Determinants of airport retail revenue: a review of literature

ABSTRACT

As the airport retail industry continues to grow due to increasing travel demands, airport operators are increasingly developing their retail revenue potential to ensure financial viability. This study aims to provide a review of airport retail literature and identify the salient factors associated with passenger shopping behaviour. The paper presents a review of contemporary airport retail literature, covering a total of 50 studies from 1998 to 2018. The review identified 26 factors, which could broadly be grouped into five categories: airport/operator related; passengers' demographic related; passengers’ travel related; passengers’ psychological related and passengers’ resources related. In addition to providing a summary of the statistically significant factors across studies, the review identifies and discusses potential approaches for future research. These include the importance of considering both “to spend or not” decision and how much to spend and how most empirical studies focussed on the former; the gap in empirical analysis on the impact of airport terminal design layout on retail performance; and the gap in application of general consumer shopping behavioural models to airport retail problems. The paper concludes with the suggestion that we can build on the existing studies to develop a hybrid approach to solve several of the identified gaps simultaneously.     

A choice model of airline passengers’ spending behaviour in the airport terminal

This study examines the influence of passengers’ travel-related factors, their intention to shop and the impact of socio-economic factors on their consumption behaviours while at the airport terminal. Three categories of consumption model – shopping, dining and airport entertainment – are developed to analyse different consumption behaviours. The results show that free time is the main factor that influences passengers to choose entertainment while waiting at the terminal, and the use of airline lounges has a negative influence on the extent of engagement in all three types of passenger consumption behaviour, especially dining. Furthermore, passengers’ dining expenditure has a positive effect on the extent of engagement in entertainment, but a negative influence on the extent of engagement in airport shopping. Passengers’ preferences of airport shopping area after they have cleared security is positively associated with the extent of engagement in both shopping and entertainment but negatively associated with the extent of engagement in dining activities.     

Optimal assignment for check-in counters based on passenger arrival behaviour at an airport

Establishing how to utilize check-in counters at airport passenger terminals efficiently is a major concern facing airport operators and airlines. Inadequate terminal capacity and the inefficient utilization of facilities such as check-in counters are major factors causing congestion and delays at airport passenger terminals. However, such delays and congestion can be reduced by increasing the efficiency of check-in counter operations, based on an understanding of passengers' airport access behaviour. This paper presents an assignment model for check-in counter operations, based on passengers' airport arrival patterns. In setting up the model, passenger surveys are used to determine when passengers arrive at the airport terminals relative to their flight departure times. The model then uses passenger arrival distribution patterns to calculate the most appropriate number of check-in counters and the duration of time that each counter should be operated. This assignment model has been applied at the Seoul Gimpo International Airport in Korea. The model provides not only a practical system for the efficient operations of time-to-time check-in counter assignments, but also a valuable means of developing effective longer-term solutions to the problem of passenger terminal congestion and delays. It also offers airlines a means of operating check-in counters with greater cost effectiveness, thus leading to enhanced customer service.     

An Airport Experience Framework from a Tourism Perspective

This study, by integrating the perspectives of sociological, psychological, and service marketing and management, all of which affect the passenger experience, proposes a theoretical framework for the creation of the airport experience in relation to tourism. This research responds to the current phenomenon in which airports are offering other types of experiences within the airport terminal, expanding the role of an airport from being a utility for transportation into a place where various and different values can be offered. This research explores the current airport experience and adds to research on airport experience by clarifying ten key components necessary for airport passenger experience propositions based on existing research, the current industry phenomena, and the empirical study. The paper also underlines those components that can enhance passenger experience in relation to tourism and highlights the role that airports contribute to a destination.     

Quantitative evaluation of passenger terminal orientation

When passenger terminal layout is being decided, one of the important aspects to consider is how the passenger orients himself during his visit to the terminal and his movements through it, i.e. terminal orientation. Among other things, this terminal characteristic results from visibility, or the visual connectivity between elements and spaces. The paper proposes an amendment and modification to the known method for the quantitative evaluation of terminal orientation which uses an oriented network to describe the connectivity of elements (terminal orientation). The amendment and modification of the method consists of proposing that during evaluation only visual connections that have functional meaning should be considered, rather than all visual connections. A further modification is the introduction of different weights for different connections. The example presented in the paper considers an airport terminal building.     

A generic system dynamics based tool for airport terminal performance analysis

Decision making for airport terminal planning, design and operations is a challenging task, since it should consider significant trade-offs regarding alternative operational policies and physical terminal layout concepts. Existing models and tools for airport terminal analysis and performance assessment are too specific (i.e., models of specific airports) or general simulation platforms that require substantial airport modelling effort. In addition, they are either too detailed (i.e., microscopic) or too aggregate (i.e., macroscopic), affecting, respectively, the flexibility of the model to adapt to any airport and the level of accuracy of the results obtained. Therefore, there is a need for a generic decision support tool that will incorporate sufficient level of detail for assessing airport terminal performance. To bridge this gap, a mesoscopic model for airport terminal performance analysis has been developed, that strikes a balance between flexibility and realistic results, adopting a system dynamics approach. The proposed model has a modular architecture and interface, enabling quick and easy model building and providing the capability of being adaptable to the configuration and operational characteristics of a wide spectrum of airport terminals in a user-friendly manner. The capabilities of the proposed model have been demonstrated through the analysis of the Athens International Airport terminal.     

Performance based clustering for benchmarking of US airports

Managing service operations is gaining significant attention in both academic and practitioner circles. In this broad area, performance evaluation and process improvement of airlines and air carriers has been the focus of several studies. Although efficient airport operations are critical for improved performance of airlines and air carriers, few studies have focused on airport performance measurement. This study evaluates the operational efficiencies of 44 major US airports across 5 years using multi-criteria non-parametric models. These efficiency scores are treated by a clustering method in identifying benchmarks for improving poorly performing airports. Efficiency measures are based on four resource input measures including airport operational costs, number of airport employees, gates and runways, and five output measures including operational revenue, passenger flow, commercial and general aviation movement, and total cargo transportation. The methodology presented here can be generalized to other industries and institutions.     

Quantitative analysis of passenger and baggage security screening at airports

The terrorist attacks in the United States in 2001 opened a new era in air transportation. The realization that civil aircraft can be used as powerful weapons of mass destruction by a small group of people has drastically increased the need for security screening procedures to protect civil flights. Serving as the interface between the air and land transportation modes, airports have become the main focus in the implementation of those procedures. The need to more thoroughly screen passengers and baggage, and the consequent increase in processing time, has created the need for more space for security checkpoints and baggage screening inside passenger terminal buildings—space that is costly and very difficult to find in existing buildings. This paper evaluates the impact those measures have had on the planning and operation of airport passenger terminals. Quantification of those impacts is performed with the use of discrete‐event simulation and spreadsheet models.     

Revenue sharing with multiple airlines and airports

This paper investigates the effects of concession revenue sharing between an airport and its airlines. It is found that the degree of revenue sharing will be affected by how airlines’ services are related to each other (complements, independent, or substitutes). In particular, when carriers provide strongly substitutable services to each other, the airport has incentive to charge airlines, rather than to pay airlines, a share of concession revenue. In these situations, while revenue sharing improves profit, it reduces social welfare. It is further found that airport competition results in a higher degree of revenue sharing than would be had in the case of single airports. The airport–airline chains may nevertheless derive lower profits through the revenue-sharing rivalry, and the situation is similar to a Prisoners’ Dilemma. As the chains move further away from their joint profit maximum, welfare rises beyond the level achievable by single airports. The (equilibrium) revenue-sharing proportion at an airport is also shown to decrease in the number of its carriers, and to increase in the number of carriers at competing airports. Finally, the effects of a ‘pure’ sharing contract are compared to those of the two-part sharing contract. It is found that whether an airport is subject to competition is critical to the welfare consequences of alternative revenue sharing arrangements.     

Congestion charges and retail revenues: Results from the Stockholm road pricing trial

This paper studies the impact of the Stockholm road pricing trial on retail revenues. The analysis is performed using revenue data from 14 shopping malls, 9 within the tool area and 5 outside the tool area. The data also include revenue data from a sample of retail stores located along the main shopping streets in Stockholm. The results show that the Stockholm road pricing trial did not negatively affect retail revenue, neither in shopping malls nor in the sample of retail stores.     

Measuring the equity effects of a carbon charge on car commuters: A case study of Manchester Airport

This papers attempts to quantify the equity effect of a hypothesized economic instrument, a carbon charge on car commuters, for reducing carbon dioxide emissions produced by commuters on airport surface access. Manchester Airport is taken as a case study using staff Survey data from 2008 and 2010. Consumer welfare change is analysed for measuring the equity effects of carbon charge by user group, which considers the changes of travel mode choice, the carbon dioxide emissions reduction, the revenue from a carbon charge and how it is distributed. First, the individual carbon footprint in terms of gram passenger kilometre, and the damage cost of carbon by commuters on airport surface access are estimated. Next, the impact of carbon charge on travel behaviour is investigated by the nested logit model. Finally, the net effect of carbon charges is assessed by travel mode user, gender, job type, and age group. The results show some impacts of the carbon charge on car users and carbon reduction, and the positive effects on lower income group and less carbon commuters. The quantified results provide the evidences for the mitigation policies to combine monetary incentives with disincentives for travel behaviour change, and demonstrate the different equity effects among commuter groups.     

Flight and passenger delay assignment optimization strategies

This paper compares different optimization strategies for the minimization of flight and passenger delays at two levels: pre-tactical, with on-ground delay at origin, and tactical, with airborne delay close to the destination airport. The optimization model is based on the ground holding problem and uses various cost functions. The scenario considered takes place in a busy European airport and includes realistic values of traffic. A passenger assignment with connections at the hub is modeled. Statistical models are used for passenger and connecting passenger allocation, minimum time required for turnaround and tactical noise; whereas uncertainty is also introduced in the model for tactical noise. Performance of the various optimization processes is presented and compared to ration by schedule results.     

Freighter operators' choice of airport: a three‐stage process

With increasing levels of congestion at the major cargo hubs and further restrictions on noise and night‐time flying, freighter operators' airport choice is a complex and important issue. The aim is to identify the factors that affect the airport choice of freighter operators through a review of the published literature. The literature reviewed includes work relating to passenger hub location, airport quality and airline network configuration, and other works relating to airport choice to paint a full picture of the current research in this area. The literature shows that freighter operators initially choose a shortlist of possible airports based on geography and then investigate any restrictions in place, such as capacity caps or noise limits that might block operations from that airport. Only when these hurdles have been cleared do freighter operators consider attributes of airport quality such as charges and terminal facilities, as well as other influences such as freight forwarder presence and airport marketing. Of particular prominence is the impact of legislation on airport choice.     

Analysis of performance and equity in ground delay programs

The discrepancy between the projected demand for arrival slots at an airport and the projected available arrival slots on a given day is resolved by the Ground Delay Program (GDP). The current GDP rationing rule, Ration-by-Schedule, allocates the available arrival slots at the affected airport by scheduled arrival time of the flights with some adjustments to balance the equity between airlines. This rule does not take into account passenger flow and fuel flow performance in the rationing assignment tradeoff.This paper examines the trade-off between passenger delays and excess surface fuel burn as well as airline equity and passenger equity in GDP slot allocation using different rationing rules. A GDP Rationing Rule Simulator (GDP-RRS) is developed to calculate performance and equity metrics for all stakeholders using six alternate rules. The results show that there is a trade-off between GDP performance and GDP equity. Ration-by-Passengers (a rule which maximizes the passenger throughput) decreased total passenger delay by 22% and decreased total excess fuel burn by 57% with no change in total flight delay compared to the traditional Ration-by-Schedule. However, when the airline and passenger equity are primary concerns, the Ration-by-Schedule is preferred.     

The Effectiveness of Conceptual Airport Terminal Designs

Abstract

Aviation passenger traffic is forecast to grow significantly over the next decade and beyond. To accommodate this growth will require investment in airport infrastructure, including terminals. These buildings represent large, lumpy investments, so it is important to provide the capacity to accommodate the forecast traffic. However, this depends on at least two factors: the accuracy of the forecast of future demand, and the process of translating these forecasts into designs. Error in either factor can be potentially catastrophic financially. Translating forecasts into designs depends on ‘rules of thumb’ formulae that convert design hour flows into area requirements for each terminal facility. This paper examines the process of translating demand forecasts into conceptual terminal designs. The basic methods used are outlined, and how they affect the conceptual terminal design process are revealed. A model for conceptual terminal design is derived, presented and validated based on a sample of UK airports. It is shown that even if demand forecasts can be taken to be completely accurate, there can still be errors in terminal design and size resulting from the use of these ‘rules of thumb’.     

How to mix per-flight and per-passenger based airport charges

This paper investigates the questions of why carriers advocate for higher per-passenger airport charges and lower per-flight charges, and whether and when this proposal is welfare-enhancing. Specifically, the paper compares the optimal mix of per-flight and per-passenger based airport charges from both a monopoly carriers’ and the social viewpoints conditional on airport cost recovery. It focuses on the trade-off between price and frequency (i.e., schedule delays) when time valuations are uniform, or differ, between business and leisure passengers. We identify an easy test for the evaluation of the mix of per-passenger and per-flight based airport charges by policy makers, which is simply to check whether the carrier’s preferred per-flight charge is zero. Our analysis suggests that there is no need for immediate regulatory corrections of the current trend towards the strong use of per-passenger based airport charges.     

Simulation-based assessment methodology to improve ground service operations at a hub airport

ABSTRACT

Airport terminals are dynamic environments and security/passport services generally constitute costly bottlenecks in terminals. Increases in the number of airline passengers compels airport terminals to provide more efficient services to its customers under space and resource limitations. This study examines the level of service of passenger processes at Istanbul Atatürk Airport by constructing a comprehensive simulation model. It focuses mainly on passport control services and passenger transfer security services because of the airport's hub status and the strategy of Turkish Airlines. The increasing number of transfer passengers may cause disruptions in departure flight schedules due to slow passenger processes. After validating the model, we investigate the consequences of three main alternative solutions, including 17 sub-scenarios, to capture target quality levels. Finally, we provide the results for each scenario to investigate the optimum allocation of resources to terminal operations.     

枢纽机场航线网络优化研究

枢纽机场航线网络优化主要解决由于航线网络结构与功能定位不匹配而导致的机场连通性低、航线网络同质化竞争严重、运行效率低下的问题。通过改进引力模型对城市对间的客流量进行预测,以此为预测的客流量为依据之一,以提高机场连通性为目的,构建航线网络优化模型,并进行求解。实现提高枢纽机场连通性、构建符合功能定位的层级网络的目标。并以位于我国中部,具有"连接南北,贯穿东西"地理优势的西安咸阳国际机场为例进行分析。由于国际航线受客观因素较多,本文主要研究国内客运航线,国际及货运不在本文研究之列。     

A literature review of flexible development of airport terminals

The Master Plan has long been the traditional go-to approach to airport development. It was originally conceived for a scenario of stable growth. In recent decades, however, the airport industry has undergone substantial structural changes, with the traditional Master Plan progressively revealing limitations with regard to airports coping with the market’s unpredictability. There have since been increased calls for flexibility in the approach as an alternative or as a complement to the traditional Master Plan. A flexible development plan helps to accommodate changes within terminals. This paper presents a review of the current literature on airport terminal flexibility, covering a total of 19 reference works. The works were analysed in terms of the concepts, definitions and deployment frameworks, or similar. The review reveals that research in airport terminal flexibility is still in its early stages. A consensual definition has yet to be defined and no robust framework for deploying flexibility has been defined. We propose a new definition of flexible development. Furthermore, flexibility has been studied essentially in the context of expansion. However, in certain regions where land availability is scarce, other forms of airport development may be more important. We conclude the paper with suggestions for future research areas.     

Automated guided vehicle system for two container yard layouts

The explosive growth in the freight volumes has put a lot of pressure on seaport authorities to find better ways of doing daily operations in order to improve the performance and to cope with avalanches of containers processing at container terminals. Advanced technologies, and in particular automated guided vehicle systems (AGVS), have been recently proposed as possible candidates for improving the terminal’s efficiency not only due to their abilities of significantly improving the performance but also to the repetitive nature of operations in container terminals. The deployment of AGVS may not be as effective as expected if the container terminal suffers from a poor layout. In this paper, simulation models are developed and used to demonstrate the impact of automation and terminal layout on terminal performance. In particular, two terminals with different but commonly used yard configurations are considered for automation using AGVS. A multi attribute decision making (MADM) method is used to assess the performance of the two terminals and determine the optimal number of deployed automated guided vehicles (AGVs) in each terminal. The simulation results demonstrate that substantial performance can be gained using AGVS. Furthermore, the yard layout has an effect on the number of AGVs used and on performance.