Improving Terminal Design to Increase Revenue Generation Related to Customer Satisfaction (2014)

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6The following chapter summarizes the primary Guiding Principles for increasing concession revenue and customer satisfaction in this Handbook. These principles include factors that influence facility design and concession selection and placement, and generally result in higher levels of customer satisfaction. While this research project included an extensive analysis of airport data to develop the Guiding Principles for terminal design, it is not intended to provide a framework for measuring the performance of commercial operations at an airport. ACRP Report 19: Developing an Airport Performance-Measurement System outlines an approach to performance measurement in the airport environment, while ACRP Report 54: Resource Manual for Airport In-Terminal Concessions includes a discussion of several concession-specific performance metrics. 2.1 New Terminals versus Existing Terminals The development of airport concessions within an existing terminal facility poses unique challenges. An existing terminal may have limited space for circulation, seating, queuing, and back-of-house operations. However, designing a new terminal allows for greater flexibility, such as the ability to design and implement more robust and customer-friendly concession programs. Later sections in this Handbook discuss the limitations of existing facilities, strategies adapted for new facilities, and techniques to mitigate challenges relating to concession placement in existing facilities. • Existing terminals may have constraints that limit flexibility in improving and updating concession configurations. • New terminals offer greater flexibility to develop optimal concession configurations. For related topics, see Section 3.3. 2.1.1 Centralized and Decentralized Terminals Airport terminals typically occur as either single centralized facilities or decentralized facilities with multiple “unit” terminals. Many airports initially develop as a single terminal building and then expand to unit terminals as additional capacity is needed. However, there is an increasing propensity, particularly in Asia and Europe where aviation is rapidly growing, to develop single mega-terminals capable of processing large passenger volumes. • Centralized and unit terminals each require unique approaches to concession configurations, wayfinding systems, and passenger circulation. • Understanding how unit and centralized terminals differ is critical in managing passenger expectations and perception of level of service. For related topics, see Section 3.3.4. C H A P T E R 2 Guiding Principles

Guiding Principles 7 2.2 Concentrating Passenger Footfall Passenger footfall, as it relates to airport concessions, is the number of passengers traveling past or within proximity of a particular store or concession node. There is a critical link between revenue and passenger footfall. In essence, an increase in footfall results in an increase in sales opportunities. Centralized terminal solutions tend to increase the flow of passengers exposed to concession offerings while also eliminating the need for duplicating concession locations (which is often required in a decentralized planning approach). Separate unit terminals typically require some degree of concession duplication, and separate unit terminals most often result in less concentrated passenger footfall in each individual terminal. • Passenger footfall is often one of the key determinants in predicting concession revenue or gauging the value of a particular concession location. • Due to passengers’ perceived level of congestion, complexity of wayfinding, and anticipated wait times, there are implications for customer satisfaction when comparing centralized and decentralized facilities. For related topics, see Section 3.4.2. 2.2.1 Amassing Concessions Increasing concession revenue, as it relates to the concept of agglomeration economics, can be somewhat attributed to the amassing or concentration of concession facilities into distinct nodes. Agglomeration economics determines that the concentration of businesses maximizes consumer choices and helps to maintain a competitive business environment. This is ultimately good for passengers because it results in additional choices, prices, and improved service. • Agglomerating concessions provides customers with more choices and the ability to comparison shop. • Landside, customers spend the majority of their time at check-in. In an observational study, few customers visited any retail or food service concessions, and surveyed customers showed little interest in offerings prior to the security checkpoint. • The activities airside passengers pursue post-security highlight that once the anxieties regarding the check-in and security processes have passed, travelers are open to exploring the airport. This exploration provides the greatest potential during their visit to increase airport revenue. • Overall, airport customers spend over two-thirds of their total time in the airport airside. For related topics, see Section 3.7.4.1. 2.2.2 Major Nodes Major concession nodes are essentially an agglomeration of concessions, most often including the full gamut of concession offerings. Major nodes are typically located at major transit points where multiple passenger types intersect. This positioning allows concessionaires to capitalize on departing and connecting passenger footfall, and in some cases arriving passenger footfall. • The success of major concession nodes ultimately depends on the effective consolidation of passenger traffic within the terminal. • In order to capture the majority of passenger footfall, major nodes are most often placed at junctions of major passenger thoroughfares in the terminal. For related topics, see Section 3.4.2.2.

8 Improving Terminal Design to Increase Revenue Generation Related to Customer Satisfaction 2.2.3 Minor Nodes Minor concession nodes are typically smaller and offer less diverse concession opportunities than major concession nodes. The positioning of minor nodes serves those passengers who have already passed through the major node or passengers within nearby holdrooms that are unwilling to leave their gate/holdroom or traverse the distance to the major node. • Minor concession nodes are typically placed along the midpoint or end-point of concourses. • Minor nodes favor a more targeted selection of concessions and have greater flexibility with regard to positioning within the terminal. For related topics, see Section 3.4.2.2. 2.3 Diversity and Amount of Concession Offerings The diversity of, and total space dedicated to, concessions varies among airports. Concessions typically fall into one of four categories: food and beverage, specialty retail, duty-free, and con- venience retail. The amount dedicated to each type of concession will vary greatly depending on factors including passenger volume, passenger demographics/characteristics, passenger flows, the terminal and concourse configuration, and anticipated revenue. When planning a concession program at an airport, an adequate mix of concessions must be provided to meet passengers’ wants and needs. The following general Guiding Principles can be applied to assist with the initial planning process at most airports that have both domestic and international passengers: • Allocate approximately one-half of the total concession space to food and beverage concessions. Then distribute the remaining space to specialty retail, duty-free retail, and convenience retail, with at least half of the total retail space allocated to specialty retail. • Allocate at least one-half of the total food and beverage service space to quick-service concepts. • Allocate the largest amount of food and beverage service space to casual dining and quick-service concessions. • A large portion of the food and beverage service concessions should be nationally branded. • A large portion of the specialty retail concessions should be nationally branded. • When determining brand diversity, consider variety both within the airport concession program and at other airports. Brands that already saturate the airport market may not perform as well and potentially detract from the freshness of a program. For related topics, see Sections 3.7.3 and 3.7.5. 2.3.1 Food and Beverage Food and beverage (F&B) concessions include any establishment that serves food or drinks. F&B excludes convenience stores, which often sell pre-packaged food and bottled or canned drinks. The amount of each F&B type varies depending on airport and passenger flow conditions. • F&B concessions are diversified into four categories typically found at airports: quick service, coffee, bar (with food), and casual/sit-down restaurants. • Coffee shops and quick-service food are typically found throughout the airport and outnumber bars and sit-down restaurants. • Among customers surveyed about their needs post-security screening, food and beverages were most often the first priority. For related topics, see Sections 3.7.1 and 3.7.6.1.

Guiding Principles 9 2.3.2 Specialty Retail Specialty retail concessions typically cater to customers seeking luxury or specialty merchandise. The types of products carried by specialty retail concessions may include jewelry, leather goods, electronics, personal care products, apparel, toys, and souvenirs. • Specialty retail can be found within most airports and includes national, regional, and local brands. • Geared toward passenger “wants” rather than “needs,” specialty retail must appeal to passengers and have creative marketing techniques to generate sales. • In an era of Internet shopping where many customers “showroom” traditional retail outlets (i.e., view products in a store and then order online), there is an opportunity to encourage airport concessions as the showrooms. For related topics, see Sections 3.7.1 and 3.7.6.2. 2.3.3 Convenience Retail Convenience retail concessions typically carry grab-and-go items such as snacks, beverages, newspapers, and magazines. Additionally, some of these stores may: • Sell other high-demand necessities such as beauty aids, souvenirs, books, and candy. • Have expanded product lines that include coffee and pre-packaged sandwiches. For related topics, see Sections 3.7.1 and 3.7.6.3. 2.3.4 Duty-Free Retail Duty-free shops offer international passengers an opportunity to purchase goods free of the taxes typically levied upon merchandise. • Duty-free shops attract passengers hoping to save money on expensive goods such as luxury items, alcohol, and tobacco. • Duty-free shops are often the anchor tenant of a larger concession program, often serving to attract passengers to a node of concessions. For related topics, see Sections 3.7.1 and 3.7.6.4. 2.3.5 National versus Local Recent trends have shown an increase in demand for local brands. While passengers enjoy the reliability and known expectations of nationally recognized brands, they also enjoy the new experiences, cuisines, and products offered by local brands. • Local brands also help bolster the airport’s regional image, which is ultimately good for the airport’s home city and local businesses. • The proper mix of local and national brands differs among airports and depends heavily on passenger sentiment toward local and national brands and chains. Frequent fliers often complain about predictable concession programs (comprising mostly national brands) present at the majority of airports. For related topics, see Sections 3.7.1 and 3.7.10.

10 Improving Terminal Design to Increase Revenue Generation Related to Customer Satisfaction 2.4 Passenger Awareness to Concession Offerings Creating awareness of the available concessions in an airport terminal improves the passenger experience by informing potential customers of the types of food service and retail that can meet their needs and wants. This awareness can be generated in a variety of ways: • Locate concessions so that they are visible from primary circulation routes. • Use signage to create awareness and draw passengers into a store or restaurant (including static, blade, digital, and three-dimensional signage). • Use static and digital directories and signage to improve wayfinding and help passengers find concessions. • Offer a map of retail and food concessions to the queue, which can increase customer satisfaction in two ways: by making the concessions easier to locate and by allowing shoppers to plan their next moves while they are purchasing concessions. For related topics, see Section 3.7.4.2. 2.4.1 Signage Aside from concession location and visibility, signage is one of the most important factors in marketing and advertising a business. • Concession signage provides consumers with important information, such as the type of business and the products or services they might provide. • Signage is the first impression of an airport concession and is critical in generating passenger interest and revenue. • An abundance of departure flight information display systems (FIDSs)—within retail outlets, at waiting areas, and even at individual tables—allows passengers to keep control of the situation and continue exploration of the airport. • All restaurants should have easy-to-read menu boards to aid in the selection of an establishment. For related topics, see Section 3.7.7. 2.4.2 Advertising and Marketing With the influx of new technologies and ever-sharper and more efficient high-definition displays, airport advertising and marketing is evolving. • Companies are using progressively more creative and unique advertising techniques to capture passenger attention to increase revenues. • Emerging marketing techniques utilizing targeted passenger advertising, near field communi- cation, and high-definition display marketing kiosks are new trends to follow since they may have a significant impact on revenue generation through customer awareness. For related topics, see Sections 3.7.10 and 3.7.7. 2.5 Optimizing Size of Concession Blocks Airport concession spaces must have sufficient space for merchandise, passenger queuing, and seating areas (if applicable), as well as back-of-house operations including storage, offices, and kitchens. Determining the proper amount of space is critical to ensuring the future success of each airport concession. Without sufficient space, concessions may experience congestion, resulting in long wait times and walk-away customers. In addition, if back-of-house operations are constrained, concessions may not be able to provide the level of service that passengers expect.

Guiding Principles 11 This constraint may ultimately reduce customer satisfaction, decrease concession sales, and result in reduced revenue. Optimizing concession block sizes reflects the need to determine the width and depth or overall square footage needed, which varies depending on the type and requirements of each individual concession: • Retail concessions often have anywhere from a 1:1 width–to-depth ratio to a 1:3 width-to-depth ratio. This ratio also tends to vary by type of retail. • Quick-service concessions, especially those in a food court, and casual/sit-down restaurants tend to have a 1:3 to 1:4 width-to-depth ratio. • Coffee concessions can operate with as low as a 1:1 ratio. • Bar width-to-depth ratios can vary widely depending on location and may even have an inverted ratio of 2:1 or 3:1 width-to-depth. For related topics, see Section 3.7.5. 2.6 Optimizing Location of Concession Types The location and positioning of concessions are primarily dependent on the actual size and configuration of an airport terminal. This does not mean that strategic placement is not possible or not worthwhile. The placement of concessions within a terminal building in relation to other concession types and passenger flows is a critical factor for success. The following Guiding Principles can be applied to assist with optimizing the placement of concessions: • Creation of a central concession core is critical for success. • Grouping concessions near the flow of passengers traveling to and from automated people mover (APM) stops increases footfall exposure to concessions. • Holdroom dining and food service delivering systems are the newest trend and may pose future planning implications for holdroom sizing should this trend continue to be popular and result in revenue gains. • Placement of FIDS monitors directly adjacent to or within a concession can assist with drawing in passenger traffic to a concession. • To the greatest extent possible, food service units should be located in clusters in concentrated areas that are within eyesight of specialty retail. • To the greatest extent possible, multiple factors need to be considered when determining the optimal locations for specialty retail, including passenger exposure, terminal configuration, and passenger mix. • To the greatest extent possible, there should be numerous convenience retail units located throughout the main areas of a terminal that can serve both departing and arriving passengers. Additionally, convenience retail should also be placed near specialty retail to increase footfall and passenger exposure to the specialty retail concessions. • Duty-free concessions can play a dual role of generating revenue and serving as anchors for other concessions. For related topics, see Section 3.7.4. 2.6.1 Food and Beverage Successful F&B concessions are often clustered in groups in the form of food courts, similar to those typically found in shopping malls. • The food court concept allows passengers to quickly make decisions based on food preferences, prices, seating, and wait time. • Food courts typically comprise only fast-food restaurants rather than sit-down full-service restaurants.

12 Improving Terminal Design to Increase Revenue Generation Related to Customer Satisfaction • The airport operators’ objective should be to make food concessions easy to find, cater to those who planned ahead, and offer fast service for those who may be making an unplanned stop. For related topics, see Sections 3.7.6.1 and 4.1.5. 2.6.2 Specialty Retail Specialty retail concessions, which may sell luxury or specialized goods, require excellent vis- ibility and passenger exposure to succeed in the airport environment. • Passengers do not typically plan their visits to specialty retail; therefore, visibility and advertising is paramount. • It is important that the stores generate interest and draw in customers to make impulse purchases. For related topics, see Section 3.7.6.2. 2.6.3 Convenience Retail Convenience retail concessions sell mostly grab-and-go items, such as snacks, reading materials, and other necessities. • Convenience retail performs best near other concessions, such as specialty retail. • Convenience retail is best positioned within areas that are convenient for arrival and departure passengers to make grab-and-go purchases. For related topics, see Section 3.7.6.3. 2.6.4 Walk-Through Duty-Free Retail Duty-free concessions, available only to passengers traveling internationally (with the exception of the duty-paid merchandise, which is offered to all domestic and international passengers), are found in international terminals or those terminals processing a combination of domestic and international flights. Duty-free concessions are either positioned as independent store- fronts or are in clusters surrounding circulation areas. The latter is known as walk-through duty free. • Walk-through duty free blurs the line between circulation and concession, allowing concession- aires to maximize passenger exposure to products and services. • Walk-through duty free has been shown to increase concession revenue. For related topics, see Section 3.7.6.4. 2.7 Controlling Passenger Behavior As demonstrated by the concept of walk-through duty-free concessions, revenue is highly dependent on passenger exposure. • Through the strategic placement of concessions, holdrooms, wayfinding, and circulation space, airports have found ways to increase passenger exposure to concessions. • When considering concession space within the context of the terminal as a whole, concession planners can begin to predict and control when, where, and how passengers use or flow through concession spaces. • Call-to-gate procedures have shown an ability to generate additional concession sales. For related topics, see Section 3.5.

Guiding Principles 13 2.7.1 Wayfinding Wayfinding within airports, especially larger facilities, can be a significant challenge and source of anxiety for many passengers. Due to increasingly large and complex airport systems, adequate wayfinding is critical in maintaining high customer satisfaction. • Wayfinding for concessions can be in the form of concession signage, airport directories, or even through concession advertisements. • Wayfinding allows passengers to quickly identify and choose among the available concession choices. • Intuitive wayfinding can be enhanced by facilitating clear sightlines in the passenger primary direction as well as creating spatial voids and sources of natural light that can indirectly influence a passenger’s path of travel. For related topics, see Section 3.4.4.3. 2.7.2 Casino Effect The “casino effect” shows that interior design and architecture affects gambling revenue and customer satisfaction. Designers can choose to apply similar principles to airport terminal concession areas. • Strategic colors, spaces, textures, and lighting have been shown to reduce anxiety and increase satisfaction. • Certain design elements may increase customer satisfaction, dwell time, and concession revenue. For related topics, see Section 3.5.4. 2.7.3 Call-to-Gate Operation Call-to-gate boarding procedures, popularized mostly by European and other overseas airports, attempt to control a passenger’s transition to holdroom areas until their plane is prepared for boarding. This form of controlling the movement of passengers can be leveraged to benefit airport concessions. • Call-to-gate terminals hold passengers within a common area. As each gate is prepared and ready for boarding, passengers are informed of the specific gate location of their flight. • At some airports, call-to-gate areas also serve as concession courts. • Concession court call-to-gate configurations are potentially another way to increase concession revenue due to the added dwell time passengers have at nearby shops, restaurants, and other stores. For related topics, see Section 3.6.3.3. 2.7.4 Limited Public Seating Traditional holdroom seating (situated in long linear rows) is not configured in favor of groups of travelers or those traveling with families. However, airport designers are beginning to use non-traditional circular or rectangular seating configurations. This type of seating arrange- ment allows families and small groups of traveling companions to cluster and face one another while waiting in the holdroom. • The linear seating configuration is optimized for business travelers or those traveling by themselves. • Families are not easily able to sit near or face one another in the linear seating configuration.

14 Improving Terminal Design to Increase Revenue Generation Related to Customer Satisfaction • Providing non-traditional seating configurations tends to reduce passenger anxiety and increase overall customer satisfaction. For related topics, see Sections 3.6.3.1 and 4.1.3.2. 2.8 Human Engineering Factors The concept of human engineering is rooted in the ability to develop, configure, and optimize spaces to meet the emotional and behavioral needs of humans. • When applied to the airport environment, human engineering translates into factors such as walking distances, wayfinding, self-service technologies, and level of service. • Human engineering allows for better understanding and provision of passengers in the terminal environment. For related topics, see Section 4.1. 2.9 Customer Satisfaction The level of service (LOS) has been the most widely used and accepted form of translating passenger satisfaction into a measurable and comparable format. • LOS parameters include passenger walking distance, number of level transitions, passenger density, quality of wayfinding and navigation aids, and wait times. • Recent ACRP research has shown that the ratio of passenger density to area occupied is often an overemphasized factor relative to LOS. For related topics, see Section 3.4.4. 2.9.1 Minimizing Passenger Walking Distances Walking distances are often cited as one of the elements having the most impact on LOS. As walking distances increase, passengers’ LOS begins to diminish. However, these effects can be mitigated by providing transport assistance via APM or moving walks as well as video monitors, advertisements, and other distractions to occupy passengers during their journey. • LOS decreases when passengers are acutely aware of how long they have been walking or when they become fatigued. • The addition of APM systems or moving walks also decreases transit time and passenger fatigue. For related topics, see Section 3.4.4.1. 2.9.2 Walking Distances and Centralized Flow Tradeoff It is often debated whether it is better to have airport facilities in the form of unit terminals with shorter walking distances or a single concentrated facility with longer walking distances. The better option depends on the passengers’ LOS in each scenario. • In the case of a single centralized facility, passenger density is typically greater with longer walking distances thereby increasing the perception in some cases of a low LOS. The compromise is that in a single centralized facility passengers flowing past concessions are more concentrated with less need to duplicate concession locations. • In the case of multiple unit terminals, shorter walking distances may result with lesser concen- trations of passengers at each terminal that result in a higher LOS and customer satisfaction.

Guiding Principles 15 The compromise is that passengers flowing past concessions are less concentrated with a need to duplicate concession locations in multiple unit terminals, often resulting in less concession variety for the passengers. For related topics, see Sections 3.3.4.1 and 3.3.4.2. 2.9.3 Self-Service Technologies Self-service technology allows passengers to bypass traditional agent positions in lieu of automated kiosk systems. While the computerized systems may be intimidating for some passengers, most airport users are comfortable with and use self-service systems regularly. • New concession ordering systems have allowed passengers to remotely order food and beverage items to be delivered to their gate. • Self-service technologies are now expanding into U.S. airports, including self-bag tagging, automated passport control, and automated boarding. Efficiencies in passenger processing could result in longer dwell times in the terminal, allowing for the opportunity for increased sales. For related topics, see Sections 3.6.1.2 and 3.6.3.4. 2.9.4 Reduction in Passenger Anxiety From a customer satisfaction perspective, reducing passenger stress and anxiety is critical. A partial solution is better communication of wait times and wayfinding to passengers. • Departing passengers cited the most stressful parts of the airport experience as check-in and security. Therefore, by minimizing the anxiety of these two processes, the landside does offer an opportunity to improve overall customer satisfaction. • Improvements in communication allow airport users to determine when and where they need to be and how to get there. • Boosting passenger confidence in the airport environment ultimately results in reduced anxiety and a higher LOS. • The more airport terminal design reduces anxiety and uncertainty among airport customers, the more customers will be open to the idea of exploring food and retail offerings, resulting in increased sales and revenue to the airport operator. • One best practice is the use of display signage that explicitly states the average wait time at certain points, as this helps customers plan and, in turn, alleviate anxiety. For related topics, see Section 3.4.4.5. 2.10 Variety of Concession Types and Pricing Passengers often assume that goods and services within the airport will cost more than those same goods and services elsewhere. To combat this notion, airports have implemented pricing structures that require concessionaires to match their prices to street standards. In some cases, airports allow a specific percentage above street pricing. This policy means that the price of airport goods and services may be more than the price paid outside of the airport. • Street pricing structures help to alleviate the burden of inflated costs customers expect, increasing customer satisfaction. • Communication to passengers that pricing structures ensure fair prices may attract additional shoppers. For related topics, see Section 3.7.8.

16 Improving Terminal Design to Increase Revenue Generation Related to Customer Satisfaction 2.11 Ancillary Land Development Airports are utilizing ancillary land development to generate additional revenue while improving customer (air traveler) satisfaction. • In some cases, this landside development has contributed a substantial portion of airport revenues. • Additionally, it has provided commercial facilities and services that enrich the passenger experience. • In sum, airports from Amsterdam to Zurich and from Athens to Seoul are pursuing ancillary land development as a pivotal means to financing airport operations while contributing to their profitability, cost competitiveness in attracting airlines, and passenger satisfaction. For related topics, see Section 5.1.