Current airport strategies for concessions are not working and should be revised, according to Justin Erbacci, CEO for Los Angeles World Airports. Speaking at the Future Travel Experience Conference in Long Beach this week, Erbacci called concessions a “necessary amenity for the passenger,” not just a money-making activity.
“Trying to use the old models, where we give people a box and say, ‘okay, give us a MAG and no matter what your business is, just keep giving us money’, doesn’t work,” Erbacci said.
He urged new models for concessions that share risk between airports and concessionaires. “We’re trying to do that at LAX with more of a partnership with concessions, where we share the upside but we also share the risk. It’s not like it used to be, where if you got a concession in an airport, at least in the U.S., you were going to be rich. We all know that with changing environments, labor issues – the cost of labor and the inability to get labor – and the cost of goods, operating airports is a lot more expensive than operating on the street. We need to find a new way to work together so that we can both be successful.”
Erbacci said flexibility around concessions is also going to be important. “The idea of just giving somebody a box and saying ‘that’s your box for seven years’, and then in seven years somebody else comes in and spends a bunch of money to change the box again, and all those boxes aren’t necessarily easily integrated, doesn’t work.” He pointed to OTG concessions at Newark Liberty International Airport (EWR), where concepts change based on day part, as an innovative approach.
Partnerships will be increasingly important in the near-term future, Erbacci continued, and he advocated for continued and expanding use of public-private partnerships. “I know some people don’t like them,” he admitted. “I think most of the time where you see failed PPP, the failure is not the model itself, it’s how the model was implemented. We shouldn’t put the baby out of the bath water there. PPPs are going to be important for us moving forward and developing the airport, bringing in new types of partners than we traditionally have worked with in the past, and then [interfacing with] airlines.
Erbacci urged expanded collaboration among all stakeholders, suggesting that current views are “parochial” and “myopic.”
“We really need to create more partnerships,” he said. “We need to look at each other as partners and not as enemies or arms-length adversaries and improve the collaboration, especially when it comes to the passenger experience. We can’t do it by ourselves. The airlines can’t do it by themselves. To really be effective and transformative, we have to figure out how to work together.
“Just basic things like sharing data” are needed, he continued. “You don’t have to share customer data – I know that’s really taboo – but operational data certain other things because we have to be able to cross-sell our different amenities.
