Airport Experience® News - Post-Conference Issue 2024

Left: Operators are overwhelmed by the huge number of RFPs scheduled to come on stream this year. Avolta’s Steve Johnson suggested airports should hold off on issuing new concessions RFPs for at least two years.

KEIR: With the union, the thing I struggle with the most, on top of the cost and affordability, is that we lose the direct relationship with our colleagues. It’s hard to have a clear conversation about how this business operates and how we can work together to serve the customer. Having that third party slows things down, and not always to the benefit of the employee. FRICKE: As somebody who has been gone for ten years and has come back, I’m surprised at how fragile the PnLs have gotten. I never felt the pressure, when I was at HMSHost, on street pricing and in the monitoring of street pricing. At the same time, rents are going up. And on top of it, not only do you have union pressure, but we’re in airports where the cities are mandating breathtaking increases [in wages]. WARD: So what what’s the answer? As the seven key operators in our industry, is this an individual effort or a collective effort? And who do you need to influence - the airports, the cities, the unions themselves? JOHNSON: All the above, really. [The current environment] is unsustainable in the industry. We’re talking about major cities, and I’m not

sure who’s going to operate there. With the number of RFPs that are on the street and the union involvement in most of those RFPs, I think you’re going to see – and we have seen – no bids. That’s our reality. I don’t think that the airports have understood the dynamic change that’s happened after Covid. We’re seeing a little bit longer term, but we’re seeing the same exact same metrics they used to have, without a look at pricing, without a look at rents, without a look at the term and without [addressing the challenges with unions]. I’m not sure how sustainable the industry is right now. SVAGDIS: We’re talking about RFPs but the existing business is just as bad, and we’re struggling. I’m sitting here on behalf of 61 joint venture partners I have today. It’s not just the primes. I have a significant number of joint venture partners and their financial wealth and well-being is on the line. BERNAL: To answer the question, I think it’s a collective effort – it’s ARRA, its AXN, it’s AMAC, it’s ACI, it’s AAAE, it’s all of us here. We’ve got to get the messaging and drive it home to all the stakeholders. And ultimately, it’s the airport, but it’s really the mayors, the

Above: Toby Keir of WH Smith North America said despite myriad challenges, the fundamentals of the U.S. market for airport concessions are strong, with rising passenger numbers and unprecedented capital investments by airports.

city council – that’s who’s driving the bus in these cities. FRICK: We hope they’re getting the message, because I know there are RFPs that nobody responded to. For the first time in my career, we walked away from an extension offer. I hope it is giving [airports] pause – they’re seeing behavior that they’ve just never seen before. PARADIES: Absent the union issue, when you look at where we were in 2019 and where we are today, there has been some progress in some airports. We’ve seen some of the street pricing adjusted because [the airport] trusts us that we’re not gouging. A good example is Phoenix. They went from a very strict street pricing to no pricing [restrictions]. The competition manages the program. Nobody is abusing it. SVAGDIS: If you think about what we need, we need longer term, we need flexibility on pricing, we need support as it relates to the unions when they have unrealistic asks. But we also need realistic expectations on capital spending. And something we haven’t talked about in a while is logistics charges – a charge for this, charge for that – and our PnLs are getting tighter and tighter. It’s almost like an additional rent.

“With the number of RFPs that are on the street and the union involvement in most of those RFPs, I think you’re going to see – and we have seen – no bids. ” – Steve Johnson , Avolta

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AX NEWS APRIL/MAY 2024