Primer: Concessions


Airport concessions are unique retailing opportunities, characterized by high-traffic volumes and travelers inclined to spend money. Passengers tend to have plenty of time in the terminal building to shop or dine.  Outside the security checkpoints, they are usually accompanied by family or friends serving as well-wishers or meeters/greeters, which provides an additional consumer group. Concessions are often viewed as a welcome distraction during flights delays and layovers.

 

Concession consumers

Before planning concessions, it is necessary to determine who will be the concession customers. In general, concession customers fall into 5 groups:

  • Domestic passengers
  • International passengers
  • Meeters-greeters (persons meeting arriving passengers)
  • Well-wishers (persons sending-off departing passengers)
  • Airport and airline employees

All of these consumers have different spending habits and needs, and each should be accounted for in any airport concession plan. While some purchases may be made by arriving passengers, the vast majority are by departing passengers.


International passengers are a major contributor to airport retail success.  They are able to purchase duty-free products, which typically yield higher value transactions. They also have longer “dwell times” or the time free to shop or eat before their flight. Leisure travelers typically spend more time in the airport and purchase more goods and services than business travelers purchase.


Types of airport concessions

There are a wide range of concessions at an airport.  These can include:

  • Retail

  • Duty free

  • Food and beverage

  • Consumer services

 

3 types of airport retailing:

  • Convenience retail:  Consists of news, individual candy and gum, personal care items, limited reading materials, beverages, pre-packaged snack food and other sundries.
  • Specialty retail:  Includes bookstores, “mall-type” retailers – apparel, sporting goods and electronics – local crafts and merchandise, gourmet or packaged foods, and gift and souvenir shops.
  • Duty-free retail:  Available to international departures only, and can include apparel, cosmetics, tobacco products, alcohol, jewelry and watches.

Since shopping is not the reason people visit an airport, the majority of sales are impulse purchases. Therefore, it is essential to locate retail shops so that they will have the highest possible exposure to passenger flows to optimize the revenue to the concessionaire and the airport operator.


The presentation of each retail unit is important.  The particular product being offered should be obvious at first glance with clear signage. Lighting should be higher than the ambient light in the terminal.  Aisles should be at least 36 inches wide, to comply with the Americans with Disabilities Act and to allow clear passage for customers with luggage, children, and shopping bags.


3 types of food and beverage offerings at airports:

  • Fast food:  Usually located within a food court or a gate area location. Can be a national brand or local offering.
  • Quick service restaurant: Has limited menu and table service, usually includes a bar component.
  • Full-service restaurant: Has a larger menu and server staff, and may include a full-service bar.

Airports typically contain a balance of these types of restaurants, with full-service restaurants located where there is more space, and QSRs located in the faster-paced concourses.  There is typically a mix of national and local brands to appeal to both visitors and local airport users.


Food and beverage outlets in an airport act as a draw for passengers, as they are destination concessions that consumers will seek out.  However, food and beverage concessions located too far off the beaten path will lead to lower sales.  Signage and visibility are important contributors to the success of food and beverage concessions. 

 

Consumer services

Consumer services are offered as a customer service convenience. The 7 main service areas are:

  • Barber/beauty shops
  • Spas and massage services
  • Shoe shines
  • Currency exchanges
  • Banks/ATMs
  • Business service centers
  • Baggage carts

 

Concession planning

When planning for concession space in a terminal building, there are no particular industry standards to follow. Instead, there are many factors to be considered depending on the specific airport. 

  • Location:  The concessions’ location in relation to the passenger flow is of prime importance to a successful operation. Consideration must be given to airport operations so concessions do not impede passenger flows or visibility. 
  • Customer demographics:  The type of passenger traffic using the airport affects how long they spend in the airport and the appropriate mix of concessions.
  • Terminal design:  The size and shape of an airport terminal is another key consideration. Older terminals were not designed to provide sufficient space for concessions. The initial planning stage of any terminal renovation should take into consideration concession locations for visibility and servicing.
  • Mix and synergy:  The mix of the right concessions and adequate room for each facility is vital to the synergy of the food and retail space at airports. Some concessions will require larger areas, such as full-service restaurants, so accurate space requirements are needed. While passengers are encouraged to purchase food, the preference is to have them consume it in view of retail shops to increase the probability of an impulse sale.
  • Current concession performance:  Well-performing operations in adequate spaces need to be compared with concessions not doing well. Some may simply have too much or little space or poor signage and merchandising.
  • Performance comparisons with other airports:  The sales performance, both per enplaned passenger and per square foot, at other airports is important in establishing a benchmark so that concession space is correctly allocated.
  • Passenger volume:  The volume of potential customers exposed to each concession area is used to determine spend rates and shop sizes.

 

Concession management approaches

The structure of the concession contract is critical to the success of, and return from, any concession.  The length of contract term and passenger numbers will usually dictate the parameters of the business terms accepted or proposed by potential concessionaires.  The extent of capital investment required by the concessionaire will impact the percentage rent and/or minimum annual guarantees offered or achieved.


4 types of concession contracts:

  • Prime or multiple prime operators:  A single firm or more than one is granted the right to operate all of a certain type of concession.  For example, many airports have a prime operator for food service and a different prime operator for retail.
  • Developer:  The concessionaire will make a substantial investment in the infrastructure and will then act as a manager, leasing out all of the concession spaces.  Developers do not operate any of the concession spaces.
  • Standard or direct leasing:  The airport leases out each concession space individually to separate vendors.
  • Fee manager:  The airport pays a fee to a third party who manages the facility, while making no investment in the infrastructure.

Airport retailers vs. street retailers
Concessions in airports present a different set of challenges for operators than those encountered in other retail locales, such as malls. Some challenges include:

  • Sales area and floor space is often inadequate.
  • Back-of-house space is either not provided or is inconveniently located.
  • Parking for staff is a constant problem and is costly.
  • Sales ‘peaks and troughs’ create staffing challenges
  • Airports are often located in areas that are not easy to access via public transit.
  • Stock routes are often indirect and lengthy.
  • Operating hours are considerably longer, in some cases 24 hours a day, 365 days per year.
  • Security requirements can cause problems for deliveries, stocking and staffing.

It is recommended that concessionaires coming on-airport for the first time make certain their team includes experienced airport staff and management.

 

Compiled by Brett McAllister (bmccallister@aci-na.org)

Senior Vice President, Operations and Chief Financial Officer