"Merchant makeover at Minneapolis airport is in the works"

Thursday, June 10, 2004

Merchant makeover at airport is in the works 
By Dan Wascoe
The Minneapolis (MN) Star Tribune 


Several Twin Cities-area restaurants, including the venerable Murray's,
French Meadow Bakery, Axel's Bonfire Grill, Buca di Beppo and the Rock
Bottom Brewery, could be part of a major makeover of concessions at
Minneapolis-St. Paul International Airport.

So could stores selling merchandise by Harley-Davidson, Department 56, Field
& Stream and Al's Farm Toys.

Escalators could carry travelers to a second-story dining area overlooking
the main terminal, amid trappings that include wood and stone. More stores
and restaurants could be built outside security checkpoints.

And new vendors would be required to charge prices no higher than those at
nearby shopping centers.

A committee of the Metropolitan Airports Commission on Wednesday unanimously
recommended such proposals to boost concession revenues and expand the
shopping-center ambience of Minnesota's biggest airport. Unless disappointed
developers can win support that was not evident Wednesday, the full
commission could approve the new concession mix on June 21. Construction
would start this year and be finished in 2006.

Since last year, the commission has heard from vendors and the Minnesota
legislative auditor that it could be making much more money. The agency
spent the past year reviewing how to expand its concessions offerings and
initiated a highly structured proposal process that drew some of the
country's biggest airport developers.

Some staff members estimate that the commission could boost its annual
concessions revenue from $9 million to about $20 million, partly by adding
about 29,000 square feet of concessions space to the current total of nearly
100,000 square feet in the Lindbergh and Humphrey terminals.

Screening criticized

Two companies not chosen for the concessions mix, BAA USA and Westfield
Group, criticized the commission's screening panel, saying it did not
understand the merits of their ideas and did not ask sharp enough questions
of the winners.

Jim Erickson of BAA challenged the estimate of $20 million in concession
revenues.

"In what year?" he asked. "When will you get to $20 million? ... It's not
there. It's your job to ask that."

Noting that his company proposed to invest $36 million of its own money to
expand the airport's concessions, he said, "You can't get where you say you
want to go in the present [structural] envelope."

That led to some testy exchanges, including an outburst from Commissioner
Kari Berman, who said the losing developers "are motivated by the bottom
line above all else. ... They knew there was a possibility they might not
win. ... I believe the process was done with the utmost integrity."

Commission Member Jack Lanners, who headed the screening committee, said
that the competition generated "the best of the best" and that the panel
favored building on the airport's award-winning concessions program rather
than undergoing a more thorough reconstruction that would lengthen the
interruption of normal airport service.

The recommendations

That priority showed in the panel's recommendations. It would award four of
17 concession batches to Host International, the airport's longtime dominant
concessionaire, and seven more to a new joint venture that includes Host and
CBR, Inc., also a current concessionaire. Each batch represents a group of
stores, restaurants or services.

Each of the 19 proposers offered its own mix of concessions. They had to
agree to a minimum annual guarantee of revenue to the commission, and many
estimated revenues beyond those minimums.

Erickson and Win Borden, representing Westfield, criticized the screening
panel's support of the "batching" concept instead of the master developer
concept employed by BAA and Westfield. The developer approach would give the
winning company the chance to redevelop the entire concessions program.

Instead, the commission's Management and Operations Committee recommended
seven companies whose proposals are expected to boost gross revenues from
disadvantaged businesses from the current 10 percent to 19 percent.

Lanners said familiar concessionaires such as Chili's Too and TGIFriday's
probably would stay put, but that new entries would significantly expand
shopping and eating choices.

"You won't buy an airline ticket to go in [the airport] to eat," he said,
noting that most concession space will remain behind security checkpoints.
But he said the new offerings will include "a wonderful Minnesota presence"
that he predicted will increase customer satisfaction and boost revenues.

That, in turn, will help the commission maintain a relatively low-cost
airport for its airline tenants, he said. Northwest Airlines, the airport's
dominant carrier, supports the recommendations.


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