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From page 137... ... 7 1 Chapter 7 Improvements to Existing Airport Businesses 7.1 Parking, Rental Cars, and Concessions Are Key Revenue Generators 7.2 Major Elements of the Strategy 7.3 Applicaon of the Strategy to Airport Parking 7.4 Applicaon of the Strategy to Rental Cars 7.5 Applicaon of the Strategy to In Terminal Concessions 7.6 Wrap up 7.7 Addional References Improvements to the planning, design, and management of exisng passenger concessions, public parking, and in terminal services at an airport can and will result in net revenue gains to the airport sponsor. This chapter focuses on how airports can manage exisng passenger concessions and services to achieve new revenue. Read the entire page →
From page 138... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7-2 Figure 7-1: Commercial Airport Opera ng Revenues, 2013 Source: FAA, Form 127, Operang and Financial Summary, 2013 Figure 7-2 examines more closely the sources of non-aeronaucal revenue for reporng airports. For large and medium hub airports, passenger-dependent acvies, such as public parking and rental cars, are the largest contributors. Read the entire page →
From page 139... ... Figure CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7-3 7-2: Commercial Airports Non-Aeronaucal Revenue Sources, 2013 Source: FAA, Form 127, Operang and Financial Summary, 2013 7.2 MAJOR ELEMENTS OF THE STRATEGY A strategy of improvements to exisng airport businesses places a high value on airport strategic and business planning, the importance of seng specific goals and objecves , and airport engagement in either self-operaon or acve management of third-party contracts that result in increased net revenues to the airport. As shown in Figure 7-3, the strategy involves five key elements: Management alternaves for airport businesses Non-aeronaucal program development Programs to improve concessionaire or service contractor performance Informaon technology that supports revenue development Monitoring performance Land and NonTerminal Facility Leases and Revenues 8% Terminal Food and Beverage 7% Terminal Retail Stores and Duty Free 8% Terminal Services and Other 5% Rental Cars (no CFCs) Read the entire page →
From page 140... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 4 Figure 7 3: Elements of the Strategy Source: KRAMER aerotek inc., 2014 Improvements to exisng airport acvies and operaons could involve many different departments or funconal areas such as concessions (CN) ; ground transportaon (GT) Read the entire page →
From page 141... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7-5 7.2.1 Element #1: Management Alternatives Airports employ a variety of structures to develop, manage, and operate acvies on the airport. Figure 7-4 shows the management opons that range from extensive airport staff engagement to limited or no involvement. Read the entire page →
From page 142... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 6 SELF OPERATION OF REVENUE AND EXPENSE ACTIVITIES With self operaon, airport staff will develop, manage, and operate a parcular airport funcon. Self operaon at small and non hub airports is a more common business pracce, as opportunies exist for cross ulizaon of both equipment and staff. Read the entire page →
From page 143... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 7 Table 7 1: Examples of Service Contracts and Management Agreements Types of Services Examples of Service Contracts Typical Hub Size Applicaon N on -A er on au tic al R ev en ue G en er at io n Concessions Food and Beverage, Retail, Adversing, Passenger Services All Fuel Storage, Distribuon, Aircra Hydrant Fueling Small/Non Hubs Ground Transportaon Shule and Bus Operaons (Public/Employees) , Automac Vehicle Idenficaon and Billing Large/Medium Passenger Processing Passenger Loading Bridges Large/Medium/Small Parking Garage and Lot Management, Credit Card and Other Payment Services, Guidance Systems Large/Medium/Small M ai nt en an ce a nd O pe ra tin g Ex pe ns e Airfield/Landside Services Snow Removal, Mowing, Deicing and An Icing Material Storage and Dispensing Equipment All Conveyance Systems Elevators, Escalators, Moving Walkways, Carts, Wheelchairs Large/Medium/Small Electronic Systems Internet/Wi Fi, Fiber Opc Backbone, Website, Digital Signage, CCTV (closed circuit TV) Read the entire page →
From page 144... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7-8 7.2.2 Element #2: Non-Aeronautical Program Development The decision about management structure will dictate how an airport sponsor will go about: (a) planning and design, (b) Read the entire page →
From page 145... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 9 performance reward programs to their concessionaires. Denver Internaonal Airport's Premium Value Concessions Program (PVC) Read the entire page →
From page 146... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 10 Performance monitoring generally will involve: Regular meengs and briefings with service providers and concessionaire managers to check in and to discuss airport trends and upcoming events that may affect business Compliance reviews for customer service, street pricing, quality control, health and safety Follow-up on vendor quesons and customer complaints Review of performance benchmarks [Adapted from ACRP Report 54] ACRP Report 19A: Resource Manual to Airport Performance Indicators provides a number of benchmarks that can be used to track individual contractors and funconal areas, as well. Read the entire page →
From page 147... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 11 highlight ways to manage parking, improve product mix, and deliver higher net revenues to the airport sponsor. 7.3.2 Parking Management Alternatives Airports typically maintain a high degree of control over public and employee parking. Read the entire page →
From page 148... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 12 minimizes the airport sponsor's risk exposure and requires the lowest number of airport staff posions and level of parking experse. PK 8: COMBINED APPROACH Some airports may adopt a combined approach in which the airport, a management company, and/or a concessionaire will manage different parking products. Read the entire page →
From page 149... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7-13 Figure 7-6: Tradeoffs for Different Management Structures Source: Jacobs Consultancy, ACRP Report 24, Figure H.1, 2009 Increasingly, off-airport compeon at many airports is movang airport sponsors to diversify and differenate their parking products and services. A parking management structure that allows airports to set rates and modify offerings in a mely manner can result in greater net parking revenues to the airport sponsor. Read the entire page →
From page 150... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 14 PARKING ANALYTIC AND PRODUCT DEVELOPMENT TECHNIQUES Parking access and revenue control systems make it possible for airports to take a close look at demand and u liza on of specific parking products. Usually the parking development team includes staff and/or outside professionals. Read the entire page →
From page 151... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 15 Transportaon fees for off airport vendors Strategies to manage capacity and develop parking revenues Strength and weakness assessment/conclusions Development of Alternaves Diagnoscs are essenal to establish a baseline assessment of current condions and to idenfy (a) where exisng parking products are/are not meeng customer demand; (b) Read the entire page →
From page 152... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 16 Figure 7 7: Parking Program Performance Source: Adapted from ACRP Report 19A: Resource Guide to Airport Performance Indicators, 2010 ACRP Report 19A suggests a number of measures that airport sponsors can use to track the performance of their parking program. These include: Parking revenues per originang passenger Average annual gross revenues per parking transacon Number of on and off airport spaces per type of parking product Number of parking transacons per month per parking product Number of parking spaces ulized by parking product during daily peak, as a percentage of total number of parking spaces In addion, monitoring customer complaints and feedback and intercepng surveys of parking customers are both effecve ways to stay in touch with customers. Read the entire page →
From page 153... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 17 o Credit card in/out o Automac vehicle idenficaon (AVI) and radio frequency idenficaon devices (RFIDs) Read the entire page →
From page 154... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 18 7.4 APPLICATION OF THE STRATEGY TO RENTAL CARS On average, rental cars return 8% of total operang revenues (aeronaucal and non aeronaucal) , as shown in Table 7 4. Read the entire page →
From page 155... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7-19 Figure 7-8: Rental Car Company Market Shares, 2013 U.S. Operang Revenues Source: Auto Rental News, FACT BOOK 2014 Figure 7-9 displays a meline of how the industry arrived at this point of consolidaon, beginning in 1990-91 when Chrysler acquired Dollar and Thriy. Read the entire page →
From page 156... ... Figure 7-9: Rental Car Consolidaon Timeline Source: Prepared by KRAMER aerotek inc., 2014 Read the entire page →
From page 157... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 21 Figure 7 10: Comparison of U.S. Rental Cars and Annual Operang Revenue Source: Auto Rental News, FACT BOOK 2014 Figure 7 11: Annual Operang Revenue per Rental Car (United States) Read the entire page →
From page 158... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 22 7.4.2 Rental Car Management Alternatives TECHNIQUES TO MANAGE RENTAL CAR CONCESSIONS The consolidaon of the rental car industry and maintenance of individual brands gives airport operators choices about how to manage the rental car concessions. CN 5: DIRECT CONTRACTS WITH INDIVIDUAL BRANDS OR BRAND FAMILIES Airports typically enter into direct contracts with rental car companies. Read the entire page →
From page 159... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 23 be located in garage structures or remote sites on the airport, and are financed typically with a pledge of proceeds from customer facility charges (CFCs) .13 Table 7 5 lists some CONRAC facilies. Read the entire page →
From page 160... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 24 Some smaller airports operate consolidated QTAs and ready/return spaces. An airport sponsor may construct a quick turnaround facility separately or as a part of a CONRAC. Read the entire page →
From page 161... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 25 necessitate inclusion (and acvaon) of a conngent rent clause to cover capital and operang costs of the CONRAC. Read the entire page →
From page 162... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 26 7.4.3 Rental Car Administrative Improvements Airports can achieve higher net revenues through careful preparaon of bid documents, definion of terms, rents, levy of off airport privilege fees, and a connuous audit program. Each of these administrave improvements is described in the next set of implementaon techniques. Read the entire page →
From page 163... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 27 Although it may be tempng to review other airports' rental car concession bid documents, every airport has unique situaons and requires a custom set of documents. Read the entire page →
From page 164... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 28 with rental car concessions and contracts are preferred to complete the audits. It may be cost effecve to have the auditors receive special training for auding rental car operaons. Read the entire page →
From page 165... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 29 7.5 APPLICATION OF THE STRATEGY TO IN TERMINAL CONCESSIONS 7.5.1 The Concession Opportunity In terminal concessions consist of food and beverage, retail, duty free, and other shops and services. These tradional revenue generators can return considerable operang revenues to an airport sponsor. Read the entire page →
From page 166... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 30 Table 7 9 esmates capture rates (transacons per enplaned passenger) using an average expenditure per transacon of $14 for food and beverage, $25 for specialty retail, and $8 for news and gis. Read the entire page →
From page 167... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7-31 Prime Concessionaire – The airport leases packages of loca ons to one or two prime concessionaires, each of which has mul ple loca ons (more than 3) within the airport. Read the entire page →
From page 168... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7-32 as food courts, or incorporate the construcon of such areas into its direct contracts with concessionaires. For a direct contract alternave to be praccal, airport management must have the freedom to make mely business decisions with a minimum of polical consideraons. Read the entire page →
From page 169... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7-33 The Metropolitan Washington Airports Authority (MWAA) uses the fee manager approach at Ronald Reagan Washington Naonal and Washington Dulles Internaonal airports. Read the entire page →
From page 170... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7-34 With fewer responsibilies and contracts to administer, the prime concessionaire alternave requires fewer airport staff to manage concessions. This approach tends to yield the least amount of compeon, however, because one or two prime concessionaires control the enre concession program, concession space, and the terms and condions for subleases. Read the entire page →
From page 171... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 35 Balmore/Washington Internaonal Thurgood Marshall Airport used a developer to improve older terminal infrastructure and update concession spaces. Boston Logan Internaonal and Newark Liberty Internaonal airports also use the developer alternave. Read the entire page →
From page 172... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 36 MANAGEMENT APPROACHES COMPARED Each management model has strengths and weaknesses. Direct contracts offer an airport sponsor more control over concession agreements and management contracts. Read the entire page →
From page 173... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7-37 Level of interest on the part of third-party developers, fee managers, and concessionaires to operate at the airport Airport net revenue esmates under each management alternave The degree of airport autonomy and flexibility to develop and manage its concession and customer service programs given the airport sponsor's policies, procedures, and legal structure The unique issues and opportunies present at the airport Capital requirements and the airport sponsor's ability to aract private capital with each alternave Terminal development plans Opportunies and flexibility to opmize revenue during the course of the contract Selecng the appropriate management alternave for an airport can result in greater revenue, less administrave and other costs, and preservaon of the airport sponsor's capital. 7.5.3 Concession Program Planning and Administrative Improvements Five key factors contribung to a successful concession program are: (1) Read the entire page →
From page 174... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7-38 For a detailed discussion of agreements, procurement processes, and management of concessions, please consult ACRP Report 54: Resource Manual for Airport In-Terminal Concessions. Figure 7-19: Overview of Planning, Design, Solicitaon, and Management of Concession Programs Source: Michael G Read the entire page →
From page 175... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 39 "If you don't know where you're going, you will end up somewhere else." – Yogi Berra STEP 1 – CN 20: PROGRAM STRATEGY, VISION, GOALS, AND OBJECTIVES Concession Working Group To develop successful concession plans, facilies, and documentaon, it is useful to form a mul disciplinary working group that represents the following mix of skills: Concessions program development Airport finance Concessions/commercial legal Properes and terminal operaons Terminal planning/shopping center architect Local jurisdicon purchasing requirements At larger airports, staff will have many of these skills. Smaller airports may need to engage outside consultants, planners, and aorneys. Read the entire page →
From page 176... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 40 Examples of goals for a concession program include: Enhance customer service and the overall customer experience Encourage healthy compeon Enhance the passenger experience through designs that offer interesng and excing concepts and movate passengers to patronize the concessions Represent the best local, regional, naonal, and internaonal concepts – use local brands to create a sense of place Provide travelers' necessies Maximize non airline revenue in a manner that is consistent with the airport's public service role to reduce the impact of airport costs on airlines Develop the concession program with a cost structure that will permit concessionaires to comply with street pricing requirements without undue economic burden Opmize small and local businesses and ACDBE opportunies Provide for periodic re concepng and facilies refreshment to keep the concessions program fresh and vibrant Recruit top local, regional and naonal food and beverage and retail brands and concepts Achieve a cost effecve approach to investment in concession space for both the airport and concessionaires (i.e., adding terminal space for concessions, construcng concession support areas, and providing ulies and other investments necessary to present a high quality concession program) Program Objecves Objecves are realisc and measurable targets established to evaluate and track progress during implementaon of a concession program. Read the entire page →
From page 177... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 41 STEP 3 – CN 22: MARKET RESEARCH Surveys Airport size, the mix of passengers (originang/connecng, domesc/internaonal, and business/leisure travelers) , and customer demographics all figure into program design. Read the entire page →
From page 178... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 42 Concession layouts Pricing informaon and relaonship to street pricing (how much is the airport pricing premium) Sales per square foot by concession unit Revenue history by month for three to 5 years Revenue history for food/beverage (by unit and by type -- casual dining, "grab and go," bar, etc.) Read the entire page →
From page 179... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 43 Preparaons for facility requirements begin with an assessment of concession space and amount of square footage by: (a) concept; (b) Read the entire page →
From page 180... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 44 the concessionaire with the best proposal for negoaon of final terms and condions. On arriving at an agreement, the concessionaire receives the concession award. Read the entire page →
From page 181... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 45 Qualificaons of Proposers and Bidders Perhaps the most important aspect of awarding concession privileges, regardless of the method used, is determining each prospecve concessionaire's ability to meet certain financial, management, and experience requirements. Before any concession award process (bid, proposal, or negoaon) Read the entire page →
From page 182... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7-46 allows an airport to offer a lower basis for inial startup of commercial acvity and services, and to share in profitability once the business is established. The profit sharing arrangement can be defined in agreements in a number of ways, such as a percentage (25% to 50%) Read the entire page →
From page 183... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 47 comprehensive. The concession documents are subject to federal, state, and local laws and regulaons, and to airport policies and rules. Read the entire page →
From page 184... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 48 publicaons. In addion, airport sponsors can list their solicitaons on the websites of ACI NA and the AAAE. Read the entire page →
From page 185... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 49 Feedback to concessionaires Response to public complaints Delivery and transportaon of the product through the terminal Performance indicators Overall evaluaon of concessionaire performance17 The airport sponsor needs to communicate regularly with concessionaires regarding the results of quality assurance checks. Each concessionaire needs to know that the airport sponsor is monitoring operaons and is available to consult on issues affecng concessionaire success. Read the entire page →
From page 186... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 7 50 The resources required to implement a vibrant concession program will vary by size of airport and by management model selected. At non hub and small hub airports, staff for concessions may be one part me employee or one full me employee; at medium and large hub airports, dedicated concession staff ranges from two to more than six employees. Read the entire page →
From page 187... ... CHAPTER 7 – IMPROVEMENTS TO EXISTING BUSINESSES 7 51 ACRP Report 26: Guidebook for Conduc ng Airport User Surveys (Jacobs Consultancy, Aviaon System Consulng, LLC, JD Franz Research, Inc. Read the entire page →

From page 137...

... 7 1 Chapter 7 Improvements to Existing Airport Businesses 7.1 Parking, Rental Cars, and Concessions Are Key Revenue Generators 7.2 Major Elements of the Strategy 7.3 Applicaon of the Strategy to Airport Parking 7.4 Applicaon of the Strategy to Rental Cars 7.5 Applicaon of the Strategy to In Terminal Concessions 7.6 Wrap up 7.7 Addional References Improvements to the planning, design, and management of exisng passenger concessions, public parking, and in terminal services at an airport can and will result in net revenue gains to the airport sponsor. This chapter focuses on how airports can manage exisng passenger concessions and services to achieve new revenue.