Airport Restaurant & Retail Association
Tackling the MAG model and concessionaire costs (IV)
#Fact 3: Labour costs are unsustainable, and employee hiring challenges are real
“Collaboration on employment related decisions is key to attracting a talent pool. A concessions surcharge will help defray rising employee costs” – Airport Restaurant & Retail Association
While all businesses face the challenge of hiring staff post-pandemic, the issue is especially acute at airports, notes ARRA. Premiums are required to offset less attractive work conditions, while concessionaires often face higher labour costs due to unionised labour or airport-mandated above-market minimum wages and/or benefits. ARRA reports: “Today on average, due to suppressed sales and minimum staffing requirements to maintain levels of service (or brand standards), US$0.35 to US$0.45 of every dollar an airport restaurant or retail store earns goes to labour. This is well over normal proportions pre-COVID. This proportion also exceeds street-side comparable businesses where labour accounts for only 25% to 30% in food service and 15% in retail. When these costs are combined with higher on-airport construction costs, security, and other airport-specific costs, concessionaires face razor-thin margins, making it difficult to operate profitably.”
Operating costs at airports remain high, led by employment and training (3Sixty Duty Free at Dallas Fort Worth Airport pictured)
ARRA argues that, while these increased costs can be partially offset through increased prices, this is usually restrained by airport pricing policies tied to pricing in street-side establishments with lower operating costs, constraining concessions revenue. “A mechanism is therefore needed to recover higher employment related airport operating costs for ongoing, long-term sustainability. One possibility is implementing a surcharge. Even before COVID-19, street-side establishments had instituted surcharges to address escalating labour, health and welfare costs. This practice has now become more widespread as their businesses have now been severely affected by the pandemic. Allowing airport concessions to collect similar surcharges would help to offset escalating employment costs and their consequential impact on the profit and loss report.”
ARRA’s recommendations for short-term survival:
- Implement a 3-5% surcharge on all retail and restaurant checks (non-rentable) to offset higher wage and benefit costs.
- Support the marketing and attraction of employee recruiting efforts through measures such as expedited badging, parking, transportation, and job fairs.
Recommendations for long-term prosperity:
Assist all vendors at making the ‘Airport’ an Employer of Choice, relying on: Day care facilities for all employees; education benefits; fringe benefits similar to those provided by a municipality; ensure quality and time efficient public transportation to service early and late hour employee commuting. Plus, ARRA suggests, support implementation of new technology initiatives which offset labour needs.
The Moodie Davitt eZine Issue 297 | 21 June 2021
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