Know Your Market
Defining who the customer is at each airport is essential to making any retail concept work profitably, according to Paul Fetscher, president of Great American Brokerage Inc., and conference chairman. And, in knowing your market, it's equally important to understand that airports and the markets they serve are generally drastically different. "We are in a challenging environment," Fetscher says. "there is no one slam-dunk solution for every airport. We need to understand where we are before we can decide what we need to do and what tools and resources we need to get there."
Diane Pryor-Vercelli, senior director of properties and contracts administration at Tampa International Airport, agrees there "is no cookie cutter approach to airport concessions."
Tampa is an O&D market, with a roughly equal split between business and leisure travelers. Following 9/11, Vercelli says the airport saw an immediate 20 percent drop in revenue. To better understand the decline and properly remedy the situation, Vercelli began monitoring concessions on a daily basis.
As a result of the drop in concession sales, two airside retail locations were closed, but have since reopened. By January 2002, Vercelli says the airport suspended daily concession reporting and by May traffic was down by only 5.4 percent, while airside and landside retail saw increases of 7 and 11 percent, respectively.
Retail opportunities at Tampa International Airport, along with the nation's other airports, will be challenged in the upcoming months by any mandates the TSA puts forth. "We have to rethink our capital development," Vercelli says. Already, she comments, the airport has been informed they will need to allow 10,000 square feet for office space for the TSA. Additionally, the airport has concerns about the ability of the floor to support the massive baggage screening equipment the TSA is requiring.
In 1995, Tampa International Airport began a Concession Improvement Trust Agreement (CIT). Under this agreement, 3 percent of gross retail and 4.5 percent of gross food and beverage sales are due to the airport authority, over and above rent. CIT was designed to cover costs of future concession development.
Vercelli says Tampa International Airport is in the process of completing a $24 million expansion project. The airport also expects to spend $24-$30 million to adapt to future TSA mandates.
While many airport concession managers suggest travelers are dissatisfied with prices at airports, research performed by J.D. Power & Associates and presented by its travel services group director, Michael Taylor, shows price has very little impact on customer satisfaction. As Fetscher suggests, "People don't mind paying more if they feel they've gotten value out of it. If costs are higher, prices need to be higher - but they need to be reasonable."
Amy Shaw, manager of concessions at Denver International Airport, says she allows tenants to dictate their own "fair pricing" by using local, comparable businesses, but it must fall "somewhere between the street and resort/special retail locations."
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