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The Passenger and Customer Profile 41 The success of any concession program partially results from developing a thorough knowl- edge of the airport’s market segments and adapting the concession mix to the needs, wants, and preferences of these segments. These market segments must first be identified and defined and may vary significantly from one airport to another and from one terminal or concourse to another in the same airport. For example, Terminal 4 at New York’s Kennedy International Airport has a very different customer profile compared to the customer profiles at other terminals at the airport because of the large and diverse number of airlines operating from that terminal. Furthermore, the wants and needs of the customers should be defined in terms of their pref- erences for concession types and categories, products, services, and brands. The definition of these preferences is most often determined using market research tools, such as direct customer surveys. Only after these preferences are defined will it be possible for the airport operator to fine-tune its concession program to respond accordingly, optimizing the locations of conces- sions and maximizing the level of service, gross sales, airport revenue, spend per passenger, and space productivity. 4.2 Passenger Segments Passengers using an airport may be divided into several subgroups that behave quite differ- ently while circulating throughout the terminal building. This behavior affects their propensity to patronize the concession program and influences the locations of the concessions, as well as the products and services offered. Several variables may be used in segmenting an airport’s cus- tomer base. The most common passenger segments are described in this section. 4.2.1 International Departing Passengers The proportion of international passengers flying out of an airport will affect the size and loca- tion(s) of the duty free outlets, the types of specialty shops, and the types of food offered. Market research has demonstrated that international departing passengers have a far greater propensity to spend at airport concessions than other passenger segments. In addition, these passengers are the only ones eligible to purchase goods on a duty and tax free basis at duty free shops, although some duty free operators are now offering a limited selection of tax-paid merchandise to all passengers. Because of their specific check-in and boarding processes, airlines may often require that inter- national passengers arrive at the airport more than 2 hours in advance of their scheduled depar- ture time. This longer dwell time is conducive to shopping and eating. Airport operators should try to capitalize on this longer dwell time as much as possible. Conversely, airlines may place lim- its on how early a passenger can check baggage for a flight, creating demand for landside con- cessions (pre-security). 4.2.2 International Arriving Passengers The international arriving passengers have special needs, such as currency exchange services and baggage carts within the post-security international arrivals zones. International passengers expect these needs to be accommodated, as they are considered customary at international airports. Although arriving passengers typically show minimal interest in food, beverage, and retail concessions compared to departing passengers, careful consideration should be given to conve- niently locating some service concessions of interest to these passengers. International terminals have certain advantages compared with domestic terminals. First, these arriving passengers are deplaning from long international trips and have just experienced the stress of Immigration and

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42 Resource Manual for Airport In-Terminal Concessions Customs inspection. Second, international passengers reaching their destination are more likely to be met by friends or relatives. Finally, arriving international passengers are more likely to be funneled through a single exit from the secure Customs area, allowing for concessions geared to arriving passengers and their meeters and greeters to be clustered, preferably in visible locations. 4.2.3 Domestic Departing Passengers Departing domestic passengers account for the largest percentage of concession sales at many airports. The types and numbers of these passengers should be carefully considered in determin- ing the concession mix and the location of the concessions and in evaluating the overall perfor- mance of the terminal concession program. These passengers are often encouraged to arrive at the airport at least 2 hours before their flights are scheduled to depart, which, in many cases, allows ample time for clearing security and making purchases at the post-security concessions. In addi- tion, because of the reduction in the offer of onboard food, domestic departing passengers have become major consumers of grab-and-go food that they can take with them on their flight. 4.2.4 Domestic Arriving Passengers Although arriving domestic passengers are most often anxious to leave the airport to reach their ultimate destinations, they may constitute a good market for the purchase of convenience items to take home or to their place of accommodation. A limited amount of concessions offer- ing concession services to domestic arriving passengers may be viable, but the revenue potential is likely to be limited. Arrivals area concessions are often not financially viable on a standalone basis, but may be marginally profitable when packaged with other concession units serving departing passengers. 4.2.5 Connecting Passengers The circulation pattern of connecting passengers within the terminal building is significantly dif- ferent from that of O&D passengers. Furthermore, layover times can be short for connecting pas- sengers, so concessions on these passengers’ circulation path or near the departure gates are best located to take advantage of this segment’s buying potential. Some connecting passengers may remain airside while others may need to exit the security area to access another secured terminal area. The specific circulation pattern at the airport and the route and volume of passengers should be assessed to ensure that the right assortment of concessions in the right locations is offered to this passenger segment. The importance of this segment can vary considerably from one airport to another, depending on the number of connecting passengers and their behavior patterns. 4.3 Other Customer Segments Concession customer segments may be determined using other segmentation variables, such as demographics, nationality, destination, or trip purpose (business or leisure). These variables greatly influence passenger behavior and the propensity to shop and make purchases at airport concessions. The value of the transaction is also influenced by these variables, as well as by vari- ables such as the income of the passenger. An airport’s customer base also includes nonpassenger segments, such as meeters and greeters waiting for arriving passengers, well-wishers accompanying departing passengers, and employees who can generate a significant portion of a concession program’s sales. These segments are described in more detail in the following sections.

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44 Resource Manual for Airport In-Terminal Concessions 4.3.2 Business versus Leisure Travelers Passenger surveys and studies have demonstrated that business and leisure travelers exhibit different behavior and spending patterns. The typical leisure traveler, who is using discretionary income to travel, is naturally more sensitive to pricing than the business traveler on a corporate expense account. The proportions of business and leisure travelers affect the mix of products, services, and concessions in a concession program, as well as the pricing strategy. Business travelers tend to arrive at the airport much closer to their departure times and thus have shorter dwell times in the terminal building. Concessions must be located directly on their circulation path, as these travelers do not have much discretionary time or inclination to wan- der and browse in a terminal to find what they might like to purchase. On the other hand, leisure travelers, especially those who do not fly frequently, are more likely to arrive at the airport earlier than business travelers and, thus, have longer dwell times in the terminal to browse and shop. Additionally, leisure travelers are more likely to be accompanied by family members or other traveling companions, which will also influence the products/services included in the concession mix. 4.3.3 Meeters and Greeters Surveys have shown that the ratio of meeters and greeters to passengers varies significantly with the demographics of the passengers served at an airport. This ratio is much higher for some nationalities than others. Meeters and greeters tend to remain in the arrivals area and are not likely to wander far from the location where they can meet arriving passengers. The optimum concession locations to serve this market vary depending on the terminal. In some cases, meeters and greeters congregate on the departures level near the exit from security or in conveniently located “meeting places” established by the airport operator. In other termi- nals, arriving passengers exit the secure zone in the baggage claim area. Where passenger flow is dispersed among many exits from the secure area, the opportunity to create a critical mass of concessions in one location and a profitable concession program is reduced. Ideally, meeters and greeters would wait on the same level as baggage claim, creating a larger market for concessions in the arrivals area. 4.3.4 Well-Wishers Similar to meeters and greeters, well-wishers, or people accompanying departing passengers, are not allowed in the post-security areas. Pre-security concessions offer an opportunity to serve this segment before the accompanying passengers enplane. For example, people accompanying departing passengers may wish to have a meal or a beverage with the passenger(s) they accompany before they proceed through security. The optimal amount and the proportion of pre-security concessions are influenced by the specific ratio of people accompanying departing passengers to departing passengers at an airport. Cultural differences can affect demand in this market segment; people accompanying depart- ing passengers from some cultures are more likely to spend time with passengers at the airport before they leave on a trip. 4.3.5 Employees Employees represent an important market segment of potentially repeat customers and may generate a significant portion of concession gross sales, especially in the food and beverage and

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The Passenger and Customer Profile 45 Retail 18% Food and beverage Visit weekly 26% 4% Visit daily 45% 0% 10% 20% 30% 40% 50% Source: Survey conducted by LeighFisher in 2004. Figure 4-3. Percentage of airport employees visiting concessions at a U.S. west coast international airport. convenience retail categories. This segment is often overlooked, but surveys have indicated that employees can account for as much as 40% of some quick-serve sales, particularly for fast food concepts with low price points. To illustrate this fact, Figure 4-3 shows the proportion of employ- ees visiting retail and food/beverage concessions on a daily and weekly basis at a U.S. West Coast international airport as determined through a survey. Figure 4-4 illustrates the average weekly expenditure of airport employees in retail and food and beverage concessions at the same airport. While some employees may only have pre-security access, some have a security clearance and may be potential customers for post-security concessions. It is therefore important that the air- port operator consider the proportion of employees with post-security access when determin- ing the concession mix and price points. Food and beverage $38.50 Retail $6.44 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 Average expenditure per week Source: Survey conducted by LeighFisher in 2004. Figure 4-4. Average employee expenditures per week at airport concessions.

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50 Resource Manual for Airport In-Terminal Concessions residents travel to the airport to spend time and enjoy a meal with the traveler before departure. This cultural trait can be best observed at airports in Asia, such as Singapore Changi and Seoul Incheon International Airports, where there are multiple restaurants, both casual and formal, in addition to quick-serve food courts in pre-security departure areas. Narita International Airport’s Terminal 2 has 15 pre-security food and beverage units, including Japanese, Chinese, and west- ern restaurants. Understanding the available opportunities can help airport and concession managers make sound long-term concession planning decisions. Survey questions for meeters/greeters and well- wishers typically cover the following: • Number of persons in party • Age group • Gender • Frequency of visits to airport • Opinion on concessions and services in terminal • Preferences for concessions and services • Time spent in airport • Amount spent in airport • Distance traveled to airport • Household income 4.6.3 Airport Employee Surveys Employee surveys are usually conducted to measure satisfaction with airport facilities and services, obtain information for transportation or concession planning, and address issues such as communications and knowledge of airport procedures. The survey questions typically cover the following topics: • Category of employer (airline, airport, tenant, or other) • Full-time or part-time employee • Frequency of concession visits and average spend per concession category • Opinion on location of concessions within terminal • Preferences in terms of brands, products, etc. • Age group • Household income • Gender 4.6.4 Other Surveys Several other survey methods are available to airport operators, such as the following: • Self-completed surveys, which are handed out to passengers at or near their holdrooms, com- pleted by the respondent, and then returned either in person or by mail. If the surveyor remains near the passengers while they complete the survey, he or she can act as a resource if some respondents have questions about some of the questions. • Mail surveys, which are infrequently used at airports, mostly because of the wide distribution of airport customers around the world. This type of survey often yields a low response rate. • Telephone surveys, which are useful for surveying households and businesses in the area served by the airport, but not practical for surveying passengers. Face-to-face interviews at the airport are much more efficient than randomly telephoning the population of an airport’s catchment area. • Internet surveys, which are extremely inexpensive and have become increasingly popular in recent years. Although convenient in certain situations, these surveys have been criticized,

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The Passenger and Customer Profile 51 mostly because the sample of respondents could be biased. For example, people who are dis- satisfied with one or more aspects of airport service and wish to complain about it have a greater likelihood of responding to an Internet-based survey than fully satisfied customers. 4.6.5 Focus Groups Focus groups are used when the detailed opinions of members of a specific group are desired. Focus groups provide an opportunity for the airport operator or concession manager to discuss certain issues in more depth than could be achieved using a standard customer survey, with rep- resentatives of certain market segments, and to obtain qualitative data about the airport conces- sion program. The selection of individuals forming the focus group is of paramount importance, as these individuals greatly affect the results. A trained facilitator should be used to lead the dis- cussions and elicit in-depth opinions and their underlying rationale. 4.6.6 Concessionaire Interviews One often overlooked source of information that can be helpful in understanding an airport’s customers is the existing airport concessionaires. Concessionaires, particularly local managers, are on the front lines of customer service and can provide a wealth of knowledge about current customer behavior, gaps in the current concession program, and preferences of particular mar- ket segments. Regional managers and business development representatives of major concession companies can also help airport operators in understanding broader industry trends and how they may apply at specific airports. Concession consultants routinely interview current conces- sionaires when preparing concession plans for clients. While concessionaire representatives may be advocates of a particular view or policy that benefits their company, they can be a good source of front line information. Regular meetings with concessionaires are recommended as a means to develop an understanding of the market from those who serve it. 4.6.7 Advanced Market Research Techniques Consumer product companies use market research to understand their customers’ demographic status and lifestyle preferences. Consumer research firms conduct broad-based research of buying trends, income, lifestyles, family status, and residence using census and zip code data typically used in market research, advertising, retail location decisions, and other commercial applications. This extensive demographic research has been applied at Dallas/Fort Worth International Air- port using the Nielsen company’s Claritas market demographic identification and segmentation system. Capturing the zip codes of the airport’s originating and connecting passengers allows seg- mentation of passenger profiles into 63 distinct lifestyle groups that identify shopping and media preferences as well as key demographic and socioeconomic characteristics. Lifestyle groups are also characterized by urban density into four groups—urban, suburban, town and rural, and second city—and further classified according to socioeconomic rank and “life stage” group, based on the presence and age of children. This market research enables airport concessions staff to develop an in-depth understanding of their customers and their preferences for brands, products, and services. This information is also provided to current and prospective concessionaires, to enable them to better understand their cus- tomers. Furthermore, there is wide variation in the characteristics of the market in each of the air- port’s five terminals, allowing for further segmentation and tailoring of the concession offerings. The application of these advance market research techniques is discussed further in the case study of Dallas/Fort Worth International Airport included in Chapter 14.