of school. Airports are beginning to publish their July 2010 passenger traffic statistics, and the numbers are not encouraging. Atlanta, the busiest airport in the country â€"- and the world -â€" recorded a decline of nearly two percent compared to July 2009. Denver, the fifth-busiest airport in the U.S., is down by one percent.
Of the 10 busiest airports that have reported their July statistics, only three have recorded relatively modest increases: San Francisco (at 3.3 percent), Chicago O'Hare (at 2.9 percent) and Los Angeles International (at 1.6 percent). This weakness means that airports will need to get creative to keep revenues high.
The airports that have experienced increases â€"- which also include Miami and Ft. Lauderdale â€"- rely heavily on international passenger traffic, which is growing much faster than domestic travel. International passenger traffic recorded double-digit increases at both San Francisco and Ft. Lauderdale. And Houston's international increase of nine percent was not enough to push its monthly total above that of 2009. Clearly this international exposure is paying off for some airports in the current environment of a weak domestic economy. But many smaller airports, with limited international service, are losing passengers during the time of the year that typically provides boosts to revenue coffers as well as parking and concessions, major sources of nonairline revenue.
The July numbers also reflect changes due to continued network rationalization in the combined Delta (DAL); we see that Cincinnati's declines are steep, while Atlanta's decline is primarily the result of decreased connecting traffic. Memphis, Minneapolis and Salt Lake City are also down year-over-year. Detroit, a growing international gateway for Delta, is the only one of the airline's hubs that recorded an increase (at 3.4 percent), boosted by a huge 25 percent jump in international passengers.
The Air Transport Association reported that travel on major U.S. carriers fell by one percent in July. At the same time, the International Air Transport Association released statistics last week that underscore the strong demand for international travel, with significant gains in Asia, the Middle East and Latin America. This supports the passenger traffic growth in Asian gateways (San Francisco and Los Angeles) and Latin gateways (Miami and Ft. Lauderdale). Europe, like the U.S. continues to perform weaker than other regions.
These passenger traffic trends follow recent unsettling housing and employment numbers and are yet another indicator that the fundamentals of the domestic economy are not as sound as we might like. And now that the kids are back in school and the typically slower fall season is upon us, airports won't be able to make up the volume that July did not produce. What can airports do to offset this problem? Attracting new air service is certainly a worthwhile endeavor, but many of those decisions can take years to come to fruition, and there are so many external factors that influence new routes that airports simply cannot control. Instead, airports should focus on what they can control directly and work to generate additional revenue from nonairline sources.
Concessions I travel through a lot of airports and am always puzzled when I see empty concession locations. And I don't just mean that they are temporarily empty while a new concession is moved in; some spaces are empty for years. Airports should not let any space go to waste â€"- an empty space is guaranteed to generate no revenue.
Another area where airports can improve is in their concession offerings. Many airports don't adapt quickly enough to changing tastes and trends, and offering trendy concepts makes an airport attractive; not only may it prompt local residents to plan to enjoy a meal or a service at the airport before a flight, but a frequent traveler may choose to connect through an airport based on a concession offering. (I speak from experience.)
Parking Parking is generally the largest source of non-airline revenue for airports. Boosting parking revenue does not necessarily have to come in the form of increased fees (which is not popular with the local residents and often generates negative publicity for the airport). Instead, airports should look at ways to better use their inventory. Close-in and/or covered spaces are used heavily by business travelers during the week, but can be empty on weekends or holidays. What about offering a discount for the use of these spaces during off-peak times? This may draw in families who don't want to trudge through snow and ice from remote lots when they travel to visit relatives during the winter holidays; they're paying more than they would in the remote lot and therefore adding more money to the airport's bottom line.
Get Creative How about working with local economic development officials to bring the filming of a movie to your airport? Many airports have unused spaces (an old cargo hangar, for example) that might be perfect for filming. What about building an old-fashioned observation area for airline aficionados? Airports could charge an entry fee and use space that might not be otherwise generating revenue. The possibilities are endless.
Structural changes to our economic foundation, combined with increasing airline fares and ancillary fees, mean that airports will likely continue to experience flat or negative domestic passenger traffic trends in the near future. So airports will need to maximize the asset they have in place and work to generate as much additional revenue from current passengers and non-passengers alike.
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Laura Jackson was just two weeks old when she took her first flight on Piedmont Airlines. In junior high school, she developed a business plan for her own airline. Today she manages research activities at one of the world's busiest airports. She holds an MBA from Thunderbird and in her free time she blogs about her travels on her personal Web site, www.welcomesignproject.com.
Photo via Brett Snyder