Research Projects

Revenue and Customer Satisfaction Decision-Enabler Model

A research paper and computational model is needed to help airports thoroughly look at financial decisions for new infrastructure that result in improved processing rates, increasing non‐aeronautical revenue justifications, prioritizing gating requests that match with changes in airline network models, creating the best financial return for all parties, and improves the overall satisfaction of passengers (check‐in, security screening, border clearance, etc.).

 

The paper and model will be developed to match the specific airport role (hub, non‐hub, small hub, etc.) in order to tailor results to the changing roles of airports as carriers hub/de‐hub operations and evolve with different forms of low‐cost carrier (LCC) operations.

Background (Describe the current situation or problem in the industry, and how your idea would address it.)

The infrastructure deficit at airports is well published by ACI North America at $100 billion 2017‐21. This gap is accelerating amidst continued growth of air travel. Limited sources of funding and other structural systems issues are prompting a wholesale rethink into the way that airports move to the next level. While airports typically determine that they need to renovate or build new because they have outgrown or are outgrowing existing facilities, there is limited input from two key areas: revenue drivers and quantifiable improvements in customer satisfaction.

There is the need to produce a set of guidelines to make sure that data collected today are helping with the decisions to justify the outcomes of tomorrow. Airports, terminal operators and airlines collectively have efforts associated with the overall terminal experience. There are also a number of other actors that have an influence over the way gating, passenger processes, security screening and border processing shape a facility.

The genesis of this problem statement was a think‐tank session by Optimas and InterVISTAS to review the experiences working in revenue management at airports, hub and connectivity improvements, process facilitation and customer satisfaction. There was an initiative done by project proponents to develop a revenue model per minute of wait time in the past that helped to inform decision‐making at airports. This was used to build upon literature associated with major changes at airports.

Problem Statement Owner Information:
Name: Solomon Wong
Title: Executive Vice President
Organization: InterVISTAS Consulting
Email: solomon.wong@intervistas.com
Phone: 604‐717‐1854

Problem Statement Contributors:

Name: Susan Stiene
Title: President & CEO
Organization: Optimas Management Group
Email: Susan.Stiene@optimas.ca
Phone: 604‐790‐5051

Name: Ed Baklor
Title: Chief Commercial Officer
Organization: LaGuardia Gateway Partners
Email: Ed.Baklor@laguardiacentral.com
Phone: 917‐561‐8529

Objective (What is the desired product or result that will help the airport industry?)

A research paper and computational model is needed to help airports thoroughly look at financial decisions for new infrastructure that result in improved processing rates, increasing non‐aeronautical revenue justifications, prioritizing gating requests that match with changes in airline network models, creating the best financial return for all parties, and improves the overall satisfaction of passengers (check‐in, security screening, border clearance, etc.).

The paper and model will be developed to match the specific airport role (hub, non‐hub, small hub, etc.) in order to tailor results to the changing roles of airports as carriers hub/de‐hub operations and evolve with different forms of low‐cost carrier (LCC) operations.

Approach (Describe in general terms the steps you think are needed to achieve the objective.)

The proposed research involves the
following:
Task 1: Synthesis of existing research
The first task involves a compilation of existing ACRP reports, industry sources as well as other analyses involving
airport financial models. The researchers will compile a literature review to synthesis existing research on the way
capital decision

making is advanced (e.g., time value of passengers, block

hour operating costs) as well as a critical
analysis of revenue drivers for airports, terminal operators and airlines.
Task 2: Conduct surveys
Airpor
ts continue to evolve in the role they serve with legacy network carriers, changing alliances and interline
agreements as well as the emergence of low

cost carrier models. Recent mergers have recalibrated roles for
hubs/non

hubs as well as focus cities for
low

cost and ultra low

cost carrier models. International growth is up 20%
over the past five years and continues to lead the growth globally, as well as in the United States.
A survey will be conducted of airports to ascertain their existing methodologi
es to conduct revenue and analyses of
customer satisfaction to drive results. While some (e.g., ACI Airport Service Quality) are published cross

airport
comparators, the survey will uncover the kinds of
methods used to be decision

enablers for capital expe
nditures for
renovations, new

builds or optimizing facilities. The use of common use self

service will also be considered to
determine if it drives turn times, flexibility, overall satisfaction, and revenue.
Task 3: Develop base revenue model
Part A
A model will be developed to provide a baseline that includes but is not limited to aeronautical charges, aircraft
parking fees, passenger spend rates by concession type (i.e., Duty Free, specialty retail food/beverage).
The model will provide results to he
lp with gate assignment, such as revenue generators around
security screening checkpoints, as well as:
a. Time series analyses to determine progress for a strategy
b. Flow of passengers
c. Spend per flight before a terminal renovation has been done compared to after
Part B
A revenue model will also be created to quantify the benefits from the airline perspective, as improved passenger
processes generally allow for reductions in minimum connect times. These improvements in turn drive higher
passenger volumes and/or more efficient aircraft scheduling at connecting airports. Using airline network modelling
software, the researchers will demonstrate the impacts of minimum connect time reduction for air carriers in terms of
incremental demand stimulation
and increased revenue for the airline and airport. This will provide the ability to
model the cost per passenger from both the airport and the airline's perspective, and inform the actions to be done to
reduce the cost if there isn't sufficient return on investment for the airline.
At the same time, there will also be a revenue model to calculate the potential retail/concessions revenue per seat by
destination by carrier (home vs international carrier). Different types of passengers have spend rates that can factor
into potential incremental spend.
Task 4: Revenue per hour of day
The researcher will outline a revenue model per hour of day that will help for change management. Reduction of
TSA screening lines and CBP processing is one emerging area that r
elies on the customer service aspects. However,
with a model developed by the research team, there will be the ability to calculate the "opportunity cost" of lost
revenues from the basis of spending by category of retail/concessions.
The model developed i
n Task 4 will also guide the amount of funding for process re

engineering or developing
facilities for the government agencies and airlines to work quicker while helping the agencies to increase the
performance of their mandate.
Task 5: Revenue and custom
er satisfaction per annum compared to capital investment
Making business decisions for new terminals and renovations can be generated from a model developed in Task 5. If
you have an area of the building that you spent a great deal of capital on, and ther
e is a return on investment by virtue
of customer satisfaction and high spend rate increases, when you go to remodel another area you will know how to
determine your financial proposal for submission to senior management. The model in Task 5 will be able t
o
compare the payback period and return on investment tied specifically to customer satisfaction rates. This model will
particularly be useful to make sure a focus is placed on customer satisfaction
with ageing facilities, as well as management of community approval issues.

Cost Estimate and Backup (Provide a cost estimate and support for how you arrived at the estimate.)

The recommended funding is $400,000, with about $100,000 for each of Tasks 3, 4 and 5 and $50,000 for Tasks 1
and 2 each.
The research period is 15 month in duration, including a 3

month period for revie
w.
Although there is a move to increase the amount of federal infrastructure spending, every indication is that there will
be a gap requiring local, state and private funds. The shortfall and quality of capital projects have generated major
spending proje
cts (e.g., LAX, ORD, LGA, etc.). However, there is the need to provide practical guidance to help with
both the development/prioritization of projects as well as the ongoing operations/optimization of existing facilities.

Related Research - List related ACRP and other industry research; describe gaps (see link to Research Roadmaps above), and describe how your idea would address these gaps. This is a critical element of a synthesis topic submission.

The following i
s a list of related research
ACRP Report 120: Airport Capital Improvements: A Business Planning and Decision

Making Approach

consists of
a guidebook and a spreadsheet

based cost

estimating model to assist practitioners with estimating the cost of
construction projects regularly proposed in an airport's capital improvement plan.
ACRP Project 01

19: Airport Capital Improvements: Developing a Cost

Estimating Model and Database

describes
the research process to develop and test a cost estimating mod
el and database intended for use during airport capital
planning.
ACRP Project 03

19: Passenger Value of Time, Benefit

Cost Analysis and Airport Capital Investment Decisions,
Volume 1: Guidebook for Valuing User Time Savings in Airport Capital Investment Decision Analysis

provides an
up

to

date understanding of how recent airport
developments, such as changes in security measures since 9/11, the
proliferation of airside passenger amenities, and the adoption of new technology, have changed the way travele
rs
value efficient air travel.
FAA: Airport Benefit

Cost Analysis Guidance

provides clear and thorough guidance to airport sponsors on the
conduct of project

level benefit

cost analysis for capacity

related airport projects.

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Idea No. 104

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