BIG PEARSON RETAIL UPSIDE SEEN
MOST EXPENSIVE TO LAND Encourage passengers to spend more to cut costs: airport expert
Toronto’s Pearson International Airport has overtaken Tokyo’s Narita as the most expensive airport in the world for airlines to land, a recent survey shows, yet retail generates a smaller proportion of total revenue at Pearson than at any other airport in North America.
Pearson’s management blames ground rent paid to Ottawa for the skyhigh landing costs, but those costs could be reduced by encouraging passengers to spend money at the airport, said Mark Knight, regional director of British Airports Authority USA.
BAA says its seven U.K. airports are among the cheapest in the world for landing and take-off fees because of the heavy retail component, said Paul Weber, BAA’s international retail director. Mr. Weber and Mr. Knight were in Toronto this week for the Airports International Conference.
BAA also operates retail services at several airports around the world, including four in the United States.
The company generated $1.3-billion from retail services in 2004. It earns more revenue from retail than it does from airport charges.
At Gatwick airport, the retailing is in such demand that local residents who are not even travelling go there to shop, Mr. Knight said.
Retail outlets at BAA’s Stansted airport outside of London have helped make it “the low-cost carrier capital of Europe,” said Mr. Knight. Stansted is only the fourth- largest airport in Britain. It has approximately 21 million passengers a year, which is seven million fewer than Pearson.
Yet its retail revenue for 2004 was approximately $140-million compared with $ 108- million at Pearson. Twenty eight million passengers, as well as people meeting and greeting them, visited the airport last year.
“[Pearson] has enormous potential,” said Mr. Knight. “ It’s not only a very strong international airport, but it’s serving one of the major cities of the world,” he said.
“ Having spent so much money on new terminals, they should be more innovative and generate more revenue from commercial services,” said Tae Oum, president of the Air Transport Research Society, who is also professor of transportation at Sauder School of Business at the University of British Columbia. The airport is in the middle of a $ 4.4- billion redevelopment plan. The first phase of that plan was completed last year with the opening of the new Terminal 1.
But the potential for more retail at Pearson is limited, said Howard Bohan, director of properties and concessions at the Greater Toronto Airport Authority, which manages Pearson.
Mr. Bohan said further retail expansion would be difficult because the airport is “landlocked.”
He also said BAA’s U.K. airports are able to generate more duty- free sales than North American airports. Focus groups indicate that users of Pearson are not interested in an “over-commercialized” BAA-style approach to retailing, he added.
However, Mr. Bohan said the airport’s management is considering changes in the airport’s retail mix.
“ Air Canada is marketing Toronto as a hub for long- haul flights ... so we’ll have to focus on those passengers who’ll spend five or six hours in the airport,” he said. That could mean more bars and restaurants, as well as spa-like services, he said.