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Own brand lounges

Passenger Terminal World speaks to Graeme Ferguson, business development director, Manchester Airports Group, about how the company is successfully operating airport lounges in the UK and USA, and the opportunities for airports to provide their own competitive lounge service

 

What kind of lounges does Manchester Airports Group (MAG) offer in its airports?
MAG owns and operates its own brand of ‘Escape Lounges’ that are common-use, meaning they are non-exclusive and available to all passengers. Airport lounges are becoming an increasingly viable commercial model for most airports as passenger demand shifts from the traditional ‘VIP’ customer segment to a wider passenger mix. Escape Lounges provide an affordable luxury that is competitively priced, bringing the premium feeling to more passengers.

What kind of customers are these lounges aimed at?
Passenger behaviors are changing and customers are increasingly looking for ‘affordable luxuries’, and Escape meets this growing demand. Escape Lounges can be accessed through cardholder access programs (such as Priority Pass and Dragonpass), by pre-booking a reservation, or by payment on entry – provided there is availability. MAG also has agreements in place with several airline partners for their first and business class ticket holders, and loyalty card members.

 

Right: The Escape Lounge at
Manchester Airport Terminal 1

 

 

 

How do they differ from airline lounges?
Airline lounges offer access to their premium passengers – usually upper class ticket holders or VIPs. Meanwhile, there is substantial demand from other passengers proven by the majority of our bookings for Escape, which come from online sales. However, where airlines do not have sufficient mass at a given airport to justify the cost of their own premium lounge, Escape can fill this void and assist airlines in providing a premium experience for their high-value passengers.

What are the benefits of offering a paid airport lounge service at the airport?
Access to lounges is wanted by leisure and business passengers, of all airline classes, as customers look to upgrade their airport experience, and discount the traditional view that lounges are ‘just for VIPs’. Airport lounges can also be an important factor for full service (FSS) carriers looking to begin services at a new airport or even in a new terminal. FSS carriers that do not have the passenger volumes to warrant setting up a dedicated airline lounge will need to set up an airline contract with a lounge provider.

Why did MAG decide to manage these rather than outsourcing to a lounge company?
MAG manages most services in-house, such as security, car parking and property management. Running airport lounges was seen as a natural extension of the company’s retail strategy and also provides a way for MAG to help deliver a customer service that exceeds passenger expectations.

What are the main challenges associated with operating your own lounges?
For an airport lounge to realize its full potential, it needs to be located near to the international departures lounge so that it is easily accessible, potentially to transiting passengers as well. The design and configuration is an important precursor to good capacity management and ensuring the space is effectively used. The decision to insource or outsource the catering function can be a challenging one.

Where are these lounges located?
There are Escape Lounges at MAG’s UK airports – Manchester (Terminal 1, 2 and 3), London Stansted and East Midlands – as well as in the USA at Minneapolis-Saint Paul and Oakland International airports.

 

Left: MAG opened a lounge at Minneapolis-Saint Paul Airport
last year

 

 

 

Tell us about MAG USA and why it was developed?
A subsidiary of MAG was established in the USA in 2014 on the basis that internal market assessments highlighted the lack of development in non-aeronautical commercial solutions. Traditionally, there has not been an accessible airport lounge offering for non-premium passengers in the USA, so the Escape model meets a growing need in a relatively immature market. MAG USA now aims to become the ‘go-to’ organization that delivers market-leading services to transform customer experiences.

How successful has it been?
Market receptiveness to Escape has been proven by high interest and successful bids. In less than 12 months, MAG has successfully secured two contracts to operate airport lounges in USA airports, at Minneapolis-Saint Paul and Oakland International, and interest is climbing. MAG has been first-to-market with a viable common-use plug-and-play lounge product, creating potential to secure a strong position in a new market.

How are the lounge services offered by MAG USA unique?
MAG is the only airport operator expanding lounge services, providing particular advantage through understanding airports’ operations, and generating revenue where lounges have traditionally been necessary cost centers. The Escape commercial model is straightforward and has a short lead-in period that can be applied to airports everywhere.

Are you planning on targeting any other countries?
Why not? MAG has an international function set up specifically to evaluate overseas opportunities and is looking to build a more global presence.

What is the next step for MAG USA?
MAG USA will continue to grow its network of airport lounges, while also exploring other commercial opportunities. MAG has also identified differences between the UK and US airport car parking models, and is keen to explore how to improve US airports e-commerce and revenue management platforms to commercialize what has traditionally been seen as ancillary service.

Are you looking at any other areas for business development?
MAG is always looking at new business development opportunities and the recent venture of establishing a subsidiary in the USA highlights the company’s ability to export products, services and knowledge to new markets outside of the UK.

 

Click here to read more about how airports are creating new spaces for economy business travelers in the June issue of Passenger Terminal World.

May 26, 2016

 









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