India’s next hottest shopping destination may not be its swanky malls, but its airports, which are getting a rapid makeover into 21st century jet-setter retreats.
As the airports located in Mumbai, Delhi, Bangalore and Hyderabad get modernized, they are leveraging their huge swathes of renovated interiors to earn extra revenue. In the process, they are bringing to India a new brand of retailers and hoteliers: the airport specialists.
“In mature markets, the revenues—from an airport point of view—are coming more and more from commercial activity. Commercial activities such as office space, car parking, food and beverages and retail represent 60% of the total turnover of the airport,” said Roberto Graziani, president and CEO of the Swiss-based Nuance Group, one of the top airport retailers in the world. Graziani spoke to Mint during his recent visit to India.
Money trail: Non-aeronautical revenue accounts for 40% of the total revenue of Delhi, Mumbai, Chennai and Kolkata airports
Last year,
The Nuance Group AG and its local joint-venture partner, Shoppers’ Stop Ltd, won from
Bangalore International Airport Ltd (BIAL) the rights to operate duty-free retail at India’s fourth-biggest airport for five years. Shoppers’ Stop also bagged the mandate to handle retail in the domestic part of the Bangalore airport supported by Nuance.
Another reason why airports the world over are looking at other options of raising money are the spiralling aviation fuel prices and the resultant pressure from airlines to reduce landing fees. “Airports have to find a way to finance the huge investments for terminal development and renovation,” Graziani said.
Typically, non-aeronautical revenue accounts for about 40% of the total revenue of an airport located in any of the four metros of Delhi, Mumbai, Chennai and Kolkata. With real-estate prices touching new highs in these cities, growing nearly 30% in a year, airports offer a viable option for real-estate and retail players. “Duty free is the biggest potential revenue generator for retailers and airport operators,” said Meghna Goenka, general manager, retail services, at property consultants Trammell Crow Meghraj Pvt. Ltd.
At the airports in Delhi and Mumbai, it is the upgrade and the additional space being created that is opening up value. The GMR Group, which is modernizing India’s second-busiest airport in Delhi, the Indira Gandhi International (IGI) airport, has appointed Jones Lang LaSalle to prepare a strategic plan for monetizing 250 acres of land. Of this, 50 acres will be bid out to global real-estate developers in the next few weeks to raise Rs3,000 crore to part-fund the project cost of Rs8,600 crore, says Madhu Terdal, chief financial officer, corporate strategic finance, GMR Group. The remaining land will be put to commercial use later for passenger or airport operation related activities.