The Real Deal New York

Come fly with me: Airports’ prized real estate revenues are struggling

Tech disruption from online retail to ride-sharing apps is challenging airports' business models
May 27, 2018 04:00PM

Foot traffic does not translate to sales as global airports are proving.

As the Financial Times reports, despite a more than 7 percent increase in the number of travelers flying worldwide, non-aeronautical revenue per person is down across Europe and plateauing in North America. Non-aeronautical revenue comes from services like car rentals, parking fees, shopping and dining components.

“Airports have done amazingly well at creating real estate and commercial revenues. The cash flows from their business are highly prized by pension and infrastructure funds around the world,” HSBC aviation analyst Andrew Lobbenberg told the Times. “But the situation does face challenges from here.”

Between 2000 and 2016, revenue from non-aeronautical services dropped nearly 10 percent, according to the Times citing data from ACI World.

The reasons for the slipping revenues are chalked up to the rise of apps like Uber and Lyft that eliminate the need for car services and the proliferation of budget airlines, which attracts budget travelers less likely to spend on shopping or pricey meals while waiting for their flights.

But there is hope; new research suggests that if check-in and security can be sped up and cause less aggravation, more travelers will start spending. The data notes satisfied passengers are twice as likely to shop and will throw down up to 20 percent more cash in stores. Some airports are trying to do this by introducing increasingly automated services relying on biometrics. [FT]Erin Hudson