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27 small-hub airports after parking revenues, and rank third after structured facility, and may include the cost of transportation parking and terminal concessions at large-hubs airports. Rev- to the terminals. CFCs may be assessed on a per-transaction enues from rental cars companies can include one or more of basis (i.e., as a one-time fee for each rental car contract) or the following. on a per-transaction-day basis (i.e., as a fee charged for each day the rental car contract is in effect). CFC revenues may be used on a stand-alone basis to leverage bonds or may be used Percentage (or Privilege) Fees together with other airport revenues to support double-barrel bonds. Rental car companies located on-airport typically pay privi- lege fees of up to 10% of gross revenue from airport-related As with PFC revenues, revenues from CFCs and rental car rentals, or a minimum annual guarantee, whichever is car transportation fees are local money. Unlike PFC rev- greater. The minimum annual guarantee may be bid for the enues, there is no requirement for any federal oversight or first year of the agreement and then adjusted by an agreed- approval of the CFC or transportation fees. CFCs are usu- upon formula or it may be specified in the bid for every year ally established pursuant to an ordinance that documents of the agreement. Off-airport rental car companies typically the CFC amount, among other things, and the CFC may pay from 0% to 8% of gross revenue from airport-related thereafter be part of the airport's annual rate resolution. car rentals. Because rental car companies cannot decide among them- selves to charge a CFC or transportation fee, the airport Terminal Rentals operator has a great degree of discretion in setting and charging the fees. Rental car companies typically lease ticket counters and some- times office space in terminals, and pay rent to the airport operator. Contingent Rent In the event that there is an unanticipated shortfall between the Land Leases airport's cost of providing and operating a consolidated rental car facility and the revenues derived from CFCs and rental Rental car companies also lease land on-airport for fuel, clean- payments, a contingent rent may be charged to the rental car ing, vehicle storage, and/or maintenance facilities. This rent companies, subject to the terms of any agreement. may be determined based on the appraised value of the land or by some other method. TERMINAL CONCESSIONS Customer Facility Charge or Transportation Fee Although airlines are currently struggling with yields, labor issues, and rising fuel costs, passengers are returning in record At some airports, each rental car concessionaire collects a CFC numbers. Today, airport shoppers are recognized as a lucra- or transportation fee from its customers at the airport. Trans- tive market and airport retailing is evolving to meet that mar- portation fees, such as those charged at San Francisco Interna- ket. Concession sales have increased dramatically as airlines tional Airport, are charged on a per-transaction basis and are discontinue meal services and changes in airport security intended to recover the operating and capital costs of trans- require that passengers arrive early, consequently finding portation between a consolidated rental car facility and the air- themselves with extra time in the airport and being a captive port's terminals (see Figure 21). audience to the products and services offered by an airport's concessionaires. CFCs are typically used to pay all or a portion of the oper- ating and capital costs of a consolidated rental car area or Airport operators have worked diligently over the past sev- eral years to satisfy the traveler's desire for a pleasant airport experience. With considerable effort directed toward devel- oping some of the best food, beverage, and retail offers any- where, concession partnerships are turning airport terminals into places that effectively serve the dining and shopping needs of millions of customers. With travelers spending 90 minutes, on average, at the air- port, airport operators have directed efforts to maximize con- venience and "down time" for the traveler, which if success- FIGURE 21 Albuquerque International Sunport--Customer ful, can translate into significant sales from the restaurants and facility charge-supported bonds. shops located in the terminal (see Figure 22).

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28 attract upscale, branded merchandise as well as food and beverage outlets in terms of revenues and service. Apart The City developed a comprehensive concession plan with detailed space from achieving the objective of maximizing nonaero- allocations; integration of the existing McDonald's operation into a new food court; development of sales and revenue forecasts; recommendation of business nautical revenues, airport operators want airports to be arrangements and lease provisions; review and drafting of concession agreements user-friendly, provide the highest possible level of and competitive proposal documents; review and analyses of food and beverage, retail merchandise, and specialty coffee proposals; and Board presentations. passenger convenience and comfort, and promote the culture of the region where the airport is located by: Creating a density of shops and restaurants that visually affects the customers--Clustering or double- loading amenities will often attract potential cus- tomers who could otherwise walk straight to the gate. Food courts strategically placed in the center of the airport's retail area stimulates foot traffic into stores FIGURE 22 Boise Airport--Concession program (e.g., at Orlando International Airport). implementation. Providing accessibility to merchandise--Because of the smaller size of most airport concessions, access is key. The entrance should be open, well-merchandised, Reinventing Terminal Concessions Programs uncluttered, and provide enough room for shoppers to enter and begin browsing immediately. Developing a concessions program that goes beyond indus- Making use of idle space by using kiosks--Using try standards requires thoughtful planning, a strong cus- kiosks in key locations offers customer convenience tomer orientation, and hard work. Each airport has a unique, and maximizes concession revenues. The kiosk should distinctive set of passenger markets, all of which use the air- look attractive--inviting and friendly--to the indi- port differently, and have varying spending motivations and viduals who are going to use it, and it should embody characteristics. a positive expression of the image that the company or institution wishes to project, including its brand Today, airport operators are recognizing the need to identity and service levels. embrace the latest trends and idea management in the indus- Playing on local concepts and "Sense of Place"-- try. These include understanding the customer, anticipating Many airports are looking for concepts that are a what they want to buy, creating a shopping environment, moti- point of differentiation, such as regional or local vating shopping behavior, and finally making it easy to buy. branding that reflects the cultural heritage of the region. Providing an accommodating dining opportunity-- New trends and innovations such as upscale dining, high- Certain airport operators provide creative food venues technology newsstands, and creative specialty retail offerings that offer quality carry-out food. Long-haul flights on are common amenities of the modern airport. Independent airlines that provide minimal food service often moti- passenger surveys have shown that airport retail programs are vate passengers to purchase food before their flight. one of the key determinants of passenger satisfaction with an Also, one-of-a-kind restaurant concepts that celebrate airport. At the same time, passengers are becoming more dis- icons, landmarks, and the cuisine from the surrounding criminating in their choices of food, beverages, and retail region are a growing trend designed to enhance the offerings at airports. travel experience. MinneapolisSt. Paul and Portland International airports are good examples of this. Recognizing the consumer--Airport operators are mak- Product preferences--Airports also consider conces- ing serious efforts to understand the key passenger mar- sionaires that best meet the taste of the profile of the ket segments in their respective airports. These efforts airport's passengers and that generate higher sales and are informed by statistics such as the ratio of men to commissions. Airports and their retailers have a much women and domestic to international passengers, the per- better chance of generating a sale if they are selling centage of business versus leisure travelers, and even something that the customer really wants to buy. connecting versus origin and destination (O&D) passen- Travelers from different countries have different pur- gers, because departing passengers often have different chasing profiles, dependent on both the availability of habits from those returning home. specific brands and styles in their respective homelands, Inviting shopping experience--Airport operators are and any price differentials that might exist. designing new airport facilities around the goal of incor- Branding--Many travelers express a preference for porating substantial amounts of retail space to provide brand name products and services. National companies greater exposure to retail opportunities. Innovative with branded products can partner with local retailers to design can help motivate potential customers. Success- provide a complement of brand name and local owner- ful design and retail plans are creative and innovative to ship (see Figure 23).