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.     

Effects of passenger characteristics and terminal layout on airport retail revenue: an agent-based simulation approach

This paper examines the effect of passenger characteristics and terminal layout on airport retail revenue using an agent-based simulation approach. Simulation results show that passenger mix (that is, the mix of shopper types according to a typology of airport shoppers) has a profound effect on airport retail revenue; the larger the number of ‘shopping lovers’ there are among passengers, the higher the airport retail revenue. Results also reveal that group travel can lead to negative effects on retail in certain terminal layouts, and that the amount of free dwell time that a passenger has can affect spending due to less retail engagement. This paper shows a combined effect of passenger characteristics and terminal layout on airport retail revenue, and discusses the implications of these results for future airport terminal design that aims to maximise retail potential.     

Knowledge based decision support in airport terminal design

The state of the art in airport terminal design has essentially remained unchanged since the 1970s, relying on the use of detailed simulation together with empirical and statistical formulae for sizing the terminal. Air transport has altered considerably since then, with increased use of air travel for both business and leisure, together with the increased use of ‘hub’ terminals in which the terminal acts as an interchange stop on a journey involving several flights. The use of simulation involves a detailed analysis of the terminal design under one set of conditions. To change the design or operating conditions involves a complete resimulation using the new design parameters which is time consuming and computationally expensive.

By using a knowledge based approach, a system can be provided which has the flexibility and speed required to explore the consequences of implementing design decisions in a variety of conditions, together with the ability to use and alter facility sizing methodologies to reflect current and future design guidelines.     

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.     

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.     

Entropy-based estimation of transfers in a terminal

An intermodal transportation terminal is a facility that provides commuters with easy transfer between transit modes and providers such as buses, light rail, subway, taxis, airport shuttles, and commuter rail. The probability of a passenger transferring from one mode to another and the estimation of total transfer demand are of great importance to both practitioners and researchers when determining optimal design alternatives as well as the best control and management policies for daily operation of the terminal. This article presents a study that uses an entropy-based optimization approach to estimate the transfer demands between the available transportation modes in an intermodal transportation terminal. The development and calibration of the entropy model is presented in the first part of the article, which is followed by a case study of the SiHui Intermodal Terminal in Beijing, China.     

Research review of air traffic management

As air transport demand keeps growing more quickly than system capacity, efficient and effective management of system capacity becomes essential to the operation of the future global air traffic system. Although research in the past two decades has made significant progress in relevant research fields, e.g. air traffic flow management and airport capacity modelling, research loopholes in air traffic management still exist and links between different research areas are required to enhance the system performance of air traffic management. Hence, the objective of this paper is to review systematically current research in the literature about the issue of air traffic management to prioritize productive research areas. Papers about air traffic management are discussed and categorized into two levels: system and airport. The system level of air transport research includes two main topics: air traffic flow management and airspace research. On the airport level, research topics are: airport capacity, airport facility utilization, aircraft operations in the airport terminal manoeuvring area as well as aircraft ground operations research. Potential research interests to focus on in the future are the integration between airspace capacity and airport capacity, the establishment of airport information systems to use airport capacity better, and the improvement in flight schedule planning to improve the reliability of schedule implementation.     

Comparative performance analysis of European airports by means of extended data envelopment analysis

Data envelopment analysis (DEA) has become an established approach for analyzing and comparing efficiency results of corporate organizations or economic agents. It has also found wide application in comparative studies on airport efficiency. The standard DEA approach to comparative airport efficiency analysis has two feeble elements, viz. a methodological weakness and a substantive weakness. The methodological weakness originates from the choice of uniform efficiency improvement assessment, whereas the substantive weakness in airport efficiency analysis concerns the insufficient attention for short‐term and long‐term adjustment possibilities in the production inputs determining airport efficiency. The present paper aims to address both flaws by doing the following: (i) designing a data‐instigated distance friction minimization (DFM) model as a generalization of the standard Banker–Charnes–Cooper model with a view to the development of a more appropriate efficiency improvement projection model in the Banker–Charnes–Cooper version of DEA and (ii) including as factor inputs also lumpy or rigid factors that are characterized by short‐term indivisibility or inertia (and hence not suitable for short‐run flexible adjustment in new efficiency stages), as is the case for runways of airports. This so‐called fixed factor case will be included in the DFM submodel of the DEA. This extended DEA—with a DFM and a fixed factor component—will be applied to a comparative performance analysis of several major airports in Europe. Finally, our comparative study on airport efficiency analysis will be extended by incorporating also the added value of the presence of shopping facilities at airports for their relative economic performance. Copyright © 2012 John Wiley & Sons, Ltd.     

An online speed profile generation approach for efficient airport ground movement

The precise guidance and control of taxiing aircraft based on four-dimensional trajectories (4DTs) has been recognised as a promising means to ensure safe and efficient airport ground movement in the context of ever growing air traffic demand. In this paper, a systematic approach for online speed profile generation is proposed. The aim is to generate fuel-efficient speed profiles respecting the timing constraints imposed by routing and scheduling, which ensures conflict-free movement of aircraft in the planning stage. The problem is first formulated as a nonlinear optimisation model, which uses a more flexible edge-based speed profile definition. A decomposed solution approach (following the framework of matheuristic) is then proposed to generate feasible speed profiles in real time. The decomposed solution approach reduces the nonlinear optimisation model into three tractable constituent problems. The control point arrival time allocation problem is solved using linear programming. The control point speed allocation problem is solved using particle swarm optimisation. And the complete speed profile between control points is determined using enumeration. Finally, improved speed profiles are generated through further optimisation upon the feasible speed profiles. The effectiveness and advantages of the proposed approach are validated using datasets of real-world airports.     

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.     

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.     

On the relationship between airport pricing models

Airport pricing papers can be divided into two approaches. In the traditional approach the demand for airport services depends on airport charges and on congestion costs of both passengers and airlines; the airline market is not formally modeled. In the vertical-structure approach instead, airports provide an input for an airline oligopoly and it is the equilibrium of this downstream market which determines the airports’ demand. We prove, analytically, that the traditional approach to airport pricing is valid if air carriers have no market power, i.e. airlines are atomistic or they behave as price takers (perfect competition) and have constant marginal operational costs. When carriers have market power, this approach may result in a surplus measure that falls short of giving a true measure of social surplus. Furthermore, its use prescribes a traffic level that is, for given capacity, smaller than the socially optimal level. When carriers have market power and consequently both airports and airlines behave strategically, a vertical-structure approach appears a more reasonable approach to airport pricing issues.     

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.     

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’.     

Airport taxi planning: Lagrangian decomposition

The airport taxi planning (TP) module is a decision tool intended to guide airport surface management operations. TP is defined by a flow network optimization model that represents flight ground movements and improves aircraft taxiing routes and schedules during periods of aircraft congestion. TP is not intended to operate as a stand‐alone tool for airport operations management: on the contrary, it must be used in conjunction with existing departing and arriving traffic tools and overseen by the taxi planner of the airport, also known as the aircraft ground controller. TP must be flexible in order to accommodate changing inputs while maintaining consistent routes and schedules already delivered from past executions. Within this dynamic environment, the execution time of TP may not exceed a few minutes. Classic methods for solving binary multi‐commodity flow networks with side constraints are not efficient enough; therefore, a Lagrangian decomposition methodology has been adapted to solve it. We demonstrate TP Lagrangian decomposition using actual data from the Madrid‐Barajas Airport. Copyright © 2011 John Wiley & Sons, Ltd.     

A simulation framework for evaluating airport gate assignments

There are many factors that affect gate assignments in an airport's operations. These factors include static gate assignments, stochastic flight delays and real-time gate assignments. Most research on gate assignments in the past has laid stress on improving the performance of static gate assignments. None has analyzed the interrelationship between static gate assignments and real-time gate assignments as affected by the stochastic flight delays that occur in real operations. In addition, none has designed flexible buffer times for static gate assignments to effectively absorb stochastic delays in real-time gate assignments. This research proposes a simulation framework, that is not only able to analyze the effects of stochastic flight delays on static gate assignments, but can also evaluate flexible buffer times and real-time gate assignment rules. Finally, a simulation based on Chiang Kai-Shek airport operations is performed to evaluate the simulation framework.     

Level of service design concept for airport passenger terminals—a European view

Drawing from the experiences of highway and pedestrian planning, the author suggests a method of improving the method of designing airport terminals. The improved technique would use the concept of level of service to indicate the interaction of time with space provision.     

A scenario approach to airport evaluation in remote communities: with particular reference to the Pilbara region of Australia

Coordinated development of aviation facilities and services is critical for geographically remote communities. Improvements in aviation capability can be assisted by an analytical base for determining the implications of alternative configurations of air services in terms of links to be served, airport/aerodrome investment, type of flight equipment and flight frequency. We outline a method for identifying airport supply configurations to meet air service demand to and from the Pilbara region of north-west Australia. The approach emphasises minimum levels of demand required from a community in order to justify provision of air services of a given scenario. The method is influenced by the paucity of data on demand in remote communities, and the consequent risk of relying solely on demand-side forecasts of patronage levels. It is therefore particularly useful in assessing transport systems associated with remote resource development projects which are notable for the rapidity of change which they can bring. The approach has relevance to a wide range of transport applications.     

Modeling capacity flexibility of transportation networks

Flexibility of the transportation system is one of the important performance measures needed to deal with demand changes. In this paper, we provide a quantitative assessment of capacity flexibility for the passenger transportation network using bi-level network capacity models. Two approaches for assessing the value of capacity flexibility are proposed. One approach is based on the concept of reserve capacity, which reflects the flexibility with respect to changes in terms of demand volume only. The second approach allows for variations in the demand pattern in addition to changes in demand volume in order to more fully capture demand changes. Two models are developed in the second approach to consider two types of capacity flexibility. The total capacity flexibility allows all users to have both route choice and destination choice when estimating capacity flexibility. The limited capacity flexibility estimates how much more demand volume could be added to a fixed demand pattern by allowing the additional demand to deviate from the fixed demand pattern. Numerical examples are provided to demonstrate the different concepts of capacity flexibility for a passenger transportation system under demand changes.     

Airport congestion pricing and terminal investment: Effects of terminal congestion,passenger types,and concessions

None of the airport-pricing studies have differentiated the congestion incurred in the terminals from the congestion incurred on the runways. This paper models and connects the two kinds of congestion in one joint model. This is done by adopting a deterministic bottleneck model for the terminal to describe passengers’ behavior, and a simpler static congestion model for the runway. We find that different from the results obtained in the literature, uniform airfare does not yield the first-best outcome when terminal congestion is explicitly taken into account. In particular, business passengers are at first-best charged a higher fare than leisure passengers if and only if their relative schedule-delay cost is higher. We further identify circumstances under which passengers are, given a uniform airport charge scheme, under- or over-charged with respect to the terminal charge. Furthermore, when concession surplus is added to the analysis, the airport may raise (rather than reduce) the airport charge in order to induce more business passengers who in turn will lengthen leisure passengers’ dwell time and hence increase their chance of purchasing concession goods. Finally, the impacts of terminal capacity expansion and time-varying terminal fine toll are discussed.