Airport Restaurant & Retail Association
Tackling the MAG model and concessionaire costs (V)
#Fact 4: Operating flexibility for concessionaires is critical to addressing the current pandemic and ongoing survival
“Reopening strategy must be tied to exposed enplanement growth, and greater latitude on critical business decisions is needed for operators” – Airport Restaurant & Retail Association
The association says that a measured approach is needed to reopening shops and restaurants, but adds that their ability to react to market circumstances has often been hindered by airport decisions made “in the name of sustainability, sponsorships, and pricing policies”. An example is airport street pricing policies, notes ARRA. “Many airports institute these policies without considering the fact that street-side locations have different revenue drivers and significantly lower cost structures than airports (e.g., rent, labour and capital investment).
Flexibility is urgently needed from airports on pricing policies and reopening schedules, says ARRA
“Additionally, restrictions associated with ‘pouring rights’ policies operate as a disservice to the traveller as options become limited: ‘I may love Coke, but I have to settle for Pepsi.’ Or worse, ‘I love Coke, and I won’t buy Pepsi!’ Choice better serves our customers. “Similar policies relating to product restrictions fail to recognise that certain products which may be ‘loss leaders’ in a street-side operation may in fact be among the top profit generators in an airport. Better understanding by airports of restaurant and retail operators profit and loss drivers is essential when analysing the feasibility of these and other policies, and charting a realistic path forward.”
Flexibility and latitude are therefore needed, especially as passenger travel and spending habits evolve. ARRA therefore asks its airport partners to engage to deliver “smart, strategic, and collaborative reopening plans and a greater level of confidence in the business decisions of operators”.
ARRA’s recommendations for short-term survival:
- Agreed to benchmarks by zone for reopening triggers and hours of operation.
- Staffing and menu changes at the discretion of the concessionaires working in partnership with airports.
Recommendations for long-term prosperity:
- Avoid in-terminal airport exclusive vendor arrangements.
- Explore efficient Central Receiving and Distribution Center (CRDC) models and Transportation Security Administration (TSA) screening integration.
- Augment market basket pricing approach to allow for more flexibility and higher spreads
Background
Facing Facts III: Survival, Revival and Braving the Future is presented as a continuation of ARRA’s series of white papers discussing the COVID-19 pandemic and its impact on the airport restaurant and retail industry. This instalment is informed by contributions from ARRA’s weekly COVID-19: Survival and Revival industry calls, discussions with airport leaders and industry experts, and close collaboration among ARRA’s Board of Directors and members—large and small, primes and Airport Concession Disadvantaged Business Enterprises (ACDBEs).
The Moodie Davitt eZine Issue 297 | 21 June 2021
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