As the COVID-19 pandemic and resulting sharp downturn in passenger traffic continue to decimate the airport concessions industry, one area of focus for stakeholders is finding solutions that would specifically enable Airport Concessions Disadvantaged Business Enterprises (ACDBE) to survive and begin to thrive again.
The weekly “survival and revival” industry call, hosted jointly by the Airport Minority Advisory Council (AMAC) and the Airport Restaurant & Retail Association (ARRA), featured commentary from Bob Silvas of Silvy Group Consulting and Jason McLemore, deputy assistant director of the office of business opportunity for the Houston Airport System.
Both men acknowledged the acute and ongoing pain ACDBE operators are feeling as airline passenger traffic levels stall at well below 50 percent of last year’s numbers. Many ACDBEs – and concessionaires in general – have shuttered their stores, at least for the time being. Some are open and are facing overheads that are extraordinarily difficult to manage in such a depressed business environment.
McLemore says the Houston Airport System is continuously advocating for its ACDBE tenants. “We’re continuing to get in front of the mayor. We’re continue to get in front of our elected officials to say, this is not something that’s gone away,” he said. “We are still in dire straits. We need all the help that we can get, because these small businesses, we want them around. So we are having a conversation both locally and federally. We need help and we need help now – that’s kind of the message I’m preaching to anybody that will listen.”
McLemore said the industry needs to focus on raising awareness at both the federal level – from which the ACDBE program is administrated – and at the local level. He’s looking for relief funding that would start at the federal level but funnel through local banks.
“We would get immediate help to our ACDBEs at the airport… but the other thing that it would help with out with is it would allow banks to understand and better appreciate how the finances work for concessionaires at the airport,” McLemore said. “That’s a really big thing that I’m really trying to work hard on – [I want to] educate our bankers locally so that my DBEs have more options when it comes to needing to borrow money or to do construction loans and things like that.”
Silvas said local politicians and influencers also need to be made aware of the fact that ACDBE operators are assets in the community. It’s easy for local powers to simply dismiss ACDBE company issues by saying it’s a federal program that needs federal solutions, he pointed out.
Instead, he suggested, companies should couple their federal appeal with a local approach. “Go in and say ‘hey, I’m a small, local business that pays taxes here in this region, that employs people that live here in your region, and I need help from you as a local small business’,” Silvas advised.
Silvas also pointed to the economic impact that thriving ACDBEs have within their communities. As part of a larger airport ecosystem, ACDBEs often source locally, hire locally and bring a sense of local pride to the airport.
McLemore agreed, adding that “you have to make sure you let everybody know that it’s not just about the airport. It’s not just about the concessionaire, the ACDBE or the DBE…. They have an effect that that far reaches, not just the city, but the region,” he said. “We really have to do a good job in letting our elected officials know that … this is about the region and the vitality of the small business community in that region.”
Looking Ahead
Silvas noted that the ADCBE program parameters may need to be addressed in a post-COVID environment. “There needs to be adjustments and we probably won’t know what those adjustments will be until after the smoke clears,” he said. “Right now the immediate concern is survival. But after we get past this we started getting into the recovery.”
Specifically, Silvas said the net worth cap for participation in the ACDBE program, currently at $1.32 million, needs to be adjusted upward if airports and the federal government expect players to come to the table being able to compete with their larger counterparts. “It may be a time to start bringing up that conversation about changing the limits … so that more ACDBEs can afford to play in this game and can participate in what the ACDBE program was set up to do.”
McLemore also raised an alarm regarding end-of-year reporting (March 31) required by the FAA. He explained that under the ACDBE joint venture guidance, ACDBEs share in risk as well as reward.
“I’m in a very awkward position because of where we are right now, and I’ve got ACDBEs trying to cover their debt service,” he said. “Then to say, ‘oh, by the way, the regulations say that you’ve got to write a check [to] that joint venture [partner] for your proportional share of the losses,’ that can’t happen. I mean, that just doesn’t fly with where we are right now.”
McLemore said such a request, although mandated, would be a final straw for many ACDBE operators. “So I’m working with my team,” he said. “We’re trying to figure out any creative, out-of-the-box, around-the-corner way to make sure that we have our ACDBEs, and that they’re going to be able to participate in our program today, tomorrow, next year, the year after that. We’re just going to have to get really, really creative to do that.”
