The ACI Europe Airport Commercial & Retail Conference in Tel Aviv brought together senior airport commercial executives, operators and brands, as well as their business partners from retail, food and beverage, travel services, media and other enterprises from around the world, with the focus on delivering non-aeronautical revenue success at airports. Here are Mark Lane’s updates from the conference floor.
Thursday 15 March
1pm: As the ACI Europe conference in Tel Aviv comes to a close, it just leaves me to say thank you for following our coverage of an event which provided some truly fascinating insight into the challenges facing the airport and travel-retail communities. The Israel Airports Authority was a wonderful host, and those of us departing Tel Aviv leave with a great impression of the city, and the country.
12:30pm: In the closing presentation, Hlynur Sigursson, commercial director of Isavia, the Icelandic airport operator, outlined tender opportunities at Keflavík International Airport‘s new North Terminal and how its retail environment is coping with a rapid growth in traffic.
Keflavik has been described as “the next important new airport hub in Europe”, with its traffic growing by 80% in the last three years and its passenger numbers are predicted to break through the 10 million barrier in 2018.
Sigursson and his Isavia colleagues will be staging the ACI Europe Airport Commercial and Retail Conference in Keflavík next year, and he assured delegates in Tel Aviv of a warm welcome, great hospitality and an event to match the excellent one seen here.
11am: The fifth, and final, working session of the conference was titled The Star Chamber and considered “new centres of commercial excellence, new markets, new ideas and new ways of making money”.
Moderator Robbie Gill, founder and managing director of The Design Solution, was joined by Aeroporti di Roma head of commercial services Giorgio Moroni, Grab commercial director Avi Robinson, Lagardère Travel Retail Marketing and Digital Duty Free global EVP Stéphanie Metz-Thevenod and Eurotrade managing director Sven Zahn.
Moroni presented on Rome Fiumicino airport’s €390m ($479m) Pier E, which opened last year with the claim of “setting a new retail benchmark”, featuring a wide variety of fashion/luxury stores and a food and beverage offering that is “definitively Italian”. He described some of the initiatives which have led to some outstanding top line figures, such as spend per passenger increasing by 24%, retail visibility up 90% and retail browsing up 80%.
Grab’s Robinson gave some revealing insight into the concept of “digitalised dining”, highlighting his company’s partnership with Heathrow to provide a new service allowing travellers to order takeaway food and drink in advance via an app. He revealed that the app will be rolled out to other UK airports soon, with launches set for Gatwick and Stansted “in the next few months”.
Metz-Thevenod reviewed some of Lagardère’s recent initiatives to boost trade, such as the recent promotion at London Luton airport with Estée Lauder brand Clinique, a gifting initiative which celebrated International Women’s Day on 8 March.
The session concluded with an engaging presentation from Zahn, who explained Eurotrade’s work on retail concepts at Munich airport, which reflect the best of Bavaria and Munich.
9am: The fourth working session of the conference featured presentations and discussions about the future of airport car parking, a key revenue stream of the airports, which is under threat from less car usage. Stanley Robotics co-founder and COO Stéphane Evanno, Chauntry CEO Theresa Hughes, APCOA Parking director of airport services Paul Connolly and Ideas director Guy Barnes joined the panel.
Evanno said there is a “strong relationship” between being relaxed and spending, and this could be achieved by car parking schemes which free up more time in the airport prior to departure, such as his company’s plans to develop a robotic valet parking service.
Hughes said parking schemes are a missed opportunity for airports looking to help retailers, and she claimed that engaged customers are five times more likely to buy and, if highly engaged, likely to spend up to 60 times more.
Connolly, whose company manages more then 1.3 million parking spaces, offered his thoughts on issues such as the potential redevelopment of airport car parks and agreed that people who can park easily and get into the terminal quickly will be relaxed and more likely to “grab a quick coffee or have a meal”.
Describing parking as “the rising star of airport commercial activity”, Barnes highlighted that 22% of airports’ non-aeronautical revenues come from car parking, and as such should be treated as a primary opportunity to drive performance.
Wednesday 14 March
8pm: Delegates were treated to a fabulous evening at the Tel Aviv venue, Hangar 11, with many international food options on offer at a variety of street-style food stalls, and plenty of wine and beer to wash it down with!
2:15pm: The final working session of the day featured five innovation masterclasses.
First up was Autogrill chief marketing officer Ezio Balarini. He focused on the importance of mobile in food ordering and in store digital touch points. He said: “These touch points increase efficiency and sales in QSR restaurants, lifting our average ticket by double digits in all our regions.” Belarini gave details of a recent successful partnership between Deliveroo and Schiphol airport for food delivery at the gate. He went on to describe dynamics that will affect the industry such as the use of facial recognition, robot technology and mobile shops; he said that those mobile shops could be potentially solar-powered, self-driving, drone-equipped and always open.
Oslo Airport commercial director Maiken Skirstad Mo highlighted work to expand T2 at the airport last year. She reported improved concession rates and said that some brands have become the best performers in their categories for the whole of Norway. However, growth in duty-free in Norway is limited as passenger growth in the country is coming through international passengers. “Norwegians are the best duty-free customers in the world but our new passengers are foreigners and they spend 50% less than Norwegians,” she explained.
JTI Tobacco corporate affairs and communications manager Mariana Stangl Pinheiro gave an optimistic address about the continued survival of the tobacco category in duty-free. She believes it still has a strong future in airport retail, pointing out a higher-than-average per basket spend by tobacco shoppers. This had benefits for other category sales with 35% of tobacco purchasers also buying alcohol, 22% beauty and 23% confectionery.
FLIO CMO Roman Bach spoke about opportunities in the digital marketplace. FLIO has 250,000 monthly active users, making it the most-used airport app worldwide, he said. He added: “Our revenue per passenger is ahead of industry standards and we see this continuing. We are seeing huge growth in services, from parking to lounges. It’s all about delivering convenience.”
The final masterclass was delivered by Coindrum founder Lukas Decker, who had the idea of converting unused coins into coupons to be redeemed in duty-free shops. He explained: “People have coins in their pockets that they take home and don’t use again. At our partner airports you can drop in your unused coins and receive a paper voucher, but with a +10% premium. That customer now has a further incentive to buy in duty free.”
1.15pm: The second working session tackled the question “Are showrooms for brands rather than shops?”, with perspectives from brands, retailers, airports and technology companies. A high profile panel was led by Mondelez World Travel Retail head of category planning Ivo Knuesel. He was joined by Tax Free World Association (TFWA) president Erik Juul-Mortensen, Dufry global commercial director Nigel Keal, Heathrow Airport retail and service proposition director Chris Annetts and AOE CEO Kian Gould.
Juul-Mortensen took to the stage first to speak on behalf of the brands. He doesn’t agree that brands are using airports unfairly. He said: “We value the space and we pay a price for it. It is for good reason that the current business model is under scrutiny. A better balance of risk and reward is needed. If that does not happen, it’s not impossible that we could see brands redeploy their resources in other areas of the business.”
Keal gave a retailer’s view on the question. He said: “Brands are tough. Their market has powerful consolidation, many are also retailers and many are luxury brands, not consumables. Travel retail is just one facet of their business. Retailers need to balance the demands of brands and airports.Once we had a business based on price, a captive audience and limited competition. Those things no longer apply in the way they once did.”
Annetts was next up with an airport view. He said: “We recognise that the world is changing. Digital disruption is everywhere; Amazon in particular is changing the game. That’s a difficult model to overcome.” He added that he wants Heathrow to be an “experiential airport” and said that the airport has invested heavily in digital capability.
Gould offered some fascinating perspective from a technology company’s point of view. “In the past airports were only making sales during the journey, not before or after, and here technology can play a part so are we doing enough to drive a brand experience pre-travel? Very few airports do this well. They are relying on impulse rather than pre-branding, which is more relevant.”
Gould highlighted his points with some great examples of the power of digital. One such example was Frankfurt airport’s e-commerce platform, which sold five luxury Leica cameras online in February, more than were sold in store in the same month.
11.00am: The first working session was moderated by Israel Airports Authority (IAA)’s Yoram Shapira, and focused on commercial activities and development at Tel Aviv Ben Gurion airport. He was joined in the discussion by Samuel Zakay (IAA), Garry Stock (JR/Duty Free), Jonathan Robinson (SSP Group) and Gabi Refaeli (IAA).
Shapira charted the decline of the shopping mall and the rise of e-commerce in his presentation, and said that today’s main airport retail challenge “is to combine the digital and the physical”. He went on to look at the changing consumer base in Israel’s airports, observing that there are more frequent flyers, more children, and fewer passengers spending in retail. On a positive note, he said that the F&B category was a huge growth opportunity at airports; there was 15% growth in F&B at Ben Gurion airport in 2017. VIP services, he said, also have great potential for growth.
Ben Gurion International Airport managing director Samuel Zakay reported on the overall growth at the airport, which has seen a steep rise from 8.7 million passengers in 2006 to over 20 million in 2017. He then described some of the main recent developments at Ben Gurion, including the reopening of T1, which is now dedicated to low-cost airlines, a new fourth concourse, an upgrade of runways and taxiways and a new air traffic control centre.
JR/Duty Free chairman Garry Stock looked at the issues facing duty free in Israel, including the elimination of purchase taxes on perfumes, changes to liquor tax rates, reduced allowances on cigarettes and major price competition, highlighting a challenge from three drug store chains on fragrances in Israel. He emphasised the importance of partnership, sharing details of the success of his company’s partnership with Gebr Heinemann at Ben Gurion. He said that airports “must stand up and say they are prepared to adapt” and “think out of the box strategically and tactically”. They need to be quicker on their feet, he claimed, adding that “operators must respond”.
SSP group business development director Jonathan Robinson presented on the vital role of F&B at airports. He urged airport authorities to make F&B more integrated into retail. “Too often F&B is tucked away in less attractive space, yet it is often outperforming retail on a spend per passenger basis,” he said. He wants F&B partners to have more say in the planning of new airport developments.
Israel Airports Authority head of business development Gadi Rafaeli shared details of a new airport opening in Israel later this year: Eilat Ilan and Assaf Ramon airport. It is commencing trade with a capacity for 1.8 million travellers in its first full year. The new airport will replace the existing Eilat and Ovda airports.
10.30am: Next on stage was the newly-appointed CEO of El Al Israel Airlines Gonen Usishkin, who focused on the many challenges currently facing the airline. He said that El Al is operating in a very tough environment, one in which there is pressure on profitability from the level of air fares for price-sensitive customers and restrictions from government regulation. “I am certain that together, with all of our dedicated employees, we will continue to guide El Al through the challenges facing it, on behalf of the company’s customers and shareholders,” he said.
10.15am: European Travel Retail Confederation (ETRC) president/Dufry external affairs director Sarah Branquinho made a passionate defence of the travel-retail industry’s tobacco category, saying: “At the moment our secure and legitimate retail channel is under a very real threat.” Branquinho said if the stakeholders of the travel-retail industry “don’t act together we might see a ban on tobacco in duty-free”. She added that the ETRC is stating the case for protecting the category. Appealing to the many interested parties in a captivated audience, she said: “Join with us and fight to preserve your income.”
10.00am: Budapest Airport head of retail and advertising Patrick Bohl addressed the conference in his capacity as chair of ACI Europe’s Commercial Forum. He began with the observation that the consumer-retailer relationship is threatening the status quo of the travel-retail model, a theme high on the agenda of the conference as a whole. Technology is changing everything, he said, asserting that the new generation has different expectations of the players in travel-retail. He believes that the industry has been “slow to read the threats”, and that it now must concentrate its efforts on working with, and embracing, the disruptions to the time-honoured way that travel retailers serve consumers.
9.45am: Israel’s Minister of Transport and Intelligence Israel Katz was next to address the conference and talked of the advances his country has made in security in the face of the terrorist threats facing Europe. Israel has become an acknowledged world leader in security measures, not least in airport environments, and the minister said Israel is “glad to share” its security advances with other countries.
9.15am: The state of the industry address was delivered by ACI Europe director general Olivier Jankovec. He began by acknowledging the importance of Israel Airports Authority in the European airport community and reporting that last year European air passenger traffic rose by 8.5%, making it the best year since 2004. 2.25 billion passengers passed through European airports in 2017.
On the negative side he said that 47% of airports in Europe made losses in 2017, but this was an improvement from a few years ago, when that number was as high as 60%.
He said that the past decade has seen many of the fundamentals of airport retail evolve, resulting in new challenges, and that that process shows no sign of slowing.”Like many other businesses, airports find themselves having to respond to ever-changing consumer behaviour, particularly among the influential millennial demographic,” he said.
Jankovec added that millennials will make up 50% of global travellers by 2020, and that technology will hold the key to meeting their demands.
9am: Israel Airports Authority board chairman Eliezer Marum kicks off proceedings with an insight into the rapid growth of Israel’s economy and in particular its fast-expanding airport sector, headed by its number one airport, Ben Gurion International airport.
Israel, he said, is now home to nine million people, with the population having almost doubled since 1992. Five years ago, Israel signed its Open Skies agreement with the EU, and this had led to a huge increase in passenger traffic in to, and out of, Israel, with a consistent annual growth of around 15% each year, a trend set to continue. There were over 20 million passenger movements in Israel during 2017.
Manum said the ACI Europe conference and the issues it is aiming to tackle are very important to Israel. He added that it is a great forum for the sharing of ideas and solutions to the non-aeronautical revenue challenges being faced by airports, and their stakeholders, across Europe. “Innovation and creativity are key solutions for these challenges,” he said, adding that “the implementation of new technologies for smooth travel, and understanding passengers’ needs and addressing them in a personal manner is vital”.
Tuesday 13 March
8pm: Welcome to our coverage of the Airports Council International Europe’s Airport Commercial & Retail Conference 2018 in Tel Aviv, Israel. The conference begins with a social event, a cocktail evening at the fabulous Suzanne Dellal Centre for Dance and Theatre in the spectacular surroundings of its famous courtyard. Conferences delegates were welcomed to Tel Aviv by Eliezer Marum, chairman of the board of the Israel Airports Authority.