The Phoenix Perspective

PHOENIX — [Editor’s Note: The AIRPORT BUSINESS September issue cover story looked at retail/concession upgrades at Baltimore-Washington and Phoenix Sky Harbor international airports. In this follow-up, we feature a one-on-one discussion with PHX business development manager Paula Kucharz, who oversees the various projects and brings to the position some 20 years in the shopping center industry. Among the PHX initiatives: a Terminal 4 redevelopment that centered around America West and Southwest operations; and, a Terminal 2 upgrade underway. Here’s an edited transcript of the Kucharz interview.]

AIRPORT BUSINESS: What things do you think you brought with you into this arena in terms of lessons learned from shopping centers?

Kucharz: Working in an airport environment is much like working onsite in a shopping center. Professionals who are onsite in shopping centers deal with a lot of the overall issues. You’re exposed to a lot; it’s in-the-trenches experience.

If I had only done leasing from a corporate environment, I don’t think I would have been as effective because with a lot of corporate leasing you do the deal and move on. But when you do the deal and live with the deal every day, you’re much more careful, more in tune with how the store is built and who the manager is and how it operates. If you made a puddle you’re stepping in it and living with it.

AB: One of the things you are trying to look at differently is the request for proposal (RFP) process. Can you elaborate?

Kucharz: One of our guiding principles, promoting competition, follows through in our RFP process. We do the RFP process in three phases [for Terminal 4], somewhat for a construction reason and somewhat due to listening to our retailers and to the challenges they face when they do a big process like this. They voiced the concern about one person winning everything, and one chance only. So when we looked at the construction schedule, we developed an RFP schedule that loosely was based on the construction schedule.

We did a rather lengthy series of meetings to determine what we term our retail bundles, and when we would put those out. We issued the RFP as one document that included everything — but there were these three phases. A bundle is a couple of stores; the most is three.

AB: What were some major considerations in this process?

Kucharz: We looked at how do we capture the most sales; how do we give the most variety to the most passengers; and how do we help the retailers to have good, solid contracts? They all want to come in with a big bunch so their operational costs are lower and they spread their management over several stores in a terminal. We were also very concerned about airside versus landside, because a lot of our program is landside.

So, every bundle is linked, airside-landside. It’s not pure, but our intent was: if you’ve got something in the lobby, you’ve got something on the concourse. We were exposing the passengers to a great variety of retail offerings, and we were, in effect, giving the people we’re contracting with contracts that were the most secure, or offered the most opportunity. We were giving them exposure airside/landside, and north/south, east/west, to the best of our ability.

That was a guiding factor in how we developed these bundles.

There was a package that went out that the Paradies Shops won. There was a newsstand at the new D Concourse; a Brighton [Collectibles] store on the S3 concourse, and a Brighton store in the northwest lobby. What that got us was the Brighton concept exposed to those people who are going essentially to the west side of the airport; and the one on the concourse gave exposure to a good deal of the east side.

AB: With Paradies, what specifically were you asking for?

Kucharz: We asked for a news concept and a fashion luggage and leather concept; they came in with Brighton. It wasn’t that we did the bundles with certain retailers in mind; we were trying to look at the merchandising mixes and where they sit in the terminal. That helped insulate them from the ebbs and tides of what we know the airlines do with changing flights.

We also limited how many news contracts one could win — back to that guiding principle of competition. So in Phase 1 there were four contracts that contained news, among other things. You could win one. In Phase 2, there were two contracts that contained news, and you could win one. In Phase 3, there were four contracts that contained news and souvenirs. You could win one.

AB: Is there a particular lease term?

Kucharz: The leases are five years with two one-year options.

AB: Local versus national – is there a prescribed mix we’re shooting for? Or is there another driver in the decisionmaking?

Kucharz: We like local, regional, national – a mix. Phoenix is a little different than, say, Indianapolis or Minneapolis. We are a very strong tourist market, where the balance of local/national has to continually look at the needs of our tourist base. It’s not the biggest driving factor, but one to consider. That means we’ll have concepts like a Native American concept, and why a souvenir concept is very important. We have people visiting for the first time and others for the 15th time. We didn’t say we had to have a certain percentage.

AB: Regarding the tourists, do we want to offer national brands like McDonald’s that the kids will know, or something local because tourists want to try something different?

Kucharz: A combination. As you saw in the new Southwest concourse, the news is a national concept with a local operator. We do want that local flavor, but balance it as we can. When we look to [HMS] Host, our master concessionaire for food in Terminals 3 and 4 [CA One is in Terminal 2], we look for a balance.

Host was on a long-term lease and we did an extension when we went to remodel. It was a ten-year with a five-year option and we recently offered an extension because of the construction.

In Terminal 2 we’re moving to a direct leasing, small package concept for food also.

AB: With a new concourse, you have a greenfield opportunity, more or less, where you can try new things, such as freight elevators. How much consultation did you do prior to design with the actual retailers who would be occupying the space?

Kucharz: Well, we only knew Host; we didn’t know the individual concessionaires. Designing for a retailer is not a viable option; designing space that works for food and beverage operators or retail operations, there are some general principles.

We worked very closely with our consultants; Southwest was at the table. We wanted to start to accommodate the things that were not working in that terminal and the frustrations at other terminals: storage; rear access; freight elevators; trash; recycling; keeping it out of the public eye. All the retailers and food and beverage people have the same challenges. We don’t have enough storage here. When we built the new concourse, we built a basement in that concourse to accommodate our facilities group; we built a mezzanine level that created storage for the tenants. They pay for it, but it is storage that we never had before.