What’s next for Airport Hospitality post-pandemic?

Together, We Make Travel Better© 2020 Plaza Premium Group.

All Rights Reserved.

Dear all,

The covid-19 situation does not only impact our businesses profoundly, it will transform the future travel industry. We know this is the biggest crisis ever all of us are facing but let’s not forget – “in the middle of crisis lies opportunity”.

The global pandemic will change the ways airports and airlines operate, and influence travellers’ behaviours. Of all the tasks we are prioritising, forward-thinking discussions top our agenda. Data and information are fundamental upon which we must derive solutions and trends to lead and develop the next level of airport hospitality.

“Don’t wait for the right opportunity; create it.” Our team established an industry outlook with six guiding principles: (1) the wellbeing of people is most important and will remain so in the future; (2) while travellers’ behaviourial changes are expected. (3) Meanwhile, the industry will adopt digitalisation in full speed and (4) sustainability is no longer nice-to-have. (5) Achieving cost efficiency and maintaining healthy cash flow are vital to survive in unforeseeable challenge such as the current turbulence. Lastly, (6) all of us will definitely undergo business re-modeling to prepare ourselves for the “new world”.

Travel industry is one mega global family. We humbly invite everyone to work together as partnership is more important than ever. Together, we can create “the new black” and thrive again.

Stay healthy.

Song Hoi-seeFounder & Chief Executive Officer, Plaza Premium Group

FOREWORD

TRAVEL WILL RESUME SLOWLY AND GRADUALLYAir traffic expected to recover in long-term.(Source: Covid-19 A New World for Airport by Bain and Company, 8 April 2020)

Recovery pace will be faster for domestic travel (~2-3 quarters); slower for long-haul and international travel (6+ quarters)

40% of passengers said they will wait for 6 months or more before returning to travel; 47% said one or two months.

“

““

“Source:

HIS Market, McKinsey Global Institute, Subject matter experts, press reports, Corporate Performance

Analytics, S&CF Insights, S&P Capital IQ

Source:IATA Survey, Conducted in 11 countries

(Australia, Canada, Chile, France, Germany, India, Japan, Singapore, United Arab Emirates,

United Kingdom, United States at the beginning of April . Numbers are rounded

IN GENERAL, TRAVEL WILL RESUME IN PHASESDomestic travel will dominate as it will take some time for countries to lift international travel bans depending on the development of covid-19

RECOVERY LED BY MAINLAND CHINA,THEN ASIAThe covid-19 situation is on a downward trend in Asia including Mainland China, Hong Kong, Taiwan, Thailand, Korea and Malaysia, all of which are still keeping stringent preventive measures. International travel likely re-emerges in Asia among all regions.

Current Confirmed Cases in Major Countries (As of April 12)

010 20 30 40 50 60 70

500000

450000

400000

350000

300000

250000

200000

150000

100000

50000

doubling every 2 days

doubling every 5 days

doubling every week

doubling every 20 days

Japan Mainland China UK US South Korea Spain Italy Germany Russia

T=81

*T=Days since current confirmed case>100 Data Source: CARNOC | Published by VariFlight

Percentage growth shown byTongcheng-Elong in China (2020)

Tendency to Travel in 2020, study by A, IVY Alliance and

China Comfort Travel(Chinese respondents on domestic and

overseas destinations)

50%

100%

150%

200%

250%

300%

Daily Bookingsfor Hotels

Daily Bookings forDomestic Flights

23 FEB - 1 MAR

23 FEB - 1 MAR

JUNE

13%No Plan to Travel

87%With Plan to Travel

Growth Forecasts for 5 ASEAN Economies and India

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Indonesia Malaysia Philippines Singapore Thailand India

Min.

Max.

The Japan Center for Economic Research and Nikkei conducted a quarterly consensus survey from 6 – 26 March 2020, collecting 33 answers from economists and analysts. (Kiyoshi Kusaka, principal economist, Japan Center for Economic Research, 6 April 2020)

Source:What Matters Now Research Study by Conde Nast Traveler, April 2020.

43% of luxury travellers said “I’ll be ready to do my part in giving back and supporting local economies /communities through travelling.”“ “

LOCAL TOURISM, EXPERIENCES AND CULTURES WILL BE MORE APPRECIATED

BUSINESS TRAVEL WILL RE-START FIRST (Absolutely) Essential business travels will commence as soon as travel bans lifted but primarily domestic. Covid-19 causes economical downturn and companies will be cautious in travel expenses. “

… leisure travellers are less likely to travel unless a vaccine is readily available for their entire family. But if a potential “game-changer” – potential antibody testing that shows who is immune to coronavirus – rolls out and can pinpoint who isn’t at risk of contracting the virus, businesses would be likely to quickly send those people on necessary corporate travel.

“

“

Alan Woinski The Daily Lodging Report Editor-in-Chief and Founder

A poll from Skift suggests that 33% of meetings have already been re-booked and GBTA suggests 40% of companies expect to return to normal business travel within 90 days.

“ “

EXPECTATION ON AIRPORT HOSPITALITY:6 GUIDING PRINCIPLES

54% of luxury travellers like to see brands providing more information about how the companies are working to help keep travellers safe in the future.

“ “1 PEOPLE IS ALWAYS AT THE CENTREAirport hospitality services must take people connectivity, communications and welfare to the next level with social distancing and hygiene at the heart of everything

• Customers: Re-definition of human touch from standard of services and range of products

• Business partners: Formation of strategic partnerships and “task force” to “re-create” win-win solutions for customer experience

• Employees: Welfare, wellbeing, safety measurements enhancement for all levels and all departments. Training re-engineered will be crucial.

Source:What Matters Now Research Study by Conde Nast Traveler, April 2020.

2 TRAVELLERS’ BEHAVIOUR WILL SHIFT FOREVERAirport lounges and hospitality services need to prepare now to stay ahead and gain customers’ trust and brand recognition

Higher level of hygiene-consciousness will drive travellers’ desire to be assured of hygienic environment

Social distancing will impact on capacity management and mode of services

Travel planning habit will change to a short booking window avoiding unnecessary rebooking or cancellation

Less preference on long-term commitment (memberships); more favourable to one-time/impulse purchase

Economy class will be the main cabin of business travels, hence demand of value-added hospitality services will increase

>1m

Randy DurbandCEO of the Global Sustainable Tourism Council

Some degree of change is likely, certainly in the short term and likely for some time to come. We might expect to see greater concern for personal health, fear of getting stranded, newfound focus on payment and cancellation policies, reduced travel budgets…

“ “

3 BUILD AND SUSTAIN COST EFFICIENCY: CASH IS KINGTo remain competitive and resourceful for any acute situation that may occur in the future

• Re-evaluate operational model to consider multi-functional staffing, services and facilities to create efficiency and offer value-added customer experiences

• Minimise Cost Centre and convert into potential Profit Centre

• Focus on core businesses and work with partner(s) on peripheral services

• Collaborate with strong global business network for economy of scale and operational efficiency

Cash is particularly important in times of crisis. With the global outbreak of covid-19, many countries have introduced strict travel restrictions, and the global aviation industry is once again facing a market shrinkage and a sharp drop in demand. During this time, airlines with large cash reserves and low debt ratios are able to withstand the negative pressure of short-term cash flow and have better financing capabilities.

“ “

Source: Covid-19 Outbreak: Analysis of Global Aviation Operation by VariFlight, 13 April 2020.

100% EFFICIENCY

QUALITY

COST

Everyone will advance in digitalisation quickly, not only for the purpose of capturing data and enhancing personalisation, but also promoting contactless processes and transactions for hygiene concerns

• O2O Journey to complete with self check-in, self-ordering systems, technological-based facilities and services

• Adopt a flexible rewards earning and redemption scheme to entice customer spending through dynamic platforms

• Digital marketing and communications will become key brand building, sales stimulation, customer personalisation and ROI drivers

Article written by global travel and hospitality lead at Publicis Sapient

and Skift.com

4 READINESS OF DIGITALISATION: NOW OR NEVER

Health and wellness practices will no longer be a nice-to-have in a post-covid-19 world. All travellers will expect higher standards to ensure their wellbeing, and digital tools will enable and expand existing “no touch” options.“ “

5 SUSTAINABILITY IS THE NORMTravellers will be more attuned to the nature as well as attending to one’s wellness and wellbeing

Customers appreciate brands which adopt environmental-

friendly practices, such as eco-friendly food package, bio-

degradable cleaning agents.

Enhance food offers with lifestyle options such as keto

diet, vegetarian option, vegan or gluten-free menus, and

enhanced nutritious values including immune and energy booster or dehydration cure.

Local sourcing of ingredients minimises carbon footprint and

supports local communities.

Organisation-wise practices on sustainability, from

procurement processes, operations to back office’s

measures on recycling, reuse and potential upcycling.

6 BUSINESS RE-MODELING WILL BE HAPPENING IN TRAVEL INDUSTRY Airport hospitality services must be flexible, dynamic and ready to innovate “new” products in order to fill the inefficiency gaps and convert them into revenues with better customer experiences

This pandemic has brought traffic to a crawl, resulting in airports and their concessionaires being put into a situation where existing rent structures and payments are no longer viable: most commercial space leases do not contemplate a complete breakdown of the commercial aviation system.

“ “

Alan GluckICF Senior Manager

Airports will start to review its portfolio of concessionaries – airside and landside to maximise rental ROIs.

Full-service airlines in general will re-evaluate the value of lounge services as compared to operational cost.

Low-cost carriers look to minimise operational costs starting from in-flight food offering which becomes opportunity for airport dining professionals to offer packaged food on-the-go.

Airlines will not sell middle seats to continue social distancing aboard while ticket prices will be set as “affordable” to win travellers’ confidence of travel in near term. In longer term, pricing needs to be adjusted again to ensure profitability.

Travel companies & corporates will likely explore schemes and programmes to incentivise customers. Thus strategic partnerships will be key to drive the confidence of travel market up exponentially.

AIRPORT HOSPITALITY PIONEER AND LEADERYOUR PARTNER OF CHOICE

GLOBAL NETWORK & AWARD-WINNING BRANDS

Plaza Premium Lounge established a strong presence in Asia including Hong Kong, Singapore and Malaysia, and with plans to expand in Indonesia.

Plaza Premium Group takes up

from the top five biggest lounge

operators

among all independent lounge operators in the

world

45% 55%

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