Airport Experience® News - Retail Innovation Issue 2024

SEPTEMBER 2024 / V22 N257

INCORPORATING AI INTO CONCESSIONS OPERATIONS

FAULTY FOOTING FOR GLOBAL LUXURY BRANDS

PIT’S NEW TERMINAL PROGRESSES FOR HYBRID CONCEPTS INCREASING DEMAND

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Our new hybrid program at GRR shares engaging restaurants and retail stores, from the iconic Uccello’s Ristorante , our gastro pub Aletitude , and fan favorite Freddy’s Frozen Custard & Steakburgers to local coffee, gourmet snacks and fresh grab and go at Blue Bridge Market and Thornapple Essentials. Grand Experiences in Grand Rapids

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14 Artificial Intelligence In Airport Concessions

Operators have been incorporating AI into their concessions operations, with more to come as the technology evolves.

4 Letter From The Editor 6 Data Check

18 Luxury Brands’ Precarious Position Airports provide a valuable storefront for global luxury brands, but demand has been declining due to a plethora of purchasing options online or on the street. What’s their place in the foremost programs in North America? 24 Incorporating F&B Into Airport Retail Passengers can have a drink or snack while browsing for reading materials, souvenirs or essentials in the growing number of hybrid concessions locations in North American Airports.

Lagardère Travel Retail’s Travel Experience Voices survey predicts the convergence of innovation, sustainability and digital transformation. 8 Latest Buzz Pittsburgh International Airport new terminal renovation will cost about $1.57 billion and will right-size the airport for now and the future. 11 Director’s Chair Ted Kitchens, director of Manchester–Boston Regional Airport, knows his region can deliver the passengers the airlines are seeking. The trick is to convincing airports to take the plunge.

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29 Industry Innovators The new Latinos in Airports group seeks to create a community to bring Latinos together for networking and career advancement. 31 Advertising Index 32 A Snackbot Named Jeeves Munich Airport’s traveling robot offers packaged snacks and drinks throughout the airport terminal.

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AX NEWS SEPTEMBER 2024

Andrew Tellijohn Senior Reporter Sally Kral Contributing Writer Sarah Beling Contributing Writer

TEAM

Barbara McCarter Portfolio Manager Chad Wimmer Senior Editorial Art Director Rae Lynn Cooper Production Manager Amanda Gochee Vice President, Marketing Strategy Katy Welch Senior Marketing Manager Tristan Lueck Marketing Coordinator Emma Vail Marketing Coordinator AXN ADVISORY GROUP Kim Becker, San Diego International Airport Derryl Benton, Avolta Zenola Campbell, Dallas/Fort Worth International Airport Bryant Francis, Cleveland Hopkins International Airport Mark Gale, Fort Lauderdale-Hollywood International Airport Eric Johnson, Nashville International Airport Roddy McOwan, WH Smith North America Pat Murray, SSP America Gregg Paradies, Paradies Lagardère Kevin Westlye, High Flying Foods

Desiree Hanson Chief Commercial Officer Melissa Montes Vice President/Publisher Carol Ward

Editor-in-Chief Nicole Watson Business Development Manager Sally Kral Contributing Writer Sarah Beling Contributing Writer Barbara McCarter Senior Portfolio Manager Chad Wimmer Senior Editorial Art Director Rae Lynn Cooper Production Manager Amanda Gochee Vice President, Marketing Strategy Katy Welch Senior Marketing Manager Amanda Litwack Senior Digital Marketing Coordinator Emma Vail Marketing Coordinator

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AX NEWS MARCH 2024

YOU’VE REACHED YOUR DESTINATION

Across North America, we’re making the journey as rewarding as the destination — bringing the heart of the community to the heart of the terminal through locally inspired retail.

TO BE A PART OF THE TRAVEL EXPERIENCE REVOLUTION, CONTACT BRIAN QUINN BQUINN@HUDSONGROUP.COM

SEPTEMBER 2024

Dear Readers,

SEPTEMBER 2024 / V22 N257

Welcome to the September Retail issue of Airport Experience News Magazine! Retail in airports is always evolving, and this issue of AXN examines some of the trends and challenges that have recently emerged. One of the biggest trends currently is hybrid retail, or incorporating food and beverage offerings into the retail environment. This issue highlights some of the newest and best efforts in hybrid retail. This issue of AXN also explores the growing use of artificial intelligence in airport concessions and its impact on revenues. And, luxury brands are in the spotlight with a feature on the changing demand for luxury products and how airports and operators are pivoting to maximize the potential of this high-margin category. In other Airport Experience News developments, the nominations for the 2025 AX Awards are underway! We’ve convened 24 industry leaders – 12 airport representatives and 12 concessions representatives – to serve on our Awards Committee. These individuals will select the winners from a roster of finalists. But first, we need your nominations! Please visit the AXN website to access the nominations portal and submit details on your favorites. We need your help in identifying the people, companies and brands that exemplify excellence in airport concessions!

INCORPORATING AI INTO CONCESSIONS OPERATIONS

FAULTY FOOTING FOR GLOBAL LUXURY BRANDS

PIT’S NEW TERMINAL PROGRESSES FOR HYBRID CONCEPTS INCREASING DEMAND

Thanks!

Carol Ward Editor-in-Chief

Airport Experience News carol@airportxnews.com

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Experts in combining the physical and digital dimensions to deliver journeys beer for travelers and more protable for airports.

Scan the QR code and contact our team for enquiries

Connecta

DATA CHECK

THE TRAVEL RETAIL LANDSCAPE Lagardère Travel Retail Report Highlights Global Airport, Brand Voices

BY CAROL WARD

Embracing Hybrid Concepts

Q: Why do you think there is an increasing popularity of hybrid concepts in airports?

Q: Do you consult with experts to formulate your master planning strategy?

UNSURE

Enhanced customer experience Increased customer expectations Novelty and innovative concepts Gain of time

24%

19%

20% 20%

YES

44%

15%

0

5

10

15

20

25

NO

37%

Q: How important do you think hybrids are today? Do you think it's a long-term trend? Airports rank 4.1/5 the importance of hybrid stores in the Travel Retail landscape and 76% consider it as a long-term trend

Almost half of airports consult experts to elaborate their master planning strategy

D ata, innovation and a focus on sustainability are themes that emerged from a recent survey of airports and brands by Lagardère Travel Retail . This online survey, conducted by Lagardère Travel Retail between January and March 2024, gathered responses from 58 airports and 150 brands in 27 countries. Results were compiled and analyzed in the report, Travel Experience Voices: Transforming Today To Step Into Tomorrow, released in May. “This year marks a pivotal chapter where innovation, sustainability, and digital transformation converge to redefine the boundaries of our industry,” Dag Rasmussen, chairmain and CEO of Lagardère Travel Retail, wrote in the foreword. “As we unveil this report, our journey through the evolving landscape of Travel Retail is marked by three cornerstone themes: embracing hybrid concepts, deepening our commitment to corporate social responsibility (CSR) and leveraging data. “These themes are not just trends; they are the beacons guiding our strategic direction in an increasingly interconnected and conscious world,” Rasmussen said.

Travel Retail Innovation One of the biggest innovations in modern travel retail is the emergence of hybrid concepts that blend digital with physical, global with local and retail with food and beverage. “These dynamic spaces redefine the travel experience, offering travelers a seamless integration of convenience, entertainment and engagement,” the report said. Based on survey responses, on a scale of one to five, airports ranking the importance of hybrid stores in travel retail at 4.1. Further 76% of airport surveyed consider it a long-term trend. Hybrid concepts require an in-depth understanding of passenger needs and behaviors across concepts and categories, the report said. The concept style meets a need for experiential retail and desire for unique, Instagram-worthy experiences, while the design and layout of such spaces maximizes efficiencies. “To successfully deliver a hybrid shop, spaces are being designed for consumers

Main reasons according to airports and brands for the increasing popularity of hybrid concepts in airports

Airports and brands rate Ef cient store layout as the most important feature to a hybrid concep t Q: How do you rate the importance of the following features in a hybrid concept? 1 Ef cient store layout 2 Diversi ed offer 3 Digital/omnichannel integration 4 Content design and communication elements 5 Uni ed services

Source: Lagardère Travel Retail's Travel Experience Voices report.

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DATA CHECK

The Challenge Of Data Sharing

Catering To Conscious Consumers

A vast majority of airports and brands are currently utilizing and analyzing customer data, but only a few of them are already using or plan to use Gen AI.

Airports and brands state Environmental impact as the best criteria to de ne a responsible offer TOP CRITERIA FOR BRANDS 1 Its environmental impact 2 Its health and safety aspect 3 Its durability/sustainability 4 Its social responsibility 5 Its concern about animal welfare Q: Which of the following criteria best de nes a responsible offer? TOP CRITERIA FOR AIRPORTS 1 Its environmental impact 2 Its social responsibility 3 Its health and safety aspect 4 Its durability/sustainability 5 Its concern about animal welfare

Q: Are you currently analyzing and utilizing customer data?

UNSURE Q: Do you use or plan to use Gen AI to analyze your data?

NO

YES 17%

47%

15%

YES

85%

NO

36%

Q: How do you see customer data sharing boosting your performance? Airports and brands mostly view customer data sharing as a performance booster, particularly when de ning shared data strategies & business goals

AIRPORTS RANK

the importance they place on actively collaborating with brands and operators to progress along the decarbonization journey 4.4/5 Q: How important is it for airports to actively collaborate with brands and operators to progress along the decarbonization journey?

De ning shared data strategies & business goals Increased passenger & consumer knowledge sharing Common innovation plans Creating airport marketplaces Common services 0

AIRPORTS AND BRANDS RANK

5

10

15

20

25

30

35

Source: Lagardère Travel Retail's Travel Experience Voices report. 3.2/5 the current level of demand for responsible consumption among traveler Q: On a scale of 1 to 5, how would you rate the current level of demand for responsible consumption among travelers?

of airports and brands would consider implementing a data-sharing model with their business partners to increase customer knowledge 56% Q: Do you think about implementing a data-sharing model with your business partners to increase customer knowledge? Source: Lagardère Travel Retail's Travel Experience Voices report.

to browse and shop while having the option to dine and enjoy refreshments within the same space,” the report noted. “One of the key benefits of hybrid concepts in sought after locations in an airport is that it can help the overall area thrive, having a ripple effect on all other retailers within the space and driving more activity and buzz.” Another aspect of hybrid environments is the integration of new technology that adds a contemporary edge and significantly enhances convenience for customers. Popular technologies include self-service kiosks, mobile ordering stands and apps, and digital menus and screens. Data Sharing The Travel Experience Voices report also predicted improved and increased data sharing as part of the effort to deliver world class customer experiences. “Most industry players are showing commitments to work in partnerships for greater efficiencies,” the report said. Going forward, “airports, brands and retailers will work towards much improved personalization for customers and unite with a common goal of customer loyalty across every touchpoint of the traveler’s journey.”

Data sharing has become a sticking point within the industry because of proprietary issues and privacy concerns yet, on a global scale and among the airports and brands surveyed, there appears to be a willingness to collaborate more closely than ever before. In fact, the survey showed that 56% of airports and brands would consider implementing a data-sharing model with their business partners to increase customer knowledge. The report noted the need for discipline in sharing good data. Airports and brands identified GDPR, compliance laws and regulations as the main challenge when developing a data-sharing model, but potential conflicts of interest, data quality and consistency, and data management issues all were identified barriers. “A cultural shift towards a mindset that values data sharing and its role in informing business decisions needs consideration,” the report concluded. “Replacing competition with co-operation becomes key, alongside a focus on customer-centricity, transparency and the cultivation of trust as the new normal. The process needs strategic alignment of data as well as a commitment to maintaining data quality, implementing the right technical solutions and adapting new ways of working.”

Corporate Social Responsibility The travel retail industry is on a journey towards sustainable development, community engagement and ethical business practices, Rasmussen said in his foreword. The issue is clearly important to airports – as a group, airports ranked the importance they place on actively collaborating with brands and operators to progress along the decarbonization journey at a 4.4 out of 5. Airports, operators and brands are working together toward sustainable practices. While the motivation might be simply that it’s the right thing to do, the entities are also spurred by traveler demands from sustainability-conscious travelers, the report said. Those travelers “demand transparency, sustainability and integrity from brands and airports alike. “Sustainability consciousness is a growing trend amongst travelers taking center stage as the narrative surrounding travel shifts,” the report noted. “This is not just a passing trend but a fundamental shift in how travelers explore the world. As they become increasingly mindful of their environmental footprint and impact, the travel industry finds itself at a pivotal moment to adapt and innovate.”

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LATEST BUZZ PIT TRANSFORMATION Two Decades After Being Dehubbed, Pittsburgh International Airport Is Being Right-Sized For The Future

BY SARAH BELING

t’s been two decades since US Airways declared bankruptcy (twice) and dehubbed its base at

PIT welcomes approximately 10 million travelers annually, a figure that has been growing recently but is about half the airport’s peak in the late 1990s. “The project is really all about right-sizing and modernizing our airport,” explains Paul Hoback, chief development officer. “[PIT was] built for 80% connecting passengers, and 20% for origin and destination passengers,” he says. “Once they dehubbed our airport, we became the complete opposite. We’re 95% origin

I

Above: The PIT Transformed project will cost about $1.57 billion and is expected to be completed next year.

Pittsburgh International Airport (PIT), but the airport is finally evolving to meet the needs of its community. The transition from a hub to an origin-and-destination airport is always tricky, but with the wide spanning PIT Transformed renovation project, Allegheny County Airport Authority officials are reinventing the facility for current and future travelers.

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AX NEWS SEPTEMBER 2024

LATEST BUZZ

Above: Two decades after being dehubbed by the now defunct US Airways, Pittsburgh International Airport is right-sizing and modernizing for the future. Right: The new terminal at PIT will offer airside-connected outdoor terraces will help travelers embrace nature during their time at the airport.

and destination, and only 5% connecting,” he adds. Creating a new landside terminal facility while renovating the airside terminal and surrounding ground transportation facilities “is about sweating all of our assets,” says Hoback. “How do we convert our facilities from this major hub into an origin and destination airport that was built for Pittsburgh, and by Pittsburgh?” After years of conversations around master planning, the $1.57-billion project broke ground in 2021 and is expected to be complete by 2025, says Hoback. Funded by a variety of sources including multiple municipal bonds, passenger facility charges and money granted by the Bipartisan Infrastructure Law, the PIT Transformed project reduces the airport’s gates from 70 to 55 while expanding its main security checkpoint area, reducing transportation time from curbside to airside gate, increasing covered parking and building a new ground transportation center, as well as adding a wide portfolio of new concessions and retail concepts.

and wanted them to truly understand what we’re all about,” says Hoback. “Out of that process came a theme of three things that we call NATECO, which stands for nature, technology and community.” PIT’s new facilities feature not only local materials like Pittsburgh steel but visual references to the region at large. “You can see some of it in the renderings – the rolling hills of the Western Pennsylvania region, identified through roof design, [and] the wood-like ceiling and tree columns that we have in the new terminal,” says Hoback, adding that the terminal’s new airside

Pittsburgh Immersion Designed in collaboration with Gensler, HDR, luis vidal + architects (who provided designs for the new terminal spaces), Michael Baker International (who designed the multi-modal parking complex) and built by PJ Dick/Hunt and Turner Construction , PIT’s new facilities are being constructed with the city of Pittsburgh in mind, says Hoback. “Early on in the process, we took the whole design team down to Pittsburgh. We really immersed them in the culture of Pittsburgh

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AX NEWS SEPTEMBER 2024

LATEST BUZZ

Right: New concessions offerings will help transform the new terminal to meet the needs of today’s travelers. SSP America’s lineup will include Bad Egg, Camden Food Co. and others.

connected outdoor terraces help travelers embrace nature inside the airport. “In a post-pandemic environment, people want to go outdoors and spend time outdoors – we thought that was a very important element of the project,” says Hoback. “The dramatic new vision for the terminal is uniquely Pittsburgh: infused with nature, regionally-inspired artwork and the latest in travel technology, creating the airport that this great city and community deserves,” adds Carolyn Sponza, principal at Gensler and project manager for the Gensler+HDR in association with luis vidal + architects design team. “Working with the team at Pittsburgh International Airport has been a great example of the value of listening and exploring new ideas,” adds Bill Peduzzi, HDR’s aviation director and project manager for the firm’s work at the airport. “The airport welcomed us as true collaborators, and the creative solutions developed in the concept development phase set the foundation for all the passenger-focused design that followed.” The PIT team is also focusing on being good stewards of the environment, adds Hoback, noting that the new facilities are on track to receive LEED Gold and Park Smart certifications in recognition of sustainable design elements and construction practices. Initiatives like irrigating the terminal’s new outdoor terraces with rainwater and recycling concrete from the airport’s defunct aircraft ramp are all part of making sure that “sustainability is one of our top priorities,” adds Hoback. Concessions Refresh Concessions will also see a refresh. PIT is now managing the concessions program directly, a departure from the developer model that the airport used for decades. In September 2023, after years of disputes, PIT agreed to pay $10.5 million to Fraport USA in a settlement of litigation between the airport and its former concessions developer. In the renovated terminal space, passengers will be able to enjoy a bounty

PITTSBURGH INTERNATIONAL AIRPORT — LD-3 CAMDEN FOOD CO. FOOD & BEVERAGE TRANSFORMATION PROGRAM

modernization project at Pittsburgh International Airport, especially when the evolution is the direct result of passenger feedback,” says Steve Johnson president and CEO of Avolta, North America. “Our goal is to provide something for everyone at any time of day,” says Scott Welding, SSP America’s senior vice president of development and pursuit of new airports. He says the airport’s diverse range of concessions offerings both provide travelers with a spate of highly requested flavors, and – as is the case with Shake Shack CEO Rob Lynch being a Pittsburgh native – an homage to the region. The PIT team hopes that the terminal’s renovations serve not only customers but also local workers. PIT estimates that the PIT Transformed project will add 14,300 direct and indirect jobs, and create more than 7,800 direct temporary design and construction jobs, due in part to the team’s decision to split the project’s contracts to include more regional firms. “We wanted this to be an airport that was built for Pittsburgh, and most importantly, by Pittsburgh,” says Hoback. “Coming right out of a pandemic when this region and the whole country needed it the most – we put people to work.” And as the PIT Transformed project barrels toward completion, Hoback notes that he already notices a change in the feel of the airport. “I stand there in the ticketing level and to me, it feels very different – it feels very special,” says Hoback. “This is the front door to Pittsburgh for 10 million passengers who travel in and out of the Pittsburgh region each and every year, and I can tell you how important it is to have that amazing front door entrance to this airport, and to this region.”

of new concessions and retail concepts, including locations of the popular Shake Shack burger and Mi Casa Cantina franchises, a Bad Egg breakfast bar, a Stack + Press Delicatessen, and Camden Food Co., all operated by SSP America . Hudson will manage the airport’s new MAC cosmetics store, Duquesne & Co. gift shop, Champion City Sports store, and Hudson News. PIT’s newcomers also include a Jimmy John’s sandwich shop operated by Atlas concessions; a branch of the popular Sambazon Açai Bowls, managed by Tailwind Airport Concessions , and the debut of local coffeehouse Café Conmigo, which will be operated by the brand’s owners. The airport also plans to expand their previously existing Johnson & Murphy store and the tech retailer InMotion. In curating their new concessions lineup, the PIT team selected a mix of national and local brands that would appeal to their travel base, Bryan Dietz, senior vice president of air service and commercial development at PIT told AXN after the airport’s concessions plan was announced. “We have a whole team that surveys [travelers] and scrapes the internet, trying to understand what people truly, genuinely want,” Dietz says. “[We want to] provide experiences that encourage people to want to get to the airport early, encourage people who maybe have one item in mind [for purchase] to walk away with five. These first 15 locations are to make sure we’ve got the basics in place, so that people feel good about the next tier of opportunities. And we don’t know what that even is yet, but we constantly want to make sure we’re in touch with what people could be wanting.” Concessionaires are equally enthused to be a part of the transformation. “It is exciting to be a part of such a significant

CONFIDENTIAL AND PROPRIETARY

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AX NEWS SEPTEMBER 2024

DIRECTOR’S CHAIR AN UNTAPPED OPPORTUNITY? MHT Director Kitchens Seeks Expanded Service That Would Slow Persistent Leakage

BY CAROL WARD

ditor’s Note: The catchment area for Manchester–Boston Regional Airport (MHT) is a swath that extends down through southern New Hampshire and into northern Massachusetts, into southern Maine and over to southern part of Vermont. But, MHT sits about 50 miles northwest of its much larger competitor, Boston Logan International Airport (BOS) and is plagued by leakage to that market, more so now than pre-pandemic. MHT Director Ted Kitchens is convinced that the right mix of carriers and an increase in the number of airline seats in the market will recapture those passengers, and he is focused on making that happen. It’s a big lift. Even prior to the pandemic, MHT’s passenger numbers were on a downward slide from a 2005 peak of about 4.3 million passengers. Last year, MHT served 1.28 million passengers. AXN’s Carol Ward spoke with Kitchens about his strategies to increase MHT’s appeal. E

WARD: I know Manchester-Boston Regional Airport has struggled to come back from the pandemic. Can you give me a state-of play? KITCHENS: The entire New England region has had a hard time coming back from the pandemic. But with the recent announcements that Avelo Airlines and Breeze [Airways] and JetBlue are coming up here to Manchester after 20 years of us pursuing them, we’re starting to see that some people are realizing that this is a growth opportunity for the airlines, particularly as they’re move capacity out of other airports that may have been oversaturated. We are one of the wealthiest sections of the country in terms of average household incomes. [Our catchment area] has probably the highest [average] discretionary income of any small hub airport in the United States and we have the third-highest average household income of any small hub airport, behind Islip and Santa Barbara. It’s a target-rich environment for the airlines that are looking for any and all revenue sources that they can find right now.

WARD: You mentioned Avelo and Breeze, as well as JetBlue. Are you focusing on ultra low-cost or low-cost carriers, or are you also talking with your current legacy airlines about increasing service? KITCHENS: I’m talking to all of them, but when I got here (in 2018) the gap that needed to be filled was that ultra-low cost airline sector. We were home to American Airlines , Delta Air Lines , United Airlines and Southwest Airlines . They provided terrific service and the community loved it, but we were a high priced airport with high airfares. The community was bypassing us to go to the low fares that were found at Logan. My initial push was to fix that, and part of that challenge was our CPE (cost per enplanement), which was high at $13.50. Pre-pandemic, as a small hub airport, we had the same CPE as BOS. We’ve done a great job of keeping our operating costs down, but what was eating us alive was our debt service. We had to deleverage our balance sheet. We restructured about 70% of our outstanding debt and we help lower the CPE by about $3.

Above: Ted Kitchens, director, Manchester-Boston Regional Airport

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AX NEWS SEPTEMBER 2024

DIRECTOR’S CHAIR

For the ultra-low-cost carriers [the higher CPE] was always a headwind. It was an impediment to our conversations with them. That changed when we got Spirit in 2021. That was our first new airline in 17 years. I think that put us back on the map when it came to the network planners – people start paying attention to us a little bit more. WARD: How far is MHT from Boston? KITCHENS: We’re the same distance as Providence (Rhode Island). We’re 50 miles away from Boston, and it’s 50 miles between Providence and Boston, but airlines treat the two markets completely different. Our population base is a little bit less but our per capita income and household incomes show we’re much wealthier than Providence. Our trade area generates a tremendous amount of demand. The trade area generated 3.6 million enplanements in 2023 with 2.1 million being residents and 1.5 million being visitors. If we were to hold on to all our demand, we would be at 7.2 million passengers. And our trade

area does not go into the Boston trade area. It skirts the northern Massachusetts border. [It encompasses] southern New Hampshire, southern Maine, and then up into the mountains of New Hampshire and over to southern part of Vermont. We’re generating tremendous amount of demand but airlines are not putting enough lift in the market for that demand to choose Manchester right now. With all the all the positive news of the new airlines coming in and JetBlue starting a service in January, we could start showing our trend line getting back to pre pandemic level. But I always like to say, the best thing that the airport has going forward is what we used to be, because there is nothing that has changed in this market for the negative. It’s not like we lost population. It’s not like we lost a major employer. It’s not like the per capita incomes tanked or unemployment has spiked – all those measurements are off-the-chart positive. We’ve got all the ingredients there to be what we used to be.

Above: Manchester-Boston Regional Airport has a vibrant and wealthy population base but struggles with leakage issues to the larger Boston Logan International Airport, located about 50 miles away.

The only thing that’s changed is the airlines perception of our market and we’re chipping away at that. WARD: I assume you don’t need to expand, and that you’re not interested in taking on more debt. That said, do you have any major infrastructure projects underway? KITCHENS: No, and it’s actually a selling point for us right now. There are all these airports that are doing these mega-billion-dollar capital development programs. And airlines, with their increasing cost structures, are looking for every penny that they can save. What we’re really leaning into is that we have infrastructure that’s already been built for those 2.25 million enplanements that

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AX NEWS SEPTEMBER 2024

DIRECTOR’S CHAIR

Right: Pandemic recovery has not been easy for MHT. The airport’s passenger traffic has declined significantly, and all efforts are focused on rebuilding to 2 million-plus enplanement levels. Below: Attracting ultra-low cost carriers has been a key goal for MHT director Ted Kitchens and his team. Earlier this year, Breeze launched service, following Avelo’s entry into the market in 2023.

we had back in 2005 – about 4.5 million total passengers. We built the gates, we built the parking, we built the roadways, we extended the runways. All that infrastructure is there. We’ve actually restructured the outstanding debt so airlines can come in and take advantage of that free capacity and a CPE that’s decreasing versus signing up for other airports where CPEs are probably going to be increasing for the next 10 to 20 years.

WARD: Turning to the terminal and your current customers, how are your concessions performing? KITCHENS: HMSHost has the food and beverage [contract] and Hudson has the news and gift. We also have some local contracts like the Dunkin Donuts with a local franchisee. They’re all doing great. We’re very fortunate to partner with HMSHost and Hudson They’ve been terrific business partners because they’re stuck through us as we’ve gone through this transition and through the pandemic. They’ve been able to increase sales over the last few years, although certainly from a lower base. They have another three to four years on this contract. Both Hudson and HMSHost have had it for a very long time so we’re contemplating what that looks like going forward. I think it’s time to do another RFP, just to see what the market has to offer. WARD: What else are you concentrating on at MHT? KITCHENS: We’re focused on the guest experience. We don’t call it customer service. I hope the industry rids itself of CX. W e’re in the travel and hospitality and tourism business. Every airport is, so we need to be talking about the guest experience, not the customer experience. It sounds like a small change in words, but it’s a huge paradigm shift and the way that you view that person in front of you. If they are your guests, they have choices. They have options and we want them to come back.

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AX NEWS SEPTEMBER 2024

Airports And Concessions Operators Are Cautiously Incorporating AI

BY SARAH BELING

Search engine plug-ins, photo editing services, ChatGPT — artificial intelligence (AI) technology is seemingly everywhere. In a crowded field that often contains not-yet-refined technology, how can AI and augmented reality (AR) tools better serve airport concessions and retail? Industry experts say that the new frontier is brimming with opportunity if airports and concessionaires can learn to rigorously manage data, be willing to experiment and keep the “human touch” at the forefront of their services. “I find, at times, that we’re still conducting business like we did back in the 1960s and 1970s,” says chief innovation officer at the Miami-Dade County Aviation Department Maurice Jenkins of the need for airports and concessionaires to reexamine their current processes and consider artificial intelligence technology.

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AX NEWS SEPTEMBER 2024

Above: Digital signage from Syntec integrates AI systems, allowing personalized information to be pushed through a traveler’s cell phone.

lot of concepts around passenger experience and behavior.” The team at PIT has also explored future tools through the airport’s xBridge Innovation Program, an initiative partnering the airport with tech companies to develop and test new AI and machine learning tools. Jenkins, whose role includes conducting business model analytics around AI products for potential implementation, believes that successfully integrating AI tools into airports relies on a few key best practices. Airports should start small “so you can properly scale,” he notes, citing the experience of receiving feedback that MIA's in-house app needed to be streamlined. “I sat with a group of fourth graders and said, ‘I have this great app in my airport – would you use it?’” says Jenkins. “What did they tell me? ‘No.’ Why? Because they’d have to delete something off of their phones, and they don’t want to,” he adds. “If a fourth grader is telling you that, what are we telling you?” Jenkins also referenced the need for airports to make sure prospective AI tools are fed with the right information, because “AI does hallucinate – it’s only as good as the data you’re drawing from.” Yahav Ran, CEO of digital airport communication firm Synect Media , believes that airports can best implement AI technology through customers’ most trusted travel accessory: the cell phone. “We believe mobile phones are essential as they are widely used, easily accessible, and an established resource for information seeking,” says Ran. Encouraging travelers to use AI-powered systems to search airport concessions and retail locations can be achieved through a two-prong strategy: awareness and simplicity. Airports should “implement a strong campaign to spread awareness about the service” at critical decision points, says Ran, ensuring that “passengers are well-informed about the AI-powered systems, increasing their usage.” Once travelers are aware of

how to use their mobile phones to engage with AI services, using already-familiar technology such as QR codes and tap-to pay checkout rather than external apps “avoids unnecessary delays or extra steps in generating an interaction,” adds Ran. Airports can also maximize the likelihood of passenger transactions by incorporating interaction between AI systems and in-airport digital displays, says Ran. “For example, if a passenger asks the AI for burgers, they will receive the information on their phone, and an icon of the food court with an arrow can appear on the nearby sign, with additional information if applicable.” Ran adds that airports can even ensure accessibility through tools like the ReverseAI concession-searching product, which automatically detects the users’ native language. “This capability is particularly beneficial in international airports and as international travel increases,” says Ran.

Above: Maurice Jenkins, chief innovation officer at the Miami Dade County Aviation Department, has a goal to “go from being proactive to being predictive” with implementation of AI.

Speaking on an AI-focused panel at the AMAC Business Diversity Conference in Nashville, Jenkins noted that airports have a wealth of untapped customer data that could be better funneled into concessions and retail strategy. “How do I help you have the ability to capture [passengers]... so you can generate revenue?” he says. In embracing new AI tools, “we want to go from reactive to proactive, but I want to go from being proactive to being predictive.” Deepak Nayyar, executive vice president and CIO at the Allegheny County Airport Authority, which runs Pittsburgh International Airport (PIT), says technology is at the forefront for the airport. “Post-COVID, many airports across the world are embracing a more commercially and customer-focused mentality, promoting themselves as shopping destinations. This shift plays a vital role in our digital transformation strategy which includes data and AI,” he says. Nayyar believes that AI offers “a transformative edge” to airports and retail partners in that it can boost non-aeronautical revenue sources such as retail concessions, duty-free shops, car parking, real estate, and food and beverage services. The team at PIT is “ just scratching the surface with AI,” says Nayyar, adding they currently use sensor data to monitor retail patterns during the airport’s rush hours. As the airport’s new terminal renovation project evolves, “we will be implementing a

Above: Deepak Nayyar, executive vice president and chief information officer at Allegheny County Airport Authority, sees potential for AI to increase non-aeronautical revenues at airports.

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ABCs” of proper data collection, says Christina Apatow, co-founder and CEO of AI-powered digital infrastructure company FetchyFox and a panelist on the recent AMAC panel. Apatow recommends that every airport and concessionaire considering incorporating AI tools both find a trusted tech partner and get certified in cybertools and data handling, lest they let their data fall into the wrong hands. “You don’t want your competitive data leaked to somebody else,” she says. When airports and concessionaires manage their data properly, AI tools can help them “reduce the cognitive load while pushing the commercial experience,” says Apatow, citing a FetchyFox tool designed to increase average order values by creating custom product combinations. “In less than four months, we can see a 25% to 50% increase in average order value by creating custom combos, cross-selling and upselling. When you look at the airport as an ecosystem rather than operating in a silo,” she adds, “then you can make magic.” “We’re all learning together,” says Nikki Harland, chief operating officer at Paradies Lagardère and fellow AMAC panelist of the industry’s adoption of AI tools. Harland notes that Paradies Lagardère frames the incorporation of AI new tools above all else around solving a pain point, adding, “There’s a lot of sizzle when you hear the buzzword ‘innovation’, but really, [technology] has to actually solve something that needs to be solved.” The team at Paradies Lagardère – which has employed AI in everything from customized visual merchandising displays to a partnership with the AI-powered Clockwork manicure machine – prioritizes tools that “drive things like speed of service, operations and productivity,” says Harland. Developing and incorporating different AI systems has been “a journey for us to learn, to test and to fail and to get back up again and try different solutions to solve different things,” she adds.

The Data Management Factor Industry experts cite secure, ethical data management as the biggest challenge to incorporating artificial intelligence technology into airport ecosystems. “Big organizations like airports are understandably risk-averse. They want to be sure a new technology is really ready, secure, and cost effective before getting involved,” says Nussbaum. “There are a lot of positives and benefits to all stakeholders in implementing AI but, of course, like everything else in life and technology, you have to err on the side of ethical, responsible and secure use of AI,” adds PIT’s Nayyar. “In a rapidly evolving landscape of artificial intelligence, building a responsible business use case for AI involves more than just keeping up with technological trends. It requires a mindful evaluation of the environmental (besides the societal) impact, ensuring that the adoption of AI technologies is not solely driven by the hype but by a genuine need and a clear return on investment,” he adds, citing PIT’s plan to collect and analyze in-store data as a predictive model for airport traffic and demand forecasting, enabling the “development of customized and targeted sales and marketing strategies which will help the passengers and also help our retail partners.” To stay secure , airports and concessionaires must follow “the

Above: Paradies Lagardère prioritizes AI tools that drive things like speed of service, operations and productivity, says Nikki Harland, chief operating officer.

One airport already marrying artificial intelligence and cutting-edge digital interplay is John F. Kennedy International Airport Terminal 4 (JFK), where LA-based communications platform Proto has showcased holographic, interactive appearances by celebrity Howie Mandel and installed curated programming from the Bronx Zoo in the airport’s busy terminal. Proto founder and CEO David Nussbaum says that Proto’s temporary programs have the capacity to become more permanent ones focused on customer interaction and transaction. “When Terminal 4 is ready for it, Proto’s AI can offer real-time flight updates, personalized advice, and showcase the terminal’s best art and food spots,” says Nussbaum. For their part, Port Authority of New York and New Jersey (PANYNJ) executives say that they are in the process of exploring potential AI uses around wayfinding and digital concierge services, product recommendations, digital product experience, real time information and assistance, multilingual support, customer feedback analysis, entertainment and product storytelling, resource and staff allocation based on predictive capabilities of AI systems and artificial reality for advertising purposes.

Left: LA-based communications platform Proto showcased a holographic interactive appearance by celebrity Howie Mandel and installed curated programming from the Bronx Zoo in JFK Terminal 4.

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Above: Jordi Martin-Consuegra, the deputy CEO and president, North America, Avolta, says the company is harnessing AI for back of-house functions such as basket analytics and tools that identify optimal store inventory.

Above: Paradies Lagardère has employed AI in everything from customized visual merchandising displays to a partnership with the AI-powered Clockwork manicure machine

Jordi Martin-Consuegra, the deputy CEO and president at North America Avolta and another participant on the AMAC panel, notes that the adoption of new technology like Amazon’s Just Walk Out self-checkout system, QR codes and mobile pay has already “been embraced” by the traveling public. Airports are now in a “second wave” of leveraging AI’s capability, he adds, noting that Avolta has been exploring collaborations with various technology startups on potential tools to implement in their concepts. “We’re seeing very exciting stuff, for instance, in terms of conversational technology,” says Martin-Consuegra. “We’re trying to build our own large language models with all the information we have about stores, and offer it in a ChatGPT format to us, to our managers, restaurants and stores, so we can tell them in the morning: ‘Hey, these are the three things you need to worry about today: you have a problem with these products that are usually best-sellers … go check out what’s happening,’” says Martin Consuegra. “We’re piloting this solution

to assist our people around the business better.” Avolta is also working on AI tools around commercial excellence solutions like basket analytics and tools that identify optimal store inventory based on customer demographics, says Martin-Consuegra. AI solutions can also be leveraged to help ACDBE concessionaires in the RFP process, experts add, both in systems that can detect bias within the selection process and through tools that ACDBEs can use to power their RFP preparation. Using AI tools “could make those groups more competitive in the [RFP] process,” says Paradies Lagardère’s Harland, “and it goes back to the accessibility of information, the speed of information. If I was a smaller business with fewer resources, this could be something that boosts the opportunity and increases access [...] and will help them drive a result.” And as for the fear around AI replacing people? AI should “enhance what you do, not detract from or replace human capital,” says Jenkins, emphasizing that employees should be dealt in as stakeholders in the AI integration process.

“I’m bringing these points to the table – I’m talking about some of this technology [to employees], I’m not just testing it or rolling it out,” says Jenkins. “No matter how good the technology is, if employees aren’t brought in from day one, they will also kill it.” Harland believes that a fear that companies will lose the human touch is affecting the speed of [AI] adoption in airports overall. The team at Paradies Lagardère believes “there are just things that humans have to do, and we will make sure that that continues, but the use of technology overall – and the use of AI in particular – maybe will allow us to redeploy resources to where we actually need more of that human touch.” Experts like Jenkins agree, saying that to maximize the customer experience, airport and concessions staff must take the risk of forging ahead with technology still in development. “Technology shifts and this industry shifts, and you’re going to have to shift,” says Jenkins. “You need to be agile enough to pivot when necessary.”

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THE LUXURY Despite Declining Demand, High-End Retail Has Its Place In Airport Concessions

BY SALLY KRAL

Consumer shopping habits have changed drastically in recent years, and this is particularly clear in airports. “People can get anything they want, likely cheaper, at the press of a button now,” points out Alan Gluck, principal consultant for the global airports’ commercial service line at ICF. Because of this, he argues, airport retail outside of travel essentials has taken a substantial hit. “Specialty retail has cratered,” he says. “And luxury brands, if non-duty free, are along for the ride. The market for duty free luxury brands is much smaller now.”

Above: LAX’s luxury brand lineup includes the Larchmont Junction store, which offers brands like Louis Vuitton, Chanel, Dior and Gucci. Photo Credit: URW Airports Right: The landscape for luxury brands at Los Angeles International Airport has remained consistent over the past decade, though demand is mostly within the airport’s duty free stores. The airport offers standalone duty paid luxury stores as well, including Hugo Boss, Tumi, and Allsaints.

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