CRM & MARKETING CRM in the airport business Whitepaper www.crm4travel.com
Comarch Airport Suite IT that innovates airport economics Modern airports are no longer sole infrastructure providers but also suppliers of multiple services to airport visitors of various types. This trend induces change to airports IT strategy. Comarch has designed and developed IT products that handle CRM initiatives, manage digital document flow as well as improve the digital infrastructure of airports. Visit crm4travel.com and learn more.
Introduction Airport business is changing. Since the early childhood of aviation, airports have been sole brokers between air carriers and airline clients. For entire decades the main tasks handled by airports involved passenger and baggage handling, passport and security control and smooth flow of aircraft. Although, smartly managing the mentioned processes is still crucial to an airport s success, the 21 st century has higher demands. Today s airports are entire city districts which offer a range of products and services for purchase, both for airline clients and those who have nothing in common with the travel process. In addition, the emergence of regional airports and the consolidation of airline groups have resulted in the competition between airports in the battle for air carriers. The more airlines took upon themselves to handle, the bigger the earned revenues. Relatively low fares offered by no-frills companies attract new segments of clients to air transport. These clients are ready to travel a couple of hundred of kilometres using ground transport to get to a cheap flight which would later transport them another couple thousand. And this is the business in which airports are battling in. In this competitive battle between airports, CRM initiatives can be employed to deliver new channels of communication with airline passengers as well as gather valuable data about them. Copyright 2012 Comarch S.A. All Rights Reserved No part of this document may be reproduced in any form without written consent of Comarch. Comarch reserves the right to revise this document and to make changes in the content from time to time without notice. Comarch may make improvements and/or changes to the product(s) and/or programs described in this document any time. The trademarks and service marks of Comarch are the exclusive property of Comarch, and may not be used without permission. All other marks are the property of their respective owners. 3
SMALL AIRPORTS CONTRIBUTE TO LARGE ECONOMIC IMPACT According to researchers, a doubling of passenger numbers in a regional airport produces up to a 4% increase in per capita income in the area. Local airport is a gateway to the global economy, enables flows of tourists and investment to geographically remote regions. 4
Airport business Intercontinental hubs The origin of today s intercontinental hubs dates back to times when air transport markets where fully regulated. Before 1978 there were mainly airports of national importance, located near agglomerations of international importance. Some of them definitely in minority were formerly military airports and rarely handled limited commercial traffic. As deregulation and liberalization processes where launched on a mass scale the hub&spoke operating model of air carriers, hubs followed the change and adopted their infrastructure in order to ease the flow of transfer traffic. Today, these intercontinental hubs handle millions of passengers traveling by plane to thousands of destinations each year. World s biggest airports in 2010 Rank City (airport) Total passengers % change 1. Atlanta ATL 89 331 622 1,5 2. Beijing PEK 73 948 113 13,1 3. Chicago ORD 66 774 738 4,1 4. London LHR 65 884 143 (0,2) 5. Tokyo, HND 64 211 074 3,7 6. Los Angeles LAX 59 070 127 4,5% 7. Paris CDG 58 167 062 0,5% 8. Dallas/Fort Worth DFW 56 906 610 1,6% 9. Frankfurt FRA 53 009 221 4,1% 10. Denver DEN 52 209 377 4,1% Source: Airports Council International. Airports participating in the ACI annual traffic statistics collection. Total Passengers: total passengers enplaned and deplaned, passengers in transit counted once. What has not changed throughout the decades is the fact that these airports handle mainly legacy carriers, however, in the US a substantial part of aircraft movements belongs to no-frills airlines. In times of fully regulated markets, traditional carriers serviced purely hi-yield traffic, mainly ones of business motivation. Price tickets were relatively high and access to service was limited. Today, air carriers operating in a liberalized or in partially liberalized environment attract clients of different types: those travelling for business and those in search of leisure; hi-yield and low-yield; those who demand full service on board of planes and those who would bring their own food. Intercontinental hubs have also been following the change in the structure of passengers in order to offer services demanded by every group of passengers. Apart from luxurious departure lounges dedicated to 1 st and business-class travellers, modern airports have plenty of fast food courts which offer cheap meals where everybody can find a product for themselves. Attracting low-yield traffic, a decrease in average yields observed in airline account sheets and boosted competition between airlines resulting from a liberalized regulatory environment have put pressure on airports to keep landing charges moderate. Eventually, ports were urged to seek new sources of revenue. Today, every airport handling +20M pax/ year has a set of commercial buildings offices, conference spaces, shopping malls constructed to mitigate the risk. 5
More on the Airport City can be found in the last part of this chapter. What is new to this business is the competition between hub&spoke ports in regions. For example, an European citizen wishing to visit Australia is offered plenty of connections, most of which are based on transfer ports in Singapore or Hong Kong. A new threat in well-established Asian ports is the airport in Dubai. The operational necessity for ultra-longhaul journey transfers has resulted in competition between airports fighting for traffic transfer. The rivalry is tough as it applies not only to a single airline, but in most cases covers the whole group of airlines belonging to one alliance. The winner takes it all. The looser is in trouble. The emergence of regional airports Airlines of new business models have contributed to the rapid development of secondary and regional airports. Low-cost carriers usually link the airport where they have their base with a regional port. Another model, less popular, is to link two satellite regional ports. This is a result of lower airport fees quoted in regions, and lower congestion securing more punctual operations than those at hubs which handle hundreds of movements a day. Regional airports woo low-cost operators to start operating from their port. Apart from natural benefits in revenue, there are also substantial advantages transferrable to regions. These come from access to air transport, especially ones emerging from direct linking to a hub airport. The catalytic effect of air transport availability means more investments in the region, lower unemployment rate and a higher life quality level of local citizens. Touristic sites pay special attention to win links from low-cost carriers who bring tourists attracted to lower tariffs. Such passengers would not have travelled at all if they had not been offered a great deal in the end. In some parts of the globe competition between airports in winning airlines is rather fierce. The European Union, for example, allows to use some types of subsidies granted by airports or regional authorities to airlines. Although airline clients are the winners, those airports who have lost the battle for a base are back-seated on the market for years. Last but not least, some regional airports possess perfect prerequisites to construct an Airport City. Although such a venture would be appropriately smaller than in the case of established hub ports, it can be a source of additional nonaeronautical revenue that every airport on the globe is so curious about. 6
An airport City concept Modern airports are becoming even better integrated with city centers. Public transportation creates a common bloodstream, the pace of port development follows the pace of a city. Airports wake up with a fresh supply of morning press and fall asleep when thousands of street lamps turned on. A catalyst for accelerating the integration of airports with city centers is the construction of retail and service facilities on parcels adjacent to airport terminals. The main reason for their formation is the need to diversify a port s revenues through the development of commercial space, which include hotels, offices, conference and exhibition facilities, shopping malls, water parks, cinema complexes, golf courses and in some cases even racetracks. This strategy is derived from the privatization and commercialization trend among airports around the world, which in turn force port managers to meet business targets in the management of entrusted assets. Another reason for the construction of an Airport City is the pressure put on airport charges by airlines, which statistics confirm an increase in non-aeronautical revenues has been on the rise for several years. Some airports like Gatwick and Stansted in London acquire a majority of its revenue from their non-aeronautical activity. The final shape of an airport city depends on many factors. The first is the market positioning of a port and the type of the offered connections. There is also a different approach to intercontinental hubs, another to airports of national importance and a third in terms of regional ports, which serve mainly low-cost and charter carriers. The second factor is the distance from the city center to an airport, as well as means of available transportation that provide the connection. The third factor is a niche observed on the local real estate market. Analysis of the combination of these three factors can result in a basic segmentation of Airport City clients: those related to air transport, and those who have nothing in common with the travel process. Building shopping malls is correct in the case of larger hubs which serve millions of passengers waiting several hours for flight transfer. But creating a shopping center would also be a good decision in cases of a regional airport, located near the center in a region which suffers from a shortage of retail space. Another factor that should be analyzed in Airport City construction concerns airport visitor profiles created from the data gathered from airport loyalty programs, supplying land around an airport, noise constraints imposed by law, models of cooperation between a port and developers of commercial space and the method of investment financing. Many factors must be taken into account in the design of an optimal Airport City, that is why It is so rare to meet two similar projects, both in terms of qualitative and quantitative measures. The Airport City concept is beneficial for both a port and a neighboring city. The most popular investments cover offices and conference spaces, which are open at business hours. Business districts on the outskirts of a metropolis allow to create cafes, restaurants, arts and cultural institutions in city centers areas that are open in the evenings. Thanks to this, these centers remain viable until late hours and there are no dead areas after business hours. 7
Airport CRM initiatives In terms of intercontinental hubs, segmentation of passengers should involve more criteria than in the case of regional airports. Basic segmentation of hub passengers can be carried out according to motivation to travel, home address, frequency of travel, short vs. long-haul flights, etc. Businessmen travelling 1 st class a number of times a year on intercontinental routes would rather be interested in new parking opportunities or new airport facilities dedicated for hi-yield passengers like departure lounges. On the other hand, a couple of senior citizens travelling a budget airline once a year would be rather interested in food courts (in order not to pay extra fees for food bought on-board of airplanes) and special deals offered by Airport City shops Passengers changing planes in the ports of hubs also have different information needs. Proper segmentation and dedicated marketing communication is a must. In terms of regional airports, informative requirements of airport visitors are also different. Students would like to know what new connections offered by low-cost carriers will be available in the new season. Enthusiasts of winter sports might be interested in new seasonal links to the most popular mountain tourism destinations. Businessmen would be glad to receive a message on the changes in the schedule of traditional carriers to hubs. Again, it is necessary to employ advanced IT technology. Airport loyalty programs Targeted marketing communication The growing competition between airports in the fight for airlines and also overlapping catchment areas have resulted in a need for optimum communication with passengers. Changes in offered connections, new services available within Airport City businesses, new land infrastructure easing access to a port all of this has to be communicated in a proper manner. Precision matters as every passenger wouldn t like to bother with every form of communication. Segmentation is required and powerful IT systems have to be employed. Loyalty programs launched by airports allow to gather valuable data that would otherwise not be available to airport managers. The gathered information can be later cleaned, analysed and used in reports presented to airlines and Airport City tenements. Knowledge acquired this way can lead to an increase in the volumes of goods and services sold by Airport City businesses, thus improving revenues. Which goods are purchased together, what is the average shopping value of airport visitors, who are they all this remains available right now. Focusing on program economics, airport loyalty programs are all about shopping. Program members accrue points for purchased goods and used services offered by Airport City businesses, as well as are able to take advantage of special services offered by an airport. Points are gathered on individual accounts and can be redeemed for awards. The 8
basket of awards is quite unique in each airport, however, among the most popular gifts are various types of discounts: for shopping; for airport parking or ground transportation to a city center; vouchers for free special services offered by a port like a fast security line. In some cases awards can be in the form of actual gifts, FFP miles or even free plane tickets. The business rules of an airport loyalty program should each time be prepared on the basis of detailed analysis of the managed traffic regarded in both quantitative and qualitative measures and the size of an Airport City. As mentioned in the chapter before, there are hardly two exactly the same Airport Cities in the world. The same applies to the business rules of airport loyalty programs. Mobile applications Mobile applications that are being massively launched by airport authorities differ in size and in the functional area while compared to microsystems used by airlines. In this case passengers are given real-time information on all processes related to checking-in and boarding. Messages can be displayed automatically on a screen of a mobile device, distributed by SMS or e-mails. Another interesting feature of apps for airports are the localization and navigation services. In this case an airport visitor is guided en route to an airport on highway, assisted in dropping his car off at an airport parking and even further navigated indoor of the terminals. The latter mode allows not only the quickly search for a way between any point A and B, but also to view live offers of shops passed along the way. A gadget? Definitely. As well as a fantastic promotional gimmick. Such systems can also deliver plenty of entertainment on demand. Films, music, videos, games and 3D animations all that content is limited only by price, production and speed of Internet access. Airport visitors can also manage their membership in an airport loyalty program via their mobile devices. The scope of the functionality is the same as the one offered by an official program website. In addition, mobile applications can be a source of additional revenues by offering space for commercial advertisements. Most advertisement partners are business located in the Airport City. Multimedia city guides can promote partnering restaurants or department stores. Augmented reality can also be employed. This feature shows product and services discounts offered by airport city shops after focusing a mobile device camera on a shop. Thinking of all those dozens of bored passengers waiting endless hours for a delayed or transferred flight? Invest in a mobile app, deliver fun to them, collect advertisement fees and gather valuable data. All in one go. 9
Comarch Airport Suite IT that innovates airport economics Marketing strategy and IT infrastructure of modern airports have to follow the massive development of airports all over the world. Communication with airport visitors, smooth data transmission between different departments, IT networks security all of that has to be managed in a proper way. Empower the intangible assets of your airport to yield tangible results. Visit crm4travel.com and learn more. 10
Worldwide offices Offices in Poland Albania Austria Belgium Canada China Finland France Luxembourg Germany Netherlands Panama Krakow Headqurter Bielsko-Biała Gdańsk Katowice Lublin Łódź Poznań Warszawa Wrocław Russia Slovakia Switzerland Ukraine United States of America Vietnam United Arab Emirates www.crm4travel.com Comarch is a leading Central European IT business solutions provider specializing in forging business relationships that maximize customer profitability while optimizing business and operational processes. Comarch s primary advantage lies in the vast domain of knowledge accumulated in and applied to our software products. These products incorporate highly sophisticated IT solutions for businesses in all vertical sectors. Comarch has a multinational network of offices employing over 3500 highly-experienced IT specialists in Europe, the Middle East and the Americas. Comarch Społka Akcyjna with its registered seat in Krakow at Aleja Jana Pawła II 39A, entered in the National Court Register kept by the District Court for Krakow-Środmieście in Krakow, the 11th Commercial Division of the National Court Register under no. KRS 000057567. The share capital amounts to 8.051.637,00 PLN. The share capital was fully paid. NIP 677-00-65-406 Copyright Comarch 2012. All Rights Reserved. No part of this document may be reproduced in any form without the prior written consent of Comarch. Comarch reserves the right to revise this document and to make changes in the content from time to time without notice. Comarch may make improvements and/or changes to the product(s) and/or programs described in this document any time. The trademarks and service marks of Comarch are the exclusive property of Comarch, and may not be used without permission. All other marks are the property of their respective owners. EN-2012.02