Airport Experience® News - Conference Issue 2025

officer for Paradies Lagardère , notes that the company performed strongly in 2024, supported by solid traffic trends in the first half of the year in North America. “However,” he adds, “revenue per enplanement has flattened since the second half of 2024 and continued to in January 2025. This trend suggests that macroeconomic pressures, including high interest rates and price inflation, are straining consumers financially, impacting airport spending. Early data indicates that price increases are becoming less effective, making reliance on annual price adjustments to offset rising costs an unsustainable strategy.” Indeed, many tried-and-true approaches just aren’t cutting it anymore. As ARRA’s report notes, the industry has “arrived at an urgent situation where airports and concessionaires must together make a choice about how to go forward.” Feeling The Pressure The biggest hurdles for concessionaires involve costs, Weddig says. “ARRA members report a weighted average 37-percent increase in construction costs from 2019 through mid-2024. Indeed, 17 percent of respondents to the member survey say their construction costs increased more than 50 percent,” he says. Weddig adds that the cost of airport construction projects far exceeds the cost of similar projects on the street. “For example, ARRA members report that average construction costs over the last two years for a full-service restaurant exceeded $1,400 per square foot, and much higher in some markets,” he says. “On the street, a full-service restaurant might cost $500 per square foot. Given that airport lease terms are generally shorter than they are on the street, and prices are constrained, this represents a significant burden for concessionaires.” Bisset points out that while costs are no longer rising at the aggressive rates they were during the pandemic, they’re not coming down either. He adds that “the

trend of Centralized Distribution and Receiving Centers (CRDCs) have driven concessionaire supply chain expenses up by 60 to 70 percent.” Then there’s the looming threat from the Trump administration of tariffs on foreign goods. “Unfortunately, it’s still too early to determine the full impact this may have, but it will most likely result in a pass-through of tariff costs, leading to higher prices, which could lead to lower sales,” Bisset says. Labor Woes On top of construction costs and other capital expenditures, labor remains challenging. Weddig acknowledges that hiring has stabilized a bit, but ARRA members are still facing issues.

Below: David Bisset, chief development officer for Paradies Lagardère, says revenue per enplanement flattened for the second half of the year and into 2025, making traditional operational and commercial performance strategies insufficient.

Above: Andrew Weddig, executive director of the Airport Restaurant & Retail Association, urges airports and concessionaires to work together to find a new way of doing business in the airport as construction and labor costs show no signs of declining.

aspect of the business that has improved over the last couple years. Everything remains challenging.” Discord within the airport concessions sector has been bubbling for the past several years. Even before the pandemic, concessions operators were voicing their concerns over the diminishing profitability of the sector, and now concerns are escalating. ARRA’s September 2024 report, “Industry at a Crossroads,” certainly paints a bleak picture of the current concessions landscape, stating, “Let’s just face facts: the current situation is not sustainable” as costs continue to skyrocket and sales per enplanement have stalled. Operators are absolutely feeling the squeeze . David Bisset, chief development

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AX NEWS MARCH 2025