"Sky Harbor retail increases"

Monday, May 27, 2002

Sky Harbor retail increases
By Hal Mattern
The Arizona Republic


Fewer passengers are flying out of the nation's airports these days, but
they are spending more money on everything from books and magazines to food
and drink, especially alcoholic beverages.

Airport officials in Phoenix and around the country say that because people
are arriving early for flights so they can navigate security checkpoints,
they are spending more time at the gates, where they are captive customers.

"We clearly have a greater opportunity (to make sales) because of the
greater dwell time," said Jack McCarthy, president and CEO of HMSHost, which
operates shops and restaurants at 70 airports around the world, including in
Terminals 3 and 4 at Phoenix Sky Harbor International Airport.

With plenty of time to spare, passengers are browsing gift shops and
newsstands. They are stocking up on take-out food and snacks because many
airlines have stopped serving meals on most flights. And, because they have
more time, an increasing number of passengers are eating at sit-down
restaurants instead of grabbing a quick meal at a fast-food outlet.

They also are spending more time at airport cocktail lounges.

"People are drinking more after September 11 than before," McCarthy said.
"It's a heck of a lot easier to make a dollar profit on alcohol than on a
Cinnabon or a Burger King meal."

That has translated into higher sales at airport shops and restaurants in
recent months, despite the decline in flights and passengers since the Sept.
11 terrorist attacks. At Sky Harbor, where passenger traffic dropped 25
percent after the attacks and still is running 6 percent below last year,
retail and food and beverage sales remain at or above year-ago levels, and
in some cases have surged.

At Terminal 4, which handles about 70 percent of the airport's passenger
traffic, retail sales rose by 16 percent in March compared with the same
month last year. Sales of food and beverages at Terminal 3 jumped 48 percent
in March.

Terminal 2, the smallest at Sky Harbor, hasn't fared as well. Retail sales
were off by 12 percent in March, while food and beverage sales were flat.
The terminal has been suffering since TWA merged with American Airlines last
year and moved to Terminal 3. It was dealt another blow after Sept. 11 when
Shuttle by United stopped flying.

Even at the bigger terminals, shops and restaurants located on the "land
side" of the airport, before the security checkpoints, have had a tougher
time than those near the gates. That's common at airports across the country
because passengers are eager to get to their gates before they think about
shopping or eating.

"People are nervous, and they want to get through security and see their
gates," McCarthy said.

Sales at land-side businesses were generally down during the first five
months after Sept. 11 but have since picked up and were running ahead of
year-ago levels in March at many Terminal 3 and 4 outlets. Sales remained
poor at Terminal 2 land-side businesses, prompting Sky Harbor to grant two
of them 20 percent rent reductions.

Airport parking revenue also has taken a hit since Sept. 11 because people
without tickets are no longer allowed to pass through security.

"We've lost the well-wishers, the meeters and greeters," said Tim Campbell,
executive director of the Salt Lake City airport. "They are dropping their
friends and relatives off at the curb."

David Cavazos, assistant Phoenix aviation director, said parking lot use
dropped by as much as 30 percent at Sky Harbor after Sept. 11, with the
largest declines at short-term lots frequented by people dropping off or
picking up passengers. But he said the revenue declines were almost totally
offset by recent increases in parking rates at the airport.

The airport has indefinitely postponed plans for a $47 million redevelopment
project in Terminal 4 that would have added retail and food outlets. About
75 percent of the terminal's shops and restaurants are on the gate side of
the airport.

Because more than half of the new outlets were planned for the land side,
officials want to wait until the federal Transportation Security
Administration develops a final security plan for the nation's airports
before proceeding.

Cavazos said the security plan might require a reconfiguration of the
terminal. It also is unclear whether the ban on non-ticketed passengers in
gate areas will remain, which also would make land-side retail outlets less
attractive to prospective tenants.

Attached Photo:

Food and drink sales at Sky Harbor International Airport's Terminal 4, which
handles 70 percent of the airport's passenger traffic, rose by 16 percent in
March over the same period a year ago.

airportretail.jpg