Retail report
Industry meets to discuss solutions to challenges facing airport retail
By Jodi Prill, Associate Editor
August 2002
PHILADELPHIA - A retail conference held here in June promised three master concessionaires as featured speakers - two showed up. Reflections of an industry that has struggled since 9/11. That struggle, changing customer needs, and revamping retail were all part of the discussion during the two-day session.
The concession managers and retailers welcomed the two master concessionaires presenting at the conference: Anton Airfood, Inc. and Marketplace Redwood. Organized by the World
Research Group, the retail conference was open, intimate, and for many, a more conducive environment for sharing ideas. Perhaps the lack of a more predominant presence means airports are moving away from the days of master concessionaires, or at least considering alternatives.
Pampering Passengers Pays Off
Keeping airport retail fresh and
inviting means staying abreast of trends, passenger needs, and discovering
new ways to meet those needs. Providing spa services, such as manicures
and massage, is offering travelers a relaxing way to spend their
newly increased time at airports.
Unlike
many other retail concepts in airports, spa services have seen increases
in revenue since September 11. Kristin Rhyne, president of Polished,
Inc., which provides manicures, massage, and cosmetics, attributes
the rise to the ability of these services to reduce stress. According
to Rhyne, heightened security issues, uncertainty of the security
process, and flight delays have encouraged travelers to pamper themselves.
Massage Bar, Inc. led the way in
1994 by providing seated chair massage in Terminal C of Seattle-Tacoma
International Airport. Since then, the company has added two additional
airport locations, and has seen an annual growth rate of approximately
20 percent each year.
At Calgary International Air-port,
Suzanne Letourneau, a former flight attendant and spa director,
operates O2ra Oxygen Spa, offering yet another alternative for weary
or stressed travelers. The concept, which provides oxygen treatments,
manicures, pedicures, and massage, was successful enough in Calgary
that Letourneau has since opened a location at Detroit Wayne County
Metropolitan Airport, with more locations planned.
Retail at sea-tac
Linda LaCombe, manager of retail/concessions
development at Seattle-Tacoma International Airport, says the airport
has been planning for changes in the concessions program for the past
six years. In 2004, the 40-year lease the airport has with HMSHost will
expire and LaCombe says the airport is looking at bringing in other concessionaires
and opening the retail program up to independent leases as well.
"We want to give customers options
and make them more comfortable," she says. Currently the airport
offers such amenities as a massage facility, meditation area, and a chapel
and is looking at expanding with an exercise room, a clinic, expanded
technology opportunities, and more. A pre-security meeter/ greeter area
with a retail presence is also under consideration.
Reconsidering retail
Paul Brown, president and CEO of Paul Brown
Consulting and former executive director of Airport Retail Management
for O'Hare Internation-al and Midway Airports, reminds retailers and concession
managers to "think about what's going on in the buyer's mind."
Because of 9/11 and increased security,
"People are acting differently in airports," Brown says. "We
(airports) have dictated this to passengers. We are not creating an environment
conducive to making people want to buy anything. People have more free
time, but they are now fatigued, irritated, and frustrated."
Brown suggests retailers consider the following
tactics for revamping the shopping experience for customers:
o begin looking at the airport as two separate
markets, pre-security and post-security,
o shift emphasis on how to spend passenger
free time - people have more time to shop, but is that really something
they want to do?,
o sell "experiences" that can
be consumed on and off the airport,
o expand our vision of what adequate services
are,
o develop more experience-based retail,
such as virtual reality games and movies,
o expand the availability of quality personal
services including nails, hair, spa, and massage,
o make an investment in business services
and landside conference facilities.
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.
Pricing Policies
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."