The Trinity Forum 2007 conference continued this afternoon in Dubai with Session 3, entitled Driving Revenues.

George Farah, Managing Director Worldwide, Philip Morris Worldwide Duty Free gave his presentation entitled Working together to boost airport duty free revenues – a Modest Proposal.

He began by saying that Philip Morris was happy to be part of the duty free industry. For them duty free is a multi-channel business, he said and PM is active in all of them – border stores, ferries, airlines, airports, ship supply, cruise ships, diplomatic and military.

He said their biggest trade channel is the border business accounting for 40% of sales, but as airports constitute a high percentage also, they have invested in extensive market research to determine attitudes of passengers. It will also assist them in running their business he said and that is why the research is focused on cigarettes, but is not cigarette-specific. It does cover those who don?t purchase and also those who buy other duty free products.

He highlighted two points which he said were not earth shattering: The cigarette buyer is a critically important consumer, not for us but for you [other categories] as well. To achieve real growth in duty free revenues, we must attract more consumers in to the shops, and convert them into buyers.

The research took place over a six-year period and covered 158,000 adult travellers in 52 different airports around the world, and covered both those that do and do not make duty free purchases. Sixty per cent went in duty free shops, 40% didn?t, said Farah. However they don?t all buy. In fact only 41% of that 60% figure bought something and 15% bought cigarettes.

He said that their research showed that cigarette buyers were shown to have a more positive attitude to visiting the shops, thought it was worthwhile shopping there and thought the prices were cheaper. Farah said cigarette buyers are the best informed of all travellers about the product they intend to buy. Buyers of other product categories do not have the same reference price in their head, he commented.

What was interesting about the research was that cigarette buyers were not only shown to spend an average of $41 on cigarettes, they also outspent non-smokers in every other purchasing category (e.g. media, alcohol, clothing, and perfume). More time to shop and making purchases easier to carry could assist in turning non-buyers into buyers.

Even if one tenth of one per cent was converted into purchasers and they were also cigarette buyers, over the next four years, additional revenue of $2.18bn would be made, and not all would be spent on tobacco. The majority would be spent on other categories, he said.

The cigarette buyer is our most loyal and satisfied customer who also spends more on other categories. There is a huge amount of money to be shared among all of us, creating the win-win-win we are all looking for, he concluded.

Moodie then joined Farah on stage for a brief question and answer session.

Farah said the category was here to stay and worldwide consumption of cigarettes is growing. He thinks the category is an integral part of the duty free offer and said Philip Morris will remain in the channel.

INDERJIT SINGH: Emerging Market of India

Inderjit Singh, Executive Director of Airports Authority of India followed with a presentation on the Emerging Market of India. His presentation looked primarily at the development of airline movements and airline and airport infrastructure and noted that airport development and commercial revenues are now incredibly intertwined.

He said that unlike other institutions, airports are global and should be seen in this larger perspective. He looked at the dynamics of air traffic growth, and said that a conservative estimate is that by 2015, 8bn passengers (22m per day) will be travelling.

He looked at the projected world fleet and said that airports cannot be looked at in isolation. Airports, airlines and aircraft manufactures have to work together. Within two years, 13 new low-cost airlines have been launched in India, said Singh. City airports are also moving from airport cities towards ?Aerotropolis?.

He said the consumer must be the focus of a composite business model, they are our bread and butter, he commented, and in this vein, airports need to be spacious, aesthetically pleasant and above all passenger-friendly.

Innovation is ?in?, text book solutions are ?out? said Singh and the optimum utilisation of existing infrastructure is important with ?green? construction and energy efficiency, anticipation of recognizable changes, integrations of security-related aspects into the design, and opening up a two-way dialogue with all the partners to create a win-win strategy.

He pointed to an unprecedented growth in Indian air passengers and air traffic. Domestic aircraft movements are up 34%, international up 14% and 25% of domestic traffic is now being handled by low-cost airlines.

Maximisation of non-aeronautical revenues is necessary for a number of reasons ? for example there are no landing/parking fees for aircraft up to 80-seat aircraft, he said.

Although his presentation may have thrown up more questions than answers, it is better to have the debate and no solution, than the solution without debate, he commented.

Sandrine Mettetal: Exploiting the airport advertising medium.

Exploiting the airport advertising medium was the next presentation, delivered by Sandrine Mettetal, Marketing & Business Development Director for JCDecaux.

She began by pointing out the fragmentation of the advertising medium, with people hit with more than 300 advertising messages per day.

The integration of advertising messages can be a challenge for airports, but due to increasing dwell-time, advertising for brands can bring them closer to their target audience, she said.

Adding entertainment and services to the mix, for example, is a good way to target consumers and the airport offers a unique indoor, secured, designed, high-tech environment, she said.

Temporary advertising solutions such as showrooms can be very impactful in an airport environment, as can advertising in different areas such as on the luggage belt itself, to capture passengers while they are waiting for their luggage.

Sponsorship of an entire car park, or on a bridge entering or leaving the airport are other options for brands to promote themselves.

Mixing print and LED technology to illuminate parts of the display is a good way to create impact, she said. New materials and technology also enable interesting displays to be made and digital media is the future for airport advertising.

She ran through some examples of new concepts and said that advertising should not be seen only as a revenue stream, but add to the ambience of the airport environment. Enjoy the airport, while brands interact with you, she concluded.

Session 4 saw delegates with a choice between two workshop sessions – Addressing the penetration dilemma and Capturing the traveller?s imagination.

Capturing the traveller?s imagination – diversifying the offer was introduced by Paul Hargreaves, Vice President of Global Foreign Exchange, American Express.

In a semi self-promotional presentation, he said that in our travels, we see the stresses faced by travellers today. There is scope for improvement, he noted. Airports provide a meaningful environment for American Express and he believes the outlook of the travel environment is good. Their research has shown them that luxury travellers are more resilient to downturns in the airport environment for whatever reason and return to travelling quicker after unfortunate events.

He concluded unsurprisingly by outlining the benefits of partnership with American Express for the airports and handed over to the panel for the continuation of the session.

Andrew Lynch, SSP began the workshop with a presentation entitled Five steps to the ideal food and beverage offer. He began by stating that if we can create the right environment in the right place with good service, customers will spend more. Non-aeronautical revenues are becoming more important and represent over 50% of the income of some airports, he said.

Food and beverage is not only important for revenue, but much more important for reputation, he noted. The impact of the airport experience is disproportionately affected by the quality of the food and beverage offer in that airport. If it is a good experience that is beneficial for the airport, but a cold cup of coffee and dirty tables will stay in the mind of the traveller and attach to the airport itself, said Lynch.

He briefly ran through SSP?s credentials to talk authoritatively about the subject, and four decades of experience and a presence in 125 airports around the world seemed good enough credentials in anyone?s book.

He said it was important to have a food and beverage operator that can offer a broad range of brands and concepts, has good people (great service and operational excellence), culinary expertise (it is after all about the food), be a specialist with knowledge of the airport environment, and financial strength – avail yourself of a partner who is financially stable and able to invest, he commented.

Sticking to the brief (sadly lacking during most conferences these days) Lynch ran through the five steps of obtaining the ideal food and beverage offer – understand the client (what does the airport need); understand the customer; understand the market (what is happening on the High Street); getting the mix right (local concepts and international brands); and delivering operational excellence (not always easy in a challenging airport environment).

A short video accompanied his presentation, giving the audience some examples of SSP?s operations in different locations. He stressed the need for maintaining standards with the use of mystery shoppers, feedback, etc.

He concluded by stressing the need for partnership – to ensure great customer satisfaction which is what everyone is after. He said it is possible to raise customer expectation and meet those expectations.

Marrying different airport revenue streams was the next presentation of the workshop by Jan Laufs, Commercial Director, Lima Airport Partners.He began an interesting presentation by looking at the stresses on the airport and the need for non-aeronautical revenues, and briefly went through some people/business related facts. He made certain points, including the fact that business travellers with the money hide in the lounges, even though lounges are generally boring.

He cited the smoking bar concept and VIP lounges at Lima Airport as ways the airport have brought innovation to previously boring airport spaces. The smoking bar is a branded area, providing financial support from the brand, and the placement of the bar will give footfall from smokers that have to walk to the bar – the only place you can now smoke in the airport. The added value of this project was $800,000.

In the same vein, he said conventional lounges are an inefficient use of space (at a premium at Lima Airport) and only the business and first class airline passengers can use them with no promotion of retail sales.

He said they looked at the lounge system differently and now have only third party operators with passengers entering at the invitation of the airline, tour operator, hotel or credit cards etc. Passengers can also buy their passage into the lounge.

This has allowed all services to be maintained and it is more profitable for the airport as retail units are present for hire in the lounge area. Every tenth sale for one supplier was triggered or finalised in the lounge, he said.

The VIP business lounge features a smoking terrace, food area, spa, electronic games area which has given savings in infrastructure, together with a 65% increase in sales in the area.

Future innovations could include cross promotions, such as a spa voucher pre-sold by the tour operator, he said. Keys to success, he said, include linking businesses, cross promotions, branding, entertainment and listening to the users. Live Trinity, he said.

Finalising the day, Dick Flink, Director of Business Unit Consumers, Schiphol Group gave his presentation entitled New and alternative commercial sectors. His presentation began with a short video to catch the listeners? attention so late in the day, showcasing the environment at Schiphol Airport, – the present and future of the AirportCity.

He outlined why he thought Schiphol had been successful, and pointed to increasing passenger growth. He said they were committed to the AirportCity concept – a dynamic hub integrating people and businesses, logistics etc.
More operating profit stemmed from non-aeronautical spending, he said. Getting the basics right is also important and Schiphol obtained 93% customer satisfaction along with a raft of awards which he displayed and are too numerous to mention here.

What is different about Schiphol he asked? They already have a museum (referring to Sung-Joo Kim?s presentation earlier in the day) and concepts such as casinos, high-speed trains and landside shopping, themed caf?s and a trendsetting seafood bar.

An airport city is more than retail he said and pointed to the World Trade Centre at Amsterdam Schiphol. So what for the future?

?A place of dedicated business? is how Flink described the future of the airport city concept – something more than an airport city. It needs to become a true destination in itself, focusing on new business development, he said.

Obviously they will continue with the progression of the current AirportCity said Flink and he shared some of the projects they hope to implement.

Dreamport – a 10,000sq m aviation themed entertainment park; yotel ? the world?s smallest hotel room concept; digital download stations; and an aviation shop plaza – a shop built like an airplane; and a golf course, to name a few.He also stressed the importance of the hotel business to the airport and transfer city, with integrated transport systems. The benefits of having your office at the airport is being seen by many also, he noted.

A question and answer session with the panel followed, covering issues such as a sense of place and the lack of good food and beverage at some airports.

COMMENT: The first day offered a lot, and it delivered with delegates remaining through the majority of presentations. The moderation was good and presentations were interesting and largely adhered to the time allocated.
However, some subjects are of such importance that perhaps more time should have been allocated at the expense of others.

It was good to have some upbeat presentations, although The Business felt that some of the ?sticky? issues were avoided, especially where tobacco is concerned.

A few comments were made through the day about the absence of the airlines. This was an incredibly valid point, especially if they are the string that ties everything together as Riches pointed out. Many said that more effort must be made to bring them into the fold.

The airlines were not the only ones missing though. If this is a true airport commercial conference, all of the stakeholders need to be in attendance, and that means those that operate car parks, manufacture luggage carts, car hire rental operators and the plethora of technical service providers that enable airlines to take off and land at the world?s airports.

The conference was very airport based, which it should be, but there is a distinct lack of participation by the rest of the travel retail and duty free industry. Should the trinity concept not apply to cruise lines, ferries and border stores, if in a slightly different fashion?

For this to be an annual event as has now been announced, then it will add yet another conference to an already crowded calendar. The subject matter will also have to be bang on target to maintain the interest of the industry in the long term.

ENDS