Hungry for more

SHANGHAI: Tour guide Ding Hong never forgets to stock up on snacks from local supermarkets before heading to the airport.

"One thing I must keep in mind is never to shop at terminal shops," says the 27-year-old tour group leader, who often travels to Hong Kong, Japan and South Korea. "I never hang out at airports, and neither do my tour groups. Goods there are ridiculously pricey."

Stores in domestic airports are clean and quiet, but charge a lot as well, Li Jun, a 28-year-old Phd student, recalls his impression of Shanghai's two airports, and he considers their shops as venues only for "businessmen and the rich".

At the international arrival area of level 2A at Pudong, a lunch box of vegetable, meat, soup and rice costs 35 yuan. In Shanghai's city center, a curry chicken lunch box at a Xin Ya Da Bao fast-food outlet costs 13 yuan.

But, thanks to a recent move by the Shanghai Airport Authority, ordinary passengers like Ding and Li may find dining at the city airports a little more affordable.

The Shanghai Airport Authority this month ordered airport food and beverage retailers to lower prices in order to attract more customers.

In response, Shanghai Pudong Airport announced its 46 commercial chain operators would lower prices to match those offered at other outlets across the city.

Terminal retailers at both city airports, Pudong and Hongqiao, also say they will reduce prices for basic food items, including bottled water, carbonated drinks, dumplings and instant noodles.

Shanghai airports are looking to increase revenues in non-aeronautic areas after policy changes ordered in March by the China Civil Aviation Administration and the National Development and Reform Commission. Airport operators were ordered to charge foreign carriers 40 percent less for take-off and landing fees in order to make Chinese airports more competitive, internationally.

Due to the fee change, the Shanghai Airport Authority says in a public announcement this March that it's expected to lose 10 percent of its annual income in 2008.

As Chinese airports face the challenge of raising non-aeronautical revenues to sustain long-term development, airport retailers are recognizing the need to draw more customers, says Teng Binsheng, professor at Cheung Kong Graduate School of Business.

And, long-tem profit incentives are prompting managers to squeeze profit margins by trimming prices, says Teng.

For Shanghai airports, non-aeronautical operations make up 30 percent of the business operations now, says Wu Nianzu, chairman of Shanghai Airport Group.

The goal is for non-aeronautical revenues to be 50 percent of the airport revenues, says Wu.

While it may be an ambitious task, food and beverage retailers at Shanghai airports are working hard win customers.

Select Service Partner (SSP), a United Kingdom food and beverage operator for travel locations 22 restaurants in Terminals 1 and 2 at Pudong Airport. The company says its prices are comparable to the chain outlets in city centers.

"There's no difference between a bowl of Ajisen noodles from Ajisen Ramen here in Pudong Airport and its chain store in Huaihai Zhonglu," says Daren Lau, managing director for SSP Asia Pacific. "They both cost 16 yuan."

Shanghai passengers spend an average 80 yuan at airport terminals while Hong Kong passengers spend roughly HK$150, according to company research.

"We introduce several tailor-made brands to meet passengers' various requirements on prices and tastes, from domestic brands of Shanghai Renjia, Tian Xia Dumplings, to foreign food chains like Ajisen Ramen and Burger King," says Lau. "Passenger spending power is too big to be ignored by us in Shanghai, especially as more low-cost carriers enter the market, bringing more tourists."

Passenger capacity at Pudong and Hongqiao airports reached 5.1 million people in 2007, up 11.8 percent from the previous year.

This year, analysts expect passenger capacity at Shanghai airports to hit 58 million people -- estimating a two-digit percentage increase, much higher than the global growth rate of 2 percent.

Still, Shanghai airports have some work ahead.

According to Liu Shaocheng, policy department director of the General Administration of Civil Aviation, growth in the non-aeronautical sectors - and retail, in particular - continues to lag far behind the passenger volume.

Shanghai Airport Group says Pudong Airport will explore more commercial catering projects within the airport and its skirt circle, in accordance with the development of Shanghai's urban rail transportation by 2010.

But analysts say that, in fact, the most challenging for the development of terminal retail is to transform passengers' misconceptions that terminal restaurants are not for ordinary people. "Airport consumption is not anymore high, that's the signal we'd like to express to Chinese passengers," Lau says.

(China Daily 05/12/2008 page10)