Airport Experience® News - 20 Years of the AX Conference
In later years, airport grab-and-go would become a cornerstone of the travel convenience offering. “I would say our explosion in demand for grab-and-go was when we were just on the cusp of Covid 19,” says Burns. “And then obviously during Covid, with all the restaurants closed, that’s where it really became a key contributor for us as an organization.” As a category, travel essentials has flourished due to its ability to evolve and change with the demands of the consumers. Specialty retail, on the other hand, has had very mixed performances. “I think we’re going to continue to struggle to find specialty retail concepts that make money,” says Pastorelle. “There are some that do well, certainly electronics,” but many other categories struggle. One success area, she says, are with larger format stores that allow the operator to build out a market district or feature brands in a store in-store approach. Avolta’s Quinn admits that the category has “always been a little challenging,” but says sunglasses, travel stores and electronics continue to do well. Others are a bit more precarious. “We saw a big risk in doing other brands because they [may be] the popular brand at the time, but they’re also trying to survive a seven-to-10 year contract, and sometimes a brand just doesn’t have the legs to do that,” he says. Hudson’s solution was to create the larger format Evolve concept. Modeled after a duty free store, Evolve relies on convenience retail to “get the customer across the threshold.” The stores also host a variety of store-in-store-style specialty retail concepts. “It’s a larger format store for us … and it really allows us to represent brands that are very hot at the moment, while not having to worry about whether or not they’ll be long lasting. If they don’t work, it’s a relatively inexpensive change-out.” Local has also made inroads on the retail side, and Burns says it has allowed Paradies Lagardère to partner with local entrepreneurse. “Customers want to buy from brands that have meaning and that give back to communities, and they want to be part of that brand story,” Burns says. “That’s been a really fun part about being in the business, because now you get to meet these amazing local entrepreneurs that have incredible ideas. We’ve brought a lot of different brands to life.” One example is Hip and Humble, which made its debut at Salt Lake City International Airport is now being rolled out in other airports.
Pricing and Costs One thing long-time players uniformly remark on is the general upgrade to the passenger experience that has happened over the past 20 years. “Concessions programs and terminals are just becoming much more evolved, much more beautiful, much more engaging for the customer than they were 20 years ago,” says Pastorelle. The innovation in the airport concessions space is undeniable, but the general upgrade to the overall passenger experience has come at a cost. Build-out costs have skyrocketed over the past two decades. Where once costs were in the neighborhood of $300-400 per square foot, now they are regularly above $1,000 per square foot and approaching $2,000 in some markets. Top that with higher wages and higher costs of goods, and it’s become increasingly more challenging to make a profit in airport concessions. “Capital costs are five to 10 times more expensive than street-side now,” notes Grzechowiak. “Yes, sales are higher in the airport environment than they are typically in a street side environment. But when you compound all these effects of labor and capital and the cost of goods in the airport environment, you’re not seeing a huge shift in the contracts in the way you’re seeing a huge shift on the pressure of operating in the environment.” One way to address the skyrocketing costs is through price increases. But while the issue of pricing is a constant talking point, operators ultimately have little leeway in the vast majority of North American airports. Over the past three decades, the industry has sashayed from few limits on pricing to strict street pricing policies to somewhere in the middle. “Street pricing was in vogue” 20 years ago, notes Banducci. “There are still a few holdouts, but I think most airports have realized the airport business isn’t the same as the street” and have adjusted accordingly, albeit not to the level that most operators want. Banducci says airports have, relatively recently, adjusted their expectations in other ways. MAGs (minimum annual guarantees) and the desire for really high percentage rent has moderated a bit,” he says. “That’s a big plus - rents were going up year after year, but now I’ve noticed that’s kind of flattened out because airports want a viable program.”
Above: Brian Quinn, chief operating officer - retail, North America, Avolta, says the travel essentials sector has been “exceptionally resilient.” over the past two decades.
Looking Ahead Leading operators and consultants say the focus over the next decade will continue to be on the customer experience. Travelers have come to expect innovative concepts, luxurious build-outs and street-comparable pricing, and all that will likely continue. But the traveler demographic is changing, and with that comes a change in demands. One area of continuing evolution is technology. In the past half-dozen years or so, most food and beverage and retail operators have adopted various customer-facing technologies, mostly focused on allowing for frictionless transactions that allow travelers to purchase without interacting with a store or restaurant team member. Quinn says self-checkout has been widely adopted by travelers where its available in Hudson stores. “Our customer conversion rates have gone up much higher,” he says, noting that around 70% of the customers opt into the self-checkout mode. “I think that the guest experiences being positively impacted by technology that allows them a multitude of ways to shop, get their product and pay for their product,” says Grzechowiak. She also notes the technology that has been integrated into the airport environment by airports, helping with wayfinding and other goals. Banducci says technology adoption among operators will continue to grow. He says potential labor savings are one factor, but the bigger goal is giving travelers what they want. “We see it everywhere – all of our colleagues in business are [adopting] tech, and we’ve really put a lot of effort into it the past few years,” he says. “It allows travelers to take more control over how they order, pay for their experience and get on with their day.”
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AX NEWS JANUARY/FEBRUARY 2024
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