Concessions Update

ORLANDO - Earlier this year, some 300 representatives of airports and the companies that specialize in retail and concessions met at the debut Revenue & Operations Conference, hosted by the Armbrust Aviation Group. Among the leading points of discussion: rates & charges; the RFP process; and options for providing wireless service to passengers. Representatives of several major airports undergoing major concessions renovations and additions were also on hand. Here are the highlights, followed by various retail-related news briefs.

William Anton, founder of Wash-ington, D.C.-based Anton Airfood, Inc., put the importance of the industry segment into perspective, pointing out that the restaurant business is the largest private sector industry in the U.S., with some 12.4 million employees. Restaurants are also the nation's largest employer of women, says Anton.

Meanwhile, presenters from Portland, Miami, and Baltimore-Washington International Airports shared insights into the scope of major concessions projects at their respective facilities - an indicator of the ongoing and increasing role that retail and food and beverage concessions are having on airport revenues.

And, according to Paul Weber, international retail director for BAA plc, the British firm often credited with starting the concessions revolution at airports, U.S. facilities have the potential to generate even more revenue from retail in terminals. According to a BAA analysis, he says, U.S. airports could potentially generate another $1.9 billion in revenues annually by reevaluating what they have in place. As an example of the uneven approach being taken by U.S. airports as a whole - and large airports, in particular, Weber points out that of the busiest U.S. airports, only three of the Top 10 in sales per passenger are also in the Top 10 in passenger movements. He reports that BAA annually generates more than $7 billion in concessions sales at its seven U.K. airports.

According to Weber, U.S. airports on average generate $6.44 per passenger; however, he projects they could average as much as $10.08 per passenger.

Reevaluating the RFP process

Regarding the request for proposal process, BAA's Weber says that too often the RFP process focuses too much on the needs of the airport rather than on the needs of the customer. He also points out that oftentimes an airport will put out an RFP on poor commercial space and give little consideration to how it will actually perform commercially. "It wouldn't happen in a successful mall," he says, "so why should it happen here?"

Most importantly, he says, the airport needs to promote competition to increase sales. "Competition is the way to change the game," he says.

Prior to issuing an RFP, says Ray Diaz of Miami International's properties division, an airport needs to benchmark itself against the rest of the industry, including both airports and the retail sector as a whole. He also recommends having an "industry input meeting," such as the popular peer review sessions held around the country, in which other airport managers evaluate the plan.

Diaz says that a key evaluation tool in the process is to put together a selection committee made up of various community representatives, including the Chamber of Commerce, economic development groups, airport staff, and others.

A couple of examples given by attendees on how to improve the selection process include:

  • At BWI, BAA put together a $1 million fund to help finance small business start-ups; and

  • At DFW's new international terminal, set to open this year, the airport developed a criteria that analyzed a small business's ability to sustain economic downturns, thus disqualifying many in the process.

Trends

Concerning what types of food mix airports should consider featuring at their facilities, Dr. Tim Ryan, president of the Culinary Institute of America, says, "What we're interested in is trends. Ethnic food is hot."

Bold, brash, spicy food is 'in,' says Ryan, as is vegetarian. Fragmentation is also occurring in the marketplace, whereby a successful Asian restaurant can lead to sucess with various derivatives, such as Vietnamese, Chinese, etc. At the same time, however, he says a traditional mix is also necessary, because in times of stress - the airport experience - many consumers, particularly women, seek out "comfort" foods.

Scott Kilgo, senior manager of concessions for Portland Internation-al, says that broadening the selection can significantly impact increased revenues. When doing so, he echoes the sentiment of others that it's important to look off-airport for trends in the overall food marketplace.

Wireless

Pam Brown, vice president of Airport Network Solutions, says that when looking at providing wireless service to passengers, it's critical to recognize that consumers "prefer reliable, high-speed versus a free wireless network."

Her "single most important recommendation" is for an airport to get an accurate evaluation of what customers want in the specific airport market by measuring current cellular traffic. Then, an assessment of revenue versus service can be achieved, she says.

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