By Jennifer Oldham, The Los Angeles (CA) Times
With millions of dollars in food and retail concessions up for grabs,
officials will debate today how to make shopping at Los Angeles
International Airport live up to the city’s reputation as a world-class
consumption capital.
The Airport Commission is expected to ask companies to submit bids to
operate 51 shops and restaurants at the world’s fifth-busiest airport.
“There’s room for the concessionaires to improve sales and for us to improve
revenues,” said Karen Tozer, concessions manager at the city agency that
operates LAX.
Lobbying of city officials by companies vying for the lucrative contracts
already has begun in earnest. A recent luncheon speech by airport chief
Lydia Kennard drew many of the city’s prominent lobbyists. In her talk,
Kennard emphasized the need for a fair, transparent contracting process.
“This is the big prize,” said Fernando Guerra, director of the Center for
the Study of Los Angeles at Loyola Marymount University. Guerra is
representing a vendor interested in a concession contract. “Every single
lobbyist that I know has been contacted – even to the point where some
lobbyists, I believe, are representing more than one company.”
Much is at stake for the city of Los Angeles as well. In the 2005 fiscal
year, concessions constituted 25% of the airport agency’s nearly
$485-million operating revenue. Most of the contracts are set to expire next
year.
Airport officials have tried for years to figure out how to make shops and
restaurants at LAX more appealing. The average LAX passenger earns $92,520 a year. But half of the travelers at the airport do not spend money on food or drinks. Sales revenue in retail stores falls below that of many other major airports. In 2005, 21 airports surpassed LAX in sales per departing passenger at food and retail outlets.
To make more money, many airports, including Pittsburgh International,
created mini-malls in their terminals by hiring developers to make
improvements and to recruit and manage stores and restaurants.
Others, such as San Francisco International, cut ties to umbrella companies
that ran their concessions for years, opting instead to lease restaurants
directly to vendors. Sales at food outlets there increased 30% after the
airport decided several years ago not to renew its contract with HMSHost,
which had managed the airport’s 60 or so food outlets for more than 40
years.
“We made a big push to get locally named restaurants that would be
well-known to travelers,” said Mike McCarron, the airport’s director of
community affairs.
At LAX, officials also hope to create a local flavor – think surf shops,
luxury brands available on Rodeo Drive and trends along Melrose Avenue –
that will let passengers know they’re in Los Angeles. They also hope to
entice major national brands.
Discussion at the commission meeting, expected to attract an overflow crowd, probably will involve choosing a management model for the city’s airport concessions program. Airport staff members are expected to propose that the commission request bids from many types of operators. But analysts say such a plan could lead to confusion and make it difficult for officials to
compare bids.
“It’s clear the airport doesn’t know what it wants,” said Pauline Armbrust,
president and chief executive of Armbrust Aviation Group, which publishes
Airport Revenue News.
Among those bidding on contracts will be: prime concessionaires, companies
that manage their own stores and those of subcontractors; developers who
would take control of the entire program; and outlets that would lease
directly from the airport. The airport agency didn’t want to limit the bids,
officials said.
Unions and current concessionaires argue that the city should retain the
existing model, which includes several prime concessionaires, as well as
outlets that lease directly from the airport.
HMSHost, based in Bethesda, Md., operates 45 food and beverage outlets at
LAX, including California Pizza Kitchen, Starbucks, Burger King and Chili’s.
The corporation, which has served the airport for 35 years, spent $26
million to improve the shops it operates, said Rana Florida, HMSHost’s
senior director of communications.
“The Los Angeles airport is very important to us,” Florida said. “It’s one
of our top three important markets.”
Mayor Antonio Villaraigosa prefers the existing model, his staff told the
commission in May. But developers who have increased sales at other U.S. airports contend that the current model’s generic feel contributes to lower sales.
“Everybody hates the status quo,” said Jon W. Plebani, a director in the
Washington, D.C., office of Buchanan Ingersoll & Rooney, which represents
BAA USA, an airport operator and concessions developer.
Since January, BAA and its representatives have met with city officials to
try to sell them on their philosophy, which includes spending money to make
more space for concessions and bringing in popular local and national
brands. The developer acts as a landlord, turning over about 3% of gross
annual sales to the airport.
Union advocates say developers tend to bring in small companies that do not
provide good wages or benefits. But BAA says that bringing in more stores
heightens competition and creates better-paying jobs.
City officials say they will not be influenced by lobbyists, who have a long
history of giving political donations on behalf of clients who want the
contracts. The airport is no exception.
In the late 1980s, several of Mayor Tom Bradley’s appointees helped raise
political contributions from lobbyists and contractors. A city audit found
that a group of politically well-connected minorities and women reaped
millions in profits between 1986 and 1989 after investing virtually no money
of their own and doing little or no work in an airport concessions business.
But times have changed, officials say, even while acknowledging that the
perception still exists that lobbyists could have undue influence over the
officials who will decide who gets airport concession contracts.
City Controller Laura Chick acknowledged that the potential for abuse in the
contracting process “is enormous,” but insisted the safeguards are much
improved. The watchdog role “is a very changed game, from inside the city
and from inside the airport department, the controller’s office and the
mayor’s office,” she said.
