Business of Travel Needs More Business Travelers

For travelers, vacant airport car lots and empty food courts may mean rock-star parking spaces and a quiet pre-flight meal. But for airport executives during a pandemic, those scenes represent turbulent times and a lot of red ink on the ledger.

What makes a bad situation worse, airport officials say, is the absence of business travelers.

“Overall, year-to-date traffic is down significantly. Right now, a large majority of customers are leisure travelers, who typically spend less while at the airport than business travelers,” said David Storer, Director of Business Development at Pittsburgh International Airport. “We greatly appreciate all those who are flying during the pandemic, but the lack of business travel worsens the financial impact.”

Since March, the COVID pandemic has precipitated a 65 percent drop in passenger traffic, and video conference technologies like Zoom, WebEx and Skype continue to keep the business traveler at home.

Airports long for the return of their biggest spenders, said Amy Miktus, Vice President of Fraport Pittsburgh, which operates the airport’s concession program.

“As frequent fliers, business travelers spend more time in airports and are more familiar with the restaurants, services, and retail offerings,” she said. “They also dine out and use their expense accounts to cover meals and related travel expenses. As a result, they may use more of their discretionary income on other purchases such as a gift or souvenir from their trip for the kids.”

Everything looked good back in January when, Miktus said, the airport was on track to exceed the 2019 sales per enplanement (SPE) figure of $14.69. (That’s the average amount spent by each ticketed passenger.) Instead, through June of this year, SPE has dropped to $12.50 and overall sales have sunk further than the 65 percent drop in traffic.

Pittsburgh is hardly alone, as airport traffic has dropped similarly across the country. That’s a lot of money—or non-aeronautical revenue, to be precise—being lost.

Airport data reported to the FAA showed that total revenue from terminal concessions was $2.07 billion in 2017. Revenue from food and beverage programs at U.S. airports represented 39 percent of the total 2017 terminal concessions revenue; retail represented 38 percent.

Because of the slow sales, only 26 of PIT’s 76 concessionaires are currently open. That same scene is reflected outside the airport where the Extended Economy lot—PIT’s largest section of parking—has been closed for about five months.

Parking fees, which brought in more than $50 million for PIT in 2019, are usually an airport’s largest stream of non-aeronautical revenue. Like so much else in 2020, there has been a significant shift in not only parking revenue, but in habits as well.

“In past years, Thursday and Friday were the busiest revenue days,” said David Paga of Grant Oliver, the management firm that operates the airport’s parking lots. “With the lack of business travel, now our biggest numbers are occurring on Sunday, Monday, and Saturday, as leisure travel drives our revenue.”

Paga’s analysis shows that passengers traveling for work were the largest slice of the parking revenue pie. Daily revenues of more than $100,000 were common—at times coming close to $200,000—but the highest total since mid-March has been a Sunday that inched over $45,000.

The airport’s parking garage, a haven for the cars whose drivers are on expense accounts, is barely breaking 30 percent occupancy this year on Wednesdays, the day when most business travelers are away. Typically, Paga said, occupancy is at 90 percent mid-week.

Perhaps the biggest indication of the decline in business travel is that 30 of 85 monthly lease holders in the airport’s Gold Key lot, with the closest and easiest access to the airport, have suspended their leases.

To attract more parkers, the fees in the two lots that have remained open have been slashed from $24 to $16 per day in the Short Term parking lots and from $16 to $8 in the Long Term parking lots.

Paga added that parking revenue will slowly come back as the number of passengers climbs. Back inside the airport, Miktus and Fraport are looking at a plan to be ready when customers return.

“It has been a gradual process, as demand and fliers very slowly return,” Miktus said. “Our goal from the outset has been to maintain a service level to meet travelers’ needs while they are at the airport.”

Airport Finance 101

Generally, U.S. airports do not use local tax money for operating expenses. Airports do use federal and state grants, in addition to other funds, for projects like runway repair, terminal construction, and a host of capital projects. For operating funds, there are several different ways airports make money that are divided into two categories: aeronautical and non-aeronautical. While it sounds simple enough, here is a breakdown of what type of revenue goes to each category.

Aeronautical revenue

A quick and easy definition would be: anything that relates to the process of aviation. Most of the money generated by an airport comes from aeronautical revenue, which includes airline terminal space rentals, hangar rent, airline landing fees, and usage fees for terminals, airfield, gates, and services.

Non-aeronautical revenue

This type of income is becoming increasingly important to airports because it is money spent by many different airport customers and users, not the airlines. More non-aeronautical revenue means the fees charged to the airlines can be lower, spurring more flights and destinations.

Types of Non-Aeronautical Revenue

Ground Transportation Fees

• Parking: Oftentimes, parking fees are an airport’s largest source of non-aeronautical revenue. Last year, Pittsburgh International Airport brought in $51 million in parking revenue.
• Taxis, Uber, Lyft, shuttles, and limos: Any vehicle that is being paid to pick up and transport passengers at the airport is required to have an authority-issued permit. Additionally, that service is required to pay per-visit fees to the airport.
• Car rentals: Rental car fees and rent paid by the rental car companies account for a major portion of non-aeronautical revenue.

Concessions and Retail

It’s no surprise that, with one of the most respected retail and concession programs in North America, that revenue from shoppers is among the best at Pittsburgh International Airport. According to a 2013 Airports Council International-North America survey, airline passengers at PIT had a median household income of $75,000 to $90,000, compared to a national median of a little more than $52,000.

Advertising, development, and miscellaneous

Airports typically have lots of land, so office buildings, business and industrial parks, retail centers, hotels, and delivery hubs can be lucrative commercial projects on airport property. Additionally, indoor billboards and digital signage, as well as sponsorships and branded areas, can be another source of revenue.