Communicating airport concession operating costs

Abstract

The long-term success of a concessions programme can depend on well-constructed business plans through which concessionaires demonstrate a thorough understanding of the cost of doing business at an airport. Sharing information upfront can allow concessionaires to make informed business decisions and is the first step to successful airport and concessionaire relationships. The layers of complexity and associated costs of operating a restaurant or shop in an airport are factors that prospective concessionaires need to fully understand in order to judge the potential for success and profitability of business opportunities. Operating at an airport presents a unique set of challenges not found in traditional street operations. Aside from basic operating costs associated with the business, airport concessionaires must operate longer hours to accommodate passenger traffic, comply with federal and airport laws and regulations, pay minimum rents and capital investment requirements, as well as a myriad of other fees associated with operating at the airport. Unfortunately, there is not an industry manual available that clearly defines the operating costs of doing business at airports, nor is there a consistent list of fees common to all airports. Each airport is unique, with their own set of specific operating requirements. Furthermore, only some airports offer a comprehensive list of anticipated concession operating costs at the onset of the request for proposals (RFP) process — at the point at which interested concessionaires are evaluating business opportunities. A prospective concessionaire — particularly new, small and/or inexperienced concessionaires — may have insufficient information to evaluate an airport business proposition. Consequently, these concessionaires may incur unexpected costs that challenge their financial viability and affect the customer service they deliver to airport passengers. Unison Consulting, along with the Airport Cooperative Research Program (ACRP), completed a synthesis to help identify gaps in the communication of cost data from airports to retail and food and beverage concessionaires. Armed with more complete information regarding the full costs of operating in the airport environment, prospective concessionaires — particularly less experienced businesses — will be better able to gauge the opportunity being offered by airports. This will result in better proposals submitted for airport consideration, featuring more accurate business plans and pro formas.