"Indianapolis airport retail taking flight"

Monday, January 7, 2008

Airport retail taking flight 
BY CHRIS O"MALLEY
The Indianapolis (IN) Business Journal 


Retailers and restaurateurs have flooded Indianapolis International Airport
with letters-of-interest for space in the Midfield terminal, which is
scheduled to open in late 2008. The demand is more than five-times the
number of concession spaces available, airport managers say. 

That suggests at least 250 firms expressed formal intent to hang a shingle
at the 50 retail and food-and-beverage spaces in the nation's first big
terminal designed and built since the 2001 terrorist attacks.

In nearly 60,000 square feet of prime retail space, concessionaires will
compete for a slice of a big pie: passengers spent $ 32 million at the
existing terminal in 2006 alone. That translates to $ 7.71 per boarding
passenger, based on last year's 4.05 million enplanements here.

Spending per boarding passenger also has been growing: up 7 percent last
year. 
Now ensconce those concessionaires in a larger, $ 1.1 billion terminal that
betrays its utilitarian purpose by doubling as virtual art gallery and
architectural showcase.

Millions of dollars worth of local and international art will grace the
interior of the curvaceous, glass-and-steel structure, which resembles a
primordial sea creature.

Airport officials are counting on looks alone to draw untold thousands of
curious visitors from across the region, further boosting retail sales.

A look at the latest configuration for terminal concessions shows another
appeal for concessionaires.

Unlike the current terminal's four concourses, two of which can be accessed
from numerous entry points, the midfield terminal has just two concourses.
And getting to them requires virtually all 9 million annual passengers to
move first through a circular civic plaza, itself home to 25,000 square feet
of concession space.

You have a lot of concentrated passenger flow to concessions, said Jeremiah
Wise, director of business development for the Indianapolis Airport
Authority.

It's location, location, concentration, said Mary Ann Falatic, the airport's
retail director.

Airport officials won't identify any of the firms that filed letters of
interest. They say they're in the midst of negotiations with prospects. Some
deals are likely to be inked in the first quarter, Wise said.

Nor will they even hint at whether any of the concepts proposed are much of
a departure from the kind of retail and food and beverage shops in the
current terminal.

Indianapolis International may not be among the nation's top 20 airports,
but it has been recognized for retail innovation in the past. For example,
in 2003, Airports Council International handed Indianapolis its most
innovative concession award for tenant Passport Travel Spa, which offers
hair and nail care and massages.

One thing that is being targeted, Falatic said, is a nice mix of local,
regional and national brands.

Designed for revenue

What is clear is that the new terminal is designed to better squeeze money
from passengers' pockets in a post-Sept. 11 world.

In the existing terminal, about 65 percent of concessions are pre-security
and the balance on the post-security side.

But the midfield terminal puts most of the concessions 55 percent of them in
the post-security gate areas.

In an era of tighter security, typically, people wait until they get behind
security to get food and go shopping, said Pauline Armbrust, CEO of Armbrust
Aviation Group. The Palm Beach Gardens, Fla., company publishes Airport
Revenue News.

It's been a trend for a while, even before 9/11 and even more so now.

Some airports have taken the new paradigm to the extreme. Food, beverage and
retail sales at Tulsa International Airport rose 27 percent after a terminal
remodeling that moved 90 percent of concession space post-security, from 45
percent previously, according to The Tulsa World.

That mix is not ideal for Indianapolis, where the civic plaza and its
200-foot-in-diameter translucent dome will corral travelers before heading
for their gates.

Besides concessions on the main floor of the plaza, an upper level circles
overhead that will house restaurants. One clever design to draw them up is a
semi-circular walkway on the east end of the upper floor. It allows visitors
to view the city's skyline as well as aircraft on the ground and coming in
for a landing.

When you have the opportunity to start from the ground up you have the
opportunity to really think through the process, said Falatic, who has
strived in the last several years to make due with an aging terminal.

The last major improvement to the current terminal was a revamping of its
food court about four years ago.

More space, same tenant count

While the new terminal is a dramatic improvement over the old and much
larger 1.2 million square feet vs. 673,000 curiously it still will have only
about 50 concessionaires.

The difference is that the midfield terminal should have a more diverse mix
of concessions, said Wise. The reason is that it has half the number of
concourses, so there's less need for several of the same kind of
concessions. With two concourses, there could be two news/gift stores
instead of four.

Today, we have a lot more duplication, he added.

Just how much more the airport could generate in concession income is
unclear, however. The income is crucial in helping the airport control rents
and fees charged to airlines.

Wise said much will be determined by negotiations with concessionaires. In
its solicitation package, the airport authority said typical rents are 15 to
25 percent of a concession's sales.

The authority's minimum guidelines are 8 percent for food and beverage, 12
percent for those selling alcohol, 15 percent for periodicals and 8 percent
for other retail.
        
The airport also collects a base rent for the space. The authority's minimum
guidelines range from $ 35,000 annually for basic retail and food vendors to
$ 150,00 for full-service restaurants with bars.

Last year the airport collected $ 5.1 million in terminal rent alone.

The authority anticipates actual [rents and percentage of gross sales] to
exceed these levels, states the package for concessionaires.

Airport retailers operate in an environment much different than most
retailers.

The airport is open 365 days a year and the average retailing day is at
least 16 hours sometimes 24 hours. That's an extra challenge for staffing,
on top of a requirement that employees receive extra training about the
airport and act as ambassadors of the airport, as the authority puts it.

Passengers are in a hurry, making serving them without sacrificing the
quality of the product difficult. Flight delays and cancellations can bring
a crush of customers and require concessions to operate extended hours.

And that doesn't include the impact of further terrorist attacks that could
again cripple the airline industry and, in turn, airport revenues.

But what price is too much for superior visibility in a key market that is a
major center for the hospitality industry, host to more convention attendees
than St. Louis, Cincinnati and Pittsburgh combined, states the airport
authority's invitation for proposals.

Not to mention that about two-thirds of the airport's passengers have
household income greater than $ 60,000 about half are above $ 80,000.

At the New Indianapolis Airport, your customers may be coming and going but
you are in a destination location.



 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dcfp/dcboard.php


*****************************************