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1. $600m bid to woo `transumers'

1. $600m bid to woo `transumers'
Dennis Eng, The Standard 9 December 2002

If everything goes according to plan, this time next year passengers at Hong Kong International Airport may want to spend more waiting time at the airport.

The operators hope a bold HK$600 million expansion and redevelopment of the SkyMart East Hall retail space will make shopping there more enticing and boost non-flying revenue, according to Airport Authority commercial director Hans Bakker.

``About 90 per cent of airports are built on the principle of getting passengers from point A to point B like human cargo. But this should not be the case as people like to experience things,'' the former managing director of Schiphol International Airport in Amsterdam said.

Bakker is trying to improve on the fact that Hong Kong International Airport has only 0.6 square metres of retail space per passenger while Schiphol has 1.5 square metres along with Singapore, while Sydney has the most with 2.75 square metres.

He adds that passengers, especially large tour groups, emerge from immigration and tend to linger, congesting traffic flow to retail outlets and duty-free shops on the floor below. ``We should provide customer satisfaction so we have to balance technology, efficiency and functionality with entertainment and experience,'' he said.

Construction is already under way on the plan, which involves extending the triangular East Hall outwards to boost retail space by more than 40 per cent to 6,800 square metres on Level 7 and more than double to 8,300 square metres on the floor below.

The additional space on Level 7, just beyond passport control and the security checkpoint, will allow the number of fast-food outlets to increase to six from the current two. There will also be new fine-dining alternatives in an open seating arrangement and a public lounge area because ``the place is basically for people to orient themselves''.

Bakker's plan for Level 6 is geared more towards creating an upmarket retail environment targeting brand-conscious mainland visitors. Specifically, there will be a Boutique Alley of 25 luxury brands as well as gold jewellery and electronics stores to encourage impulse buying.

``Our surveys revealed that people wanted more brands,'' airport authority retail and advertising general manager Eva Tsang said. ``Previously, our retail mix targeted mainly Japanese and Taiwanese visitors but recently the marketing has focused on mainland customers as they have greater spending power and are more willing to spend.''

The switch is not surprising. According to the Airport Authority, just under 50 per cent of total passengers are Japanese, Taiwanese and mainland Chinese compared with 20 per cent for Singapore. Mainland visitors make up the lion's share of any passenger group with about 17 per cent of departures, transfers and arrivals and Bakker expects a year-on-year increase of 10 per cent in their numbers. On average, they spend about US$67 (HK$522.60) on retail goods and US$10 on food.

Tenants, too, are warming to the plan, partly because the Airport Authority has sweetened the offer.

When the airport first opened its doors in 1998, the retail revenue-sharing scheme required tenants, who signed leases of between 30 months and five years, to cough up a fixed minimum payment on expectations of healthy passenger traffic flow. As this has been slow to materialise, Bakker says the minimum payment is now linked to the total number of passengers ``so this is really a minimum per passenger and the onus is on us to generate greater passenger traffic''.

``We have received far more bids for the 25 luxury brands so we can create the best brand mix,'' he said. ``We expect at least a double-digit return on our investment.''

One area the airport is aiming at specifically is the transfer passenger.

Bakker says the transfer passenger earns an average monthly income of HK$55,000 whereas well-wishers in the arrivals hall take home about HK$38,000 a month. The transit passenger also stays at the airport for about four hours compared with two hours for departing passengers. He expects the 11 million transfer passengers to rise from the current 10 per cent of total passengers to 32 per cent in the coming years.

``They are transumers who buy on the way to their destination so it's mostly impulse buys,'' he said.

Although optimistic about this target market, Bakker admits that when direct flights between Taiwan and the mainland get the green light, ``we may see a dip of about 5 to 8 per cent if there are direct flights from Taiwan to China but we are the biggest hub in Asia and we have the critical mass of location, connections and frequency of flights''.

In fact, Bakker, who joined the Airport Authority in June 2000 after 23 years with Schiphol, is already mulling ideas in his head for similar plans in the West Hall.

``It will be more service-oriented with shower facilities and rest areas as the west wing services mostly Japanese airlines with peak hours between 11am and 3pm,'' he said.

He also hopes to appeal to the airports 34 million passengers with a new Sky Plaza complex in front of the terminal. Scheduled to open in 2005, ``it will be high in content, catering especially to tour groups from the mainland. We want to create a destination for meeters and greeters,'' he said.

But, unlike Schiphol International Airport, which has its own casino, ``we can't have gambling under Hong Kong law''.