"Retail renovation at PDX"

Sunday, July 3, 2005

Retail renovation at PDX
The $6 million project builds on a successful strategy
By Shelly Strom 
The Business Journal of Portland (OR)


Officials at Portland International Airport are launching a $6 million
program that aims to renovate roughly one-third of the 60,000 square feet of
space devoted to retail shops and restaurants. 

The project is a key part of a two-decades-old strategy that turned the
airport into a national leader in concessions. 

"The people at PDX are perceived as pioneers in the airport concessions
industry," said Pauline Armbrust, publisher and editor of Florida-based
Airport Revenue News. "Airports now try to make sure the flavor of the
community is reflected and Portland could be credited with starting that
whole concept." 

Airport officials, however, are more interested in revenue than bragging
rights. 

"There is a huge opportunity -- by redeveloping these locations, we expect
revenue to increase by close to $300,000 a year," said PDX Concessions
Development Manager Scott Kilgo. 

The square footage is spread among 20 locations. 

The strategy is pretty simple: "We like to think of PDX as the front door to
the Portland metropolitan area," Kilgo said. 

It involves bringing a high proportion of local businesses, such as Nike
Inc., Norm Thompson Outfitters Inc. and Portland Brewing Co., into the
airport and creating a shopping mall-like experience. 

Each time the concept is applied to an additional portion of concessions at
PDX, revenue increases beyond expectations, Kilgo said. PDX is home to 60
retail and food outlets, 40 of which are local. 

Revenue generated from concessions airport-wide last fiscal year totaled $51
million. Per passenger, that number is an average of $8 -- a level that puts
PDX second highest for passenger spending among airports nationwide. 

In the current fiscal year, which ends this month, revenue is estimated to
reach $56 million, and the per passenger average is pushing $8.50. 

The vast majority of sales are to passengers -- roughly 13.35 million
traveled via PDX in the fiscal year ending this month, down from an all-time
high of 13.8 million in 2000. 

In applying the concept to the last group of outlets, located mostly in
PDX's north terminal, Kilgo is looking for local operators to take over
about a dozen locations. 

National outlets, such as Wendy's and Hudson News, are expected to continue.


None of the locations has been refurbished for more than a decade. Food
offerings are limited and a specific local feel is absent -- qualities that
caused sales to lag the rest of PDX concessions, according to documents
describing the redevelopment project. 

To turn around the situation, the modern style of newer parts of PDX will be
applied. The goal is to emulate Concourse C, completed in 2001 and home to
Alaska Airlines. 

That concourse has the feel of a street scene. Facades of concessions extend
into the corridor. Dining tables and chairs are situated in front of
restaurants in the fashion of a sidewalk cafe. Finishes such as marble and
tile differentiate one shop from another and from the concourse corridor. 

Concession clusters at each end of Concourse C are wider than the corridor
sections and have higher ceilings, and skylights brighten the areas. 

In one concessions cluster, stylish furniture arranged on a modern rug
provides a comfortable place to take in works of art placed floor-to-ceiling
along the corridor. 

"We want people to be able to look down the concourse and see that there is
something there and give them a reason to continue down and linger," Kilgo
said. "If they are spending time, then they're spending dollars." 

Those dollars are important because profits at the airport are plowed into
operating costs, reducing the tab for airlines serving PDX. 

"Airports are going through a pretty significant transition in the way they
need to operate," said Armbrust. "About 10 to 15 years ago, airports
realized they could not count on the airlines for all their revenue." 

Portland's concessions program predates most similar strategies applied at
airports across the country. 

PDX officials, however, didn't exactly set out to be pioneers. 

"We started with a firm groundwork in surveys to find out what our
passengers wanted," said Jeanne Raikoglo, who worked as PDX concessions
manager until retiring in 2002. She is a concessions consultant with other
airports. 

In 1988, PDX housed little in the way of concessions -- just a few fast-food
outlets, generic newsstands and only two retail outlets, locally owned Nike
and Norm Thompson. 

"We found out passengers were looking for more like the retail that was
there," Raikoglo said. "That was the genesis of the idea to try an expanded
program with local operators -- to use the whole area of the center of the
airport as a kind of showcase for the Northwest and Portland." 

But with restaurant space operated by national concessions contractors in
the middle of long-term leases, PDX customers would have to wait for local
food offerings. 

When those leases began expiring five years later, PDX ushered in the first
wave of locally owned food outlets, including Coffee People and now-defunct
Macheesmo Mouse. 

"That was so successful that revenue increased more than 100 percent in the
first year and kept increasing at a much higher rate than enplanements,"
Raikoglo said. "We knew we were dealing with a very successful program." 

One longtime concessions tenant lauds PDX for its creativity. 

"The whole concept, the look and feel and the localness, is setting a course
for the whole industry," said Dan Lester, district manager for Coffee
People. "The numbers are speaking for themselves," Lester said. 

A preproposal meeting last month drew about 50 interested parties.


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