Revenue & Loyalty Before, During & After the Flight
Why – between 2015 and 2016 – did airline retail sales decline (-2.9%) even while airport retail sales increased significantly (+5.7%)? That’s a stark contrast which points to airports’ ability to think (and act) like retailers. But more airlines are catching up as they invest in new platforms for travel merchandising and personalization across the day of journey (before, during and after the flight).
What links different aviation technology trends, from localization of retail to mobile ordering and airport renovation, is that they’re driven by a need to serve a new type of traveler, the connected traveler. These passengers are often (but not exclusively) Millennials and are accustomed to booking and managing all aspects of travel directly from their mobile devices.
If airlines hope to capture more hearts, minds and wallets as passenger volumes increase globally, they’ll need to “learn the ropes” now with gradual improvements geared toward the connected traveler.
Airlines and the ‘Connected Traveler’
In many cases, the connected traveler will not have a straightforward journey from home to airport, airport to hotel and back again – they may book a flight while waiting for their Uber ride to the airport, for example, or book a hotel from the airport lounge and then go to the duty-free shop to redeem a mobile offer.
For the connected traveler (effectively any passenger with a mobile device), interactions and the overall experience need to be seamless between the airport, cabin, destination and return. The direct (i.e., mobile) channel is the only way to achieve that across the day of journey and between different partners (airports, airlines, retailers).
Investing in the mobile channel is a precondition for airports to really become “urban centers” and for airlines to become profitable and growing retailers with a better passenger experience.
Travel Merchandising for Airlines and Airports
If airport retailers’ biggest advantage is guaranteed foot traffic, then airlines’ biggest advantage is that they own all the passenger data – i.e., they know where their passengers will be, how long they’ll be there, where they’re going and what they’ve purchased in the past.
If airlines can start harnessing this simple data and using it for more targeted and personalized selling – getting the right inventory to the right passenger at the right time – it will immediately increase revenue and improve passenger experience. But personalization and localization are only part of the merchandising equation for airlines and airports. Better merchandising also requires enhancements and upgrades to the platforms that passengers interact and transact with. When OTG first launched the iPad for its airport properties, for instance, passengers spent 43% more at its iPad terminals than they did on average.
The OTG iPad, café-style waiting areas and other practical improvements to passenger experience fill a need that often gets overlooked at airports where luxury sales are the focus. The success of high-end airport retail is an opportunity for airlines to focus on other retail needs of their passengers – not just trying to sell more luxury or duty-free items before arrival.
If a passenger forgets their phone charger at home, for example, they’d be more likely to buy one (if offered) than they would a nice bottle of liquor. We can’t talk about passenger spend until we first talk about passenger experience, and that starts with having relevant merchandise and personalized offers driven by passenger data in the direct (i.e., mobile) channel – these are the immediate needs of the connected traveler.
Behavioral Economics for Retail Success
Growing airline/airport retail across the day of journey (before, during and after the flight) requires a fundamentally new approach to passenger experience. If airlines and airports can approach passengers through the lens of behavioral economics – combining real-time data with human nature and passenger psychology – they can adapt their digital strategies to sell more merchandise, personalize the onboard experience and boost ancillary revenue.
The airports that are succeeding (Schiphol, Changi, Heathrow Terminal 5, DFW) are thinking about the psychological/behavioral science behind passenger behaviors and how consumers have an almost irrational mindset when they enter the airport environment, i.e., how they “treat” themselves. They’re also thinking about the utility that passengers need, like charging stations, cafes that will deliver orders to the gate, etc., and turning that into a better experience.
At Munich Airport, Lufthansa installed Bluetooth beacons to deliver personalized and context-aware offers to passengers wherever they are in the vast airport (for example, near the lounge or bar).IATA Resolution 753 also went into effect earlier this year requiring airlines to reduce mishandling by implementing baggage tracking, a simple feature that will solve one of the biggest frustrations for passengers: not knowing where their luggage is.
Passenger smartphones are becoming essential tools to get them through larger and more byzantine airports – increased sales and revenue are absolutely necessary, but the shift to mobile is also an operational necessity as airports try to move more people more efficiently.
Is your airline prepared for the needs – and high expectations – of the connected traveler? Want to learn more how you can use travel technology to implement practical strategies for “day of journey” revenue? Book a demo of our platform for travel merchandising and airline commerce – designed to address the needs of the ‘connected traveler’ and the airlines and other travel merchants serving them.