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Establishing Goals for the Concession Program 31 Source: OECD n.d., Table IV.1 Figure 3-4. Value-added tax rates for select countries (2010). awarded to the highest bidder, driving prices higher and limiting selection to high-margin mer- chandise. The result was high prices and low levels of service, usually in generic and utilitarian concession units. While European passengers have long expected competitive pricing and good value, the same has arrived relatively recently at U.S. airports, where changing customer percep- tions on pricing and value have taken considerable time and effort, mostly in the last 20 years. Local regulations can also make a difference. For example, by law, local shops in Amsterdam must close at 6 p.m. and on Sundays, while the airport is exempt from this requirement. In response, an extensive pre-security concession program serving the substantial numbers of arriv- ing passengers and employees has been developed at Amsterdam Airport Schiphol. Frankfurt Airport has similar advantages, including a license to sell alcoholic beverages after regular local closing hours and on Sundays. 3.5.5 Airports in Asia Asian airports also provide their passengers with good value. In addition to high consump- tion taxes, excise taxes, and import duties, in many Asian countries, luxury brands are not widely sold and are restricted to sale in a few department stores, limiting price competition. Cosmetics are particularly expensive in Asia, and airport duty free shops offer a strong selection of brands at attractive pricing compared with local department stores.

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32 Resource Manual for Airport In-Terminal Concessions 102% of retail value regardless of alcohol content Korea $23.62 Turkey $19.37 Norway $19.25 Australia $16.42 Sweden $11.66 Ireland $9.00 United Kingdom $9.95 New Zealand $8.75 Finland $7.18 Poland $5.56 Czech Republic $5.56 Belgium $5.45 Hungary $5.24 Denmark $5.12 Switzerland $5.04 Netherlands $4.91 Slovak Republic $4.76 France $4.64 Greece $4.43 Germany $4.08 Portugal $3.62 Japan $3.44 Austria $3.41 Luxembourg $3.29 Spain $2.92 Canada $2.77 United States $2.76 Italy $2.02 Iceland $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 Note: “Whiskey” is assumed to be 40% alcohol by volume and 0.75 liter bottle. Excludes beer and wine. VAT or sales taxes are additional. Source: OECD n.d., 2009, Table IV.5. Figure 3-5. Comparison of 2007 local excise taxes on liquor (in U.S. dollars).

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Establishing Goals for the Concession Program 35 Table 3-1. Example of a concession program SWOT analysis. POSITIVE NEGATIVE STRENGTHS WEAKNESSES Strong origin-destination market Lack of post-security space to meet demand Lack of utilities in some concession units limits cooking Consistent long-term growth in traffic and types of food concept s Relatively good layout for concessions Lack of local food and retail concepts INTERNAL FACTORS Local economy growing at a faster rate than national Surplus of pre-security space economy Strong interest in our concession program by potential Some older concessions appear dated concessionaires Planned terminal expansion will provide new Some concepts are weak, tired concession spaces Below average spend rate compared with benchmark airports High sales per square foot in post-security areas of terminal indicate a lack of capacit y OPPORTUNITIES THREATS Additional low-cost airline service could stimulate Terminal expansion may dilute traffic in some areas of traffic and concession sales the existing terminal, requiring rebalancin g One airline is financially weak and may fail or be Expiration of major concession agreements in 2013 EXTERNAL FACTORS acquired, with unknown consequences in terms of future allows time to plan a new program passenger demand Well known local food concepts could boost spend Lack of consens us on need for conces sion at Board rates level Low spend rate compared to other benchmark airports Current concessionaires may oppose program shows good upside from an updated progra m expansion Specific opportunities for more specialty coffee, more specialty retail, and food court expansion Source: LeighFisher. Using the evaluation measures described in Section 3.3 and interviews with concessionaires and peers at other airports, as well as industry consultants, the concession manager can develop a set of attributes that helps define the current program. This simple technique, used in many aspects of business analysis, can also help provide an eas- ily understood snapshot of the current concession program that can be readily understood by senior management, policymakers, airport staff, and other stakeholders. Table 3-1 presents an example of a concession program SWOT analysis. 3.8 Common Concession Program Goals For some, a statement of goals for the concession program may seem like a statement of the obvious. However, during concession program planning and implementation, it may become apparent that some concession program goals are in conflict with others. This section presents an overview of some common concession program goals.

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