"Bidding Intense for McCarran News Stand"

Tuesday, March 27, 2007

Bidding Intense for McCarran News Stand 
By Benjamin Spillman 
The Las Vegas (NV) Review-Journal 


In his biography, Clark County Commissioner Rory Reid credits former Gov.
Bob Miller, the longest-serving state executive in Nevada history, for
appointing him to a spot on the Nevada Taxicab Authority early in his
political career.

But when the Clark County Commission met recently, it was Miller, now a
principal with the lobbying group Dutko Worldwide, asking Reid for
consideration.

The issue that had Miller, as well as former Sen. Richard Bryan, looking for
help from a group of local politicians? The right to operate a single news
stand at McCarran International Airport.

"I don't know if there is anyone else left in town," Reid's colleague,
Commissioner Chip Maxfield, said as he surveyed the lineup of Nevada
political heavyweights arguing why their clients should have the right to
sell newspapers, candy and trinkets from an 1,800-square-foot shop located
near McCarran's C gates. "That is incredible."

More incredible than the speakers at the commission meeting, however, is the
financial windfall just one news and gift stand can generate in America's
sixth-busiest airport. The proposed shop is one of 16 airport news and gift
stands in the United States capable of generating more than $5 million in
revenue annually.

Two of the companies vying for the concession, The Hudson Group of East
Rutherford, N.J., and The Paradies Shops of Atlanta, already control about
1,000 airport retail outlets in North America. Each has promised McCarran it
would pay $125,000 monthly to rent the news stand space.

"This store is going to earn a lot of money," attorney Christopher Kaempfer
said before the commission. Kaempfer was arguing on behalf of Ayala's at
McCarran, the third company considered to be a finalist to get the bid.

Ayala's, a minority-owned firm based in Las Vegas, offered a minimum of
$108,000 in monthly rent plus a percentage of the proceeds should the store
hit certain revenue goals.

"The money stays here. The profits from this business stay here in Las
Vegas," Kaempfer said during an extensive pitch that included several
charts, emphasized the minority status of operator Brian Ayala and
criticized a corporate scandal at Paradies that resulted in a company
founder's conviction in 1994.

With an increasing number of passengers seeking to spend more money in
limited airport space, competition for the most lucrative spots can be
intense. Concessions at the top 50 airports in North America generated
nearly $4.2 billion in total sales in 2005, the trade publication Airport
Revenue News reports. The figures are a combination of food and beverage,
news and gift and specialty sales.

Only New York's LaGuardia and Kennedy, Atlanta, Chicago's O'Hare and Los
Angeles airports had higher total sales than McCarran's $183 million,
according to the magazine.

In 2006, total sales at McCarran rose to more than $203 million and
concessionaires paid the airport a combined $26.5 million in rent. Slot
machines, a concession unique to McCarran, generated $63 million in revenue
for operator Michael Gaughan with nearly $40 million going to the airport.

The new store will be in an upcoming addition to the C gates and should be
open for business by late 2008. The County Commission couldn't agree on a
concessionaire at its last meeting and directed the firms to rework their
bids with airport staff members and return for another vote.

Paradies and Hudson, both private companies, dominate the retail business.
Both are represented at McCarran. Hudson operates the existing news and gift
stands in the airport and Paradies has two PGA Tour shops.

If the new store generates as much as $7 million in revenue, which is
possible under some projections, it could boost either company's bottom line
1 percent to 2 percent by itself.

"When you put it in that kind of perspective, it is a pretty significant
chunk of business," said Ann Ferraguto, principal at AirProject of
Alexandria, Va., a consulting firm that specializes in airport retail.

For Paradies, the stand represents an opportunity to reach further into the
news end of the business, a segment dominated by Hudson. If Hudson gets the
concession, the company would be able to strengthen its grip on news and
gift sales at McCarran, where it has boosted revenue in that category more
than 60 percent since taking over from another company in December of 2003.

"It is definitely a competitive business. There aren't a lot of players,"
Ferraguto said. "When contracts come up, especially the big lucrative
contracts, people go after them in a competitive way."

Competition has intensified in recent years as mainstream brands and
mall-style shopping have become common in airports.

Security has had an impact, too. Lengthier security procedures have people
coming to the airport earlier, which means longer "dwell time" in terminals.

More time in the terminal means more demand for sit-down restaurants, wine
bars, and demand for upscale shopping. Brooks Brothers, Kenneth Cole, DKNY
and Gucci are among brands available in airports.

"You have a lot of business people out there who don't have a lot of time to
go shopping," Ferraguto said. "It's is helping people multitask."

But even more recent security rules to prohibit people from bringing liquids
and gels into secure areas are make competition for space beyond security
checkpoints, called the airside part of a terminal, even more intense,
especially when it comes to selling bottled water or bath products.

"They really need to be post-security at this point. That is where
passengers can then buy it and take it on the airplane," she said.

Hudson and Paradies, in particular, are known as intense, knowledgeable
competitors.

But even with the airport equivalent of two heavyweight champions vying for
the same prize, Ayala, the local concessionaire, isn't backing down.

During his recent presentation Kaempfer scored points with commissioners by
emphasizing client Brian Ayala's local roots.

"They'll chalk it up to a lost business opportunity and they will go bid
again," Kaempfer said of Hudson and Paradies. "That is not the case with
Brian Ayala. Las Vegas is his home. He works here. He lives here. His family
lives here."

Kaempfer was the only speaker to bloody a rival. His criticism of the
Paradies scandal 13 years ago made caught the attention of Commissioner Tom
Collins.

"That is just a tarnish that would be spread to this community," Collins
said.

Ferraguto said the scandal was old news, however, and isn't a reflection of
the company's recent performance.

"It is unfortunate that occurs sometimes," she said of the mudslinging. "For
some of these bigger deals, they pull out all the stops."

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