'Growing traveler expectations and a need for personalization have encouraged airports to prioritize travel and re-think traditional layout/design.'
The Indian aviation industry has always played a pivotal role in providing national and international connectivity and being a key catalyst for the travel and tourism sectors. These key infrastructure and transportation nodes have seen increased activity and focus by the central and state governments over the last few years, which is likely to change all stakeholders’ dynamics positively. Currently, as the pandemic continues to drive the urgent need for innovative revenue streams, landside real estate development at airports will be essential to diversifying the risks and opportunities. Opportunities for private sector participation with domestic and international developers/investors have been made available across various locations in the country. In an exclusive interaction with the Financial Express Online Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa, CBRE talked about airport development, its impact, trends and more. Excerpts:
What is your opinion on airport development and its future scope in the country?
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Besides being essential travel nodes, airports have been a significant source of revenue for the country’s travel and tourism sector. However, a shift in passenger priority towards a comfortable air travel experience has led airports to deploy innovative solutions. Development of retail chains, lounges, hotels, convention centers on the landside will provide a convenient travel experience while creating Non-Aeronautical Revenue (NAR) streams for airports.
Since the onset of COVID-19, these revenue streams have been at the center of airports’ resilience – ensuring limited but stable revenue inflow. Landside real estate development, including consumer services like car parking and rental services, commercial offerings like hotels, high-tech office/ business parks, and advanced healthcare infrastructure, have significantly driven airport experience as these cater to passengers’ basic and premium needs. Besides opening newer avenues for revenue generation, landside development will be crucial to driving real estate growth. By enabling appreciation in the value of nearby land, airport development will induce a positive sentiment in the realty market.
How will monetization of airports and the landside around it help boost the economy?
Owing to the reduced passenger footfall, the development of landside real estate has become a crucial source of NAR and an integral part of the overall airport business model. These additional revenue streams are gradually driving primary business functions – filling revenue gaps left by the demand-supply disparity in the aviation sector.
While offering extended revenue avenues for airports, landside RE development has become pivotal to unlock the growth potential of the aviation sector. Besides making air travel more customer-centric, the development of airports has been attracting increased foreign investments, thus providing a boost across sectors- Aviation, Tourism, and Real Estate. Further, with increased private participation in development projects and the government’s initiatives to make air travel affordable, airport development will be a solid factor to drive resilience and growth in the economy.
How impactful is private participation going to be in boosting the aviation and tourism infrastructure of the country?
India, at present, has 29 international and 114 domestic operational airports. Through the UDAN scheme, the central and state governments aim to develop more greenfield projects—encouraging more participation from the private sector. In 2019, the Airports Authority of India (AAI) proposed six airports for operations, management, and development under Public-Private Partnership (PPP) which will possibly result in an increase in the non-aeronautical revenue from airport operations.
The lands not intended for aeronautical activities are instead used to cater to the demands generated by passengers—for hospitality development, retail development, warehousing, or commercial activities. In her budget address, the finance minister mentioned that the government would privatize 6-10 airports from tier II and III cities between 2021-22. These joint efforts of the public and private sectors would assure higher quality in the airport development projects and generate long-term revenues for the private players.
With the UDAN scheme and private participation coming to the forefront, while the economy is expected to witness a boost, do you think the growth will be steady and sustainable?
India’s civil aviation industry has emerged as one of the fastest-growing industries over the last few years. The government launched the UDAN Scheme in 2017 to tap the massive potential of airports in driving revenue and facilitating better connectivity to other parts of the country. The scheme aimed to develop 100 new airports by 2030, of which 70 would be set up at new locations. These upcoming airports are considered opportunities to fuel economic development in tier-2 and tier-3 cities, further paving the way for a new transport corridor. The development of landside real estate, primarily commercial, will also play a central and long-term role in driving the non-aero revenue for these upcoming greenfield projects.
Hence, the economic boost facilitated by airport development will be sustainable. Besides, with the commercial and residential properties around airports likely to experience an appreciation in value, airport development shall also benefit the real estate sector.
Going forward, what are the future trends that will shape airport development?
Growing traveler expectations and a need for personalization have encouraged airports to prioritize travel and re-think traditional layout/design. Further, the pandemic has created an urgent need to position health and well-being at the center of business models and infrastructure design. The world is in a re-set mode as travel restrictions across the globe are being relaxed.
However, airports must re-design to boost and regain passenger confidence due to increased focus on health and social distancing measures. Tech solutions, including the deployment of Artificial Intelligence and Machine Learning (ML), will be central to a streamlined and contactless check-in, boarding, and screening process. Moreover, altering seating arrangements and efficient use of space on both the airside and landside of terminal facilities will be critical to ensure that passengers feel safe to travel.
Recently, GMR Hyderabad International Airport (GHIAL) collaborated with leading virtual analytics software to implement Queue Management Systems, combining IoT security cameras and AI video analytics to improve passenger experience by reducing waiting time at passenger touchpoints. Globally, airport authorities are testing virtual queuing trails to make the airport experience less stressful for flyers. Besides reducing crowding, virtual queuing could reduce passengers’ waiting time, giving them more time to visit restaurants and shops, boosting airport concessionaire revenues.