Better by design
HOK’s regional leader of aviation and transportation, Keith Hui, and Woolpert’s director of strategic consulting, David Tomber, share their thoughts on how better design can maximise an airport’s return on investment (ROI).
Design education and practice emphasise the importance of achieving design vision, functional requirements, construction budget and schedule. However, these ubiquitous project objectives can limit the opportunities inherent to the design process.
Design has the power to influence far beyond construction completion, and equal emphasis needs to be placed on the long-term outcomes of design decisions. These outcomes play a significant role in operation and maintenance costs, financial health, environmental stewardship, and occupant wellbeing through the life of the building.
Airports are large complex facilities where design has a considerable influence on terminal development and its operating life, enabling many opportunities to increase return on investment (ROI) by maximising revenue generation, lowering total cost of ownership (TCO), reducing carbon emissions and enhancing the customer experience.
Airport owners can quantify these opportunities to make informed design decisions that have a positive impact on their facilities and generate a long-term ROI.
Maximising revenue generation
These days, non-aeronautical revenue represents a significant part of an airport’s operating income and is closely associated with the traveller experience.
Within the airport terminal, revenue sources include retail, food and beverage, passenger amenities and advertising. Increasing sales and maximising passenger spend depends on a range of factors.
The most obvious are product and service, but the factors that design can influence are visibility, traffic, and time.
Architects can work with airport owners to design terminal concessions layouts that maximise passenger foot traffic at storefronts. These designs can utilise spatial volumetrics that enhance storefront visibility and increase sales, supporting revenue generation.
If the average passenger spend at a US airport ranges from $8 to $20, an increase of a few dollars could potentially equate to tens of millions of dollars of additional revenue over the long-term, depending on annual enplanements.
Time is a factor unique to all transportation facilities, but airports likely present the most time-restrictive and stressful environments. Design that makes it quick and easy for passengers to get to their departure gates in effect increases the amount of leisure time they have at the airport, thereby increasing dwell time and foot traffic that will ultimately contribute to revenue increases.
Lowering the total cost of ownership
A common challenge in major capital programmes, such as new terminal developments, is neglecting to consider the entire asset lifecycle prior to capital investment.
The initial investment often represents less than 25% of the total lifecycle cost, and airports often miss the opportunity to develop a cost-effective approach before they commence with the capital delivery phase.
That missed opportunity typically contributes 5% to 10% to the initial capital costs and can impact the lifecycle cost by over 40%.
Planning, design and construction management all play critical roles in a capital delivery programme, but none of them focus on providing an effective lifecycle ownership strategy that includes data management, financial depreciation strategies, asset reliability and capital investment value maximisation.
Collectively, those four elements of the asset portfolio offer significant opportunities to reduce initial capital demand, while reducing TCO over the life of the asset.
With 75% of the TCO occurring after an owner has taken possession of a new asset, standards that reduce the lifecycle cost (lowering the owner’s annual obligations) without increasing the first cost provide an additional ROI that can be established during design and then realised through lower resource costs on an annual basis.
Reduce material use and carbon emissions
The world today is facing broad and complex challenges that threaten every aspect of our lives. According to the latest Intergovernmental Panel on Climate Change (IPCC) report, the time for climate action is now.
Building design plays a crucial role in mitigating and adapting to climate change through sustainable and resilient design. Energy efficiency, reduced use of materials with a right-sized terminal footprint and other sustainability strategies help conserve resources and reduce carbon emissions.
Studies have shown that the built environment generates 50% of annual global carbon emissions. With the total global building footprint expected to double within the next 40 years, strategies to maximise space efficiency by ‘right-sizing’ the programme to minimise its footprint are critical.
Unlike operational carbon, which can be reduced over time with efficient energy design and renewables, embodied carbon emissions are locked in place as soon as a building is built.
Achieving zero-carbon emissions requires us to reuse, reduce and sequester materials. High-impact materials such as concrete, steel and aluminium account for almost 25% of total global carbon emissions.
Architects and engineers can design, construct and evaluate terminal projects holistically to achieve a zero-carbon, equitable and healthy built environment for airport operators, passengers and their communities.
Enhancing customer experience
JD Power surveys airport passengers on an annual basis and provides results to the public in the form of a JD Power Circle score rating from 1 to 5, with a rating of 5 being best.
Using publicly available FAA CATS data (Certification and Activity Tracking System, forms 126 and 127), the scatter plot graph above illustrates the relationship between each airport’s JD Power Terminal Satisfaction score and a benchmark metric (asset management FTE budget/total asset management budget).
Out of the 12 airports that received a score of 4 (better than most) or 5 (among the best), 11 of them spent at or above the median, from a database of 30 airports in North America.
These airports spent a higher percentage of their asset management budget on internal asset management employees. This ensured a better customer experience in areas such as frequently cleaned restrooms; regularly emptied trash; less frequent breakdown of elevators, escalators and moving walkways; operable HVAC, lighting, electrical outlets, and Wi-Fi; clean windows, walls and floors; and roofs that do not leak.
Potentially, these airports could respond to issues in public areas of the terminal quicker and with greater flexibility. A correlation can be made between a higher level of satisfaction and higher passenger spending on concessions due to an enhanced customer experience.
In closing, the influence that design has on ROI for airport development projects is often overlooked but it is extremely significant – especially when compounded over multiple years. Since airports play the long game, it is critical that designers and airports consider initial costs in relation to measurable long-term benefits.
Airports can maximise ROI through asset management and excellence in terminal design.