Airport Experience® News - Retail & Amenities Issue 2023

certain markets, cities and airports are subject to passenger complaints, but in this case, should the minority influence the majority of passengers who realize that it just costs more at an airport, much like a sports arena?” Although PHX is setting an example for how price caps can be removed with minimal issue, airports are largely staying put with their current policies. “We know our industry partners were interested in increasing our current pricing strategy of street cost plus 10 percent to cost plus 15 percent, but concession revenue is performing well—exceeding our expectations, even—so we are not planning to adjust pricing at this time,” notes Mookie Patel, chief business and finance officer for Austin-Bergstrom International Airport (AUS), who adds that the airport is also not open at this time to increasing the number of times a year prices are reviewed, which for AUS is two.

At Tampa International Airport (TPA), pricing reviews happen every four months, or more frequently as agreed upon by the airport authority, according to Laurie Noyes, vice president of concessions. She notes that the airport is trialing a new pricing review process—but only for Starbucks locations at this time. “This new process entails that the concessionaire advises us of price changes for review—this is a change from submitting price changes for approval and then subsequent implementation,” Noyes says. “This is a subtle difference that results in a faster and more autonomous process for the concessionaire to update pricing. Review and approval by airports takes time; advising allows the concessionaire to move at their pace and notify the airport. And since Starbucks is a national brand with many street locations for comparison, the operator can better keep up with movements in the pricing in the market.” Noyes acknowledges that pricing policies have a significant impact on the overall profit and loss of a concession unit. “However, this is just one of many impactful components that need to be considered by airports when putting together the financial portion of an RFP, and which concessionaires should consider when responding,” she says. Other Potential Solutions Patel points out that a major inhibitor for AUS when it comes to adjusting pricing policies is that pricing is very sensitive in markets where the cost of living is difficult. “We want to support travel and offer products and services in the airport to reach all of our passengers equitably,” he says. “To compromise on pricing pressures, we adjust with the street, and we will continue to look at term and capital investment as a compromise.” McOwan offers other compromises that could support concessions businesses without necessarily eliminating pricing caps: “Airports can help by reducing rents accordingly, or allowing for increased service charges to compensate for rising costs— Minneapolis–Saint

Paul International Airport (MSP) introduced this fee up to 4% without any complaints,” he says. “However, I recognize that this may not be plausible on higher ticket items in retail, such as tech and accessories where the consumer can easily track pricing on the Internet.” In his presentation, Crews also identified other areas where airports can offer relief besides eliminating price caps, including the reduction of other ancillary costs to operators, including storage, delivery, marketing and common area maintenance fees. Additionally, he discussed things that can be done internally to help with profitability. “One potential solution that is company-controlled is individual item pricing,” he said. “For example, previously in one of our pizza locations where we had personal sized pizzas, the cheese, supreme and pepperoni pizzas were all priced at the same level just because we want to be easy for the guest experience. But now with these cost impacts, we have to raise the prices on various pizza items. So cheese is one price and then it’s another 50 cents for pepperoni and another 50 cents for the supreme.” Crews added that combos and add-ons are another way to drive up the average price per transaction. “Both of these approaches have supported us as far as absorbing the inflationary pressures we’re facing.” McOwan points out while there have been discussions on this topic for decades across a variety of different business models, there has never been any real substantial evidence that one model works better over any other, either negatively or positively. “I would love to see some research done where airports try different models across various terminals for a direct comparison for a period of a month and then revert back to their old model to gauge any reaction,” he offers. “As retailers we have the ability to evaluate and respond to price sensitivities by category and by location to maximize our joint returns— but the current pricing policies limit our ability to do so. It’s in our interest to test, learn and execute pricing that maximizes sales, but we don’t currently have the flexibility and ownership to do that.”

Above: Tampa International Airport is trialing a new pricing review process wherein the concessionaire advises TPA of price changes for review rather than going approval process—but only for Starbucks locations at this time, says Laurie Noyes, vice president of concessions. through the often time consuming review and

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