Business

Airport concessions: OHM ROI vs. Customer Service

July 21, 2015

clean-drinking-water
Yesterday’s post about bottled water not being offered at the gift shops at the Pensacola International Airport caught the attention of another Inweekly reader.

In February, Interim Airport Director Dan Flynn suggested that some resolution might be reached to allow the gift shops to sell bottled water:

From: “Mark Clabaugh”
Subject: RE: Pensacola Airport
Date: February 20, 2015 at 4:33:42 PM CST
To: “‘Zach Michael'”
Cc:

Zach,
I arrived in Pensacola, went to the News Stand to get a bottled water and they still cannot sell drinks. I did not hear back from Dan nor has anyone provided a logical explanation why Pensacola International (Intergalactic) does not allow the News Stand to sell beverages. I can certainly understand Alcoholic beverages, but every airport store in the US and I venture to guess the world can sell beverages. As I stated previously, the negative impact to the customer / travelers are:

1.) Time – you have to stand in two lines. In my case, the line was very long at the food place and I did not have time.
2.) Inconvenience – if you want a magazine and a water, peanuts and water, snacks and diet coke or whatever — you have to go 2 places.
3.) Two Transactions – taking more time.

Imagine what visitors whom travel think of that? Their very first impression is “this is crazy, never seen that before” and in fact, they have not because no one else places that restriction on their newsstands in their airports.

I eagerly await your reply explaining this policy and hopefully agreeing with me and reversing it benefitting all visitors to our airport.

Thank you,

Mark Clabaugh

—————–

From: Dan Flynn [mailto:DFlynn@cityofpensacola.com]
Sent: Friday, February 20, 2015 7:02 PM
To: Mark Clabaugh
Cc: Ashton Hayward; Zach Michael
Subject: Pensacola Airport Concessions

Dear Mr. Clabaugh,

I understand you had some questions regarding certain aspects of the concessions here at the Pensacola International Airport and I wanted to give you a little more information that will hopefully help provide insight as to why certain vendors are allowed or not allowed to sell various items.

For smaller airport facilities, the news/gifts concessions and the food/beverage concessions are typically operated by separate firms under separate agreements. In order to be able to provide the services, these firms will be required to make a significant capital investment in their facilities, will be required to pay a percentage of their gross revenues to the airport (as the airport is self-sufficient, being funded through the fees generated by those providing services from it), and have a limited concession term.

Here at Pensacola the food and beverage concessionaire is obligated to invest at least $1,809,750 in the improvements to their area. This includes all of the demolition and construction work they must perform to finish the area in the manner that will benefit the facility.

To help pay for the Airport’s overall operation, they must remit anywhere from 10% to 14% of their gross revenue depending upon the product that is sold and location in the terminal from which it is sold. On top of this, under certain Federal regulations, the longest concession term we can provide is ten years.

Therefore, given the large financial impacts coupled with a relatively short period of time that they have to amortize their investment, these concessionaires are granted the exclusive rights to sell certain classifications of items. The news/gifts concessionaires are granted the exclusive rights to sell new/gifts related material and small snack items, and the food/beverage concessionaires are granted the exclusive rights to sell food and beverage products.

Again, this condition is very common in smaller airport facilities and has been for decades. It provides each entity that may be interested in submitting a proposal for a concession, each entity that may be developing financial models and predictions for a proposal, and ultimately each concessionaire that ends up with the operation with the knowledge that their authorized product lines will allow them to amortize their investment.

While larger airport facilities with greater passenger volumes will have more flexibility as to what the different concessionaires may be able to sell in common, smaller facilities have to be more restrictive.

While each concessionaire has the exclusive right to sell certain items, we understand the customer service aspect of offering certain elements in each location (such as beverages in the gift shop). We’ve already been having discussions with both concessionaires to determine what arrangements they might be able to make between themselves to accommodate something such as this. Given these discussions, we are hopeful that in the near future we will see beverage sales available in the gift shops.

I hope this information provides a little clarification on the subject.

Daniel E. Flynn
Interim Airport Director
Pensacola International Airport

————

From: Mark Clabaugh
Sent: Saturday, February 21, 2015 2:44 PM
To: ‘Dan Flynn’
Cc: ‘Ashton Hayward’; ‘Zach Michael’
Subject: RE: Pensacola Airport Concessions

Dan,
In opening, I would like to thank you for your detailed account regarding beverage sales. I think that we depart in opinion with regard to small airports and the sales of beverages in their gift shops / newsstands. This is simply not the case in my experience and I have flown well over 3 million miles locally and abroad. At the very smallest airports with no gift shops, I have seen vending machines. In fact, I have seen vending machines in the same airport with gift shops and dining. So, while I can appreciate the investments made by the vendors at the Airport, it is their business. I think that paramount to everything should be the efficiencies provided to the travelers in what is already a stressful situation in most cases these days.

Imagine, you are running late, you want to run in and get something for the plane before you board…. Bam – You have to go 2 places and 2 lines and 2 transactions. What is your thought? I can tell you what mine was and that of fellow travelers I spoke to. So, my question is do we want this to be factored into the opinions of those visiting Pensacola? My first thought was “That is stupid, I have never seen the such”. And again, that is saying a lot given my travel experience. If anything, my first inclination is to but nothing from them for causing me this additional inconvenience. In short, I look at them in disdain. They should have figured that into their business model

In closing, I am very pleased that you are working on this and in discussions to accommodate travelers purchasing beverages from the gift shop. I truly hope that this can be fixed. It really should be about our visitors and customers and not about profits. Thank you again and I really do look forward to the day I can walk into the Gift Shop, purchase a magazine, some cashews and a diet coke for the ride on the plane all in one place.

Thank you for your time and your very complete explaination of the situation.
Mark Clabaugh

————-

Five months after these emails, nothing has changed.

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