Airports and concessionaires will likely begin exploring new business models as the pandemic eases and passenger traffic begins returning in greater numbers, Charlene Reynolds, assistant aviation director at Phoenix Sky Harbor International Airport (PHX) said this week.
Speaking on the weekly industry call hosted by the Airport Restaurant & Retail Association (ARRA), Reynolds said at least some airports, including PHX, are open to modifying their future lease parameters in light of the devastation concessionaires have experienced over the past year.
“Right now, I don’t believe anyone has a perfect solution, but one thing the pandemic has done is to make everyone take a look at existing business models and start really digging in and analyzing things that may need to change,” Reynolds said.
“At some point in the future, we’re going to have to look at the [minimum annual guarantee] and see if that is the right kind of revenue predictor for our concessions program, and or if there is something else,” Reynolds continued. PHX has a solicitation coming up for food and beverage, retail and a lounge in one of its new concourses, and MAG will be a part of the airport’s expectations, she said. “However, we’ve had a discussion going for when we send out a solicitation for Terminal 4 in the future, and it probably won’t have MAG. From the Phoenix perspective, we need to change the business model.”
Reynolds also noted the ongoing challenges facing Airport Concessions Disadvantaged Business Enterprises at PHX and elsewhere, particularly regarding the need to secure funding to operate businesses going forward. “Our program is what it is because our city council had a mandate that they wanted more ACDBE participation,” Reynolds explained. “So how do we get more ACDBE participation if we don’t have funding vehicles for them? We don’t want them to be burdened with debt. That’s a conversation that we’re going to have to tackle collectively as an industry.”
Making A Comeback
While still far short of 2019 levels, passenger traffic has come back relatively strongly at PHX, at least temporarily. The airport typically experiences a lull during summer months due to the hot weather the city experiences.
“Average spend is down and … we are still missing the international travel and the business travel that impact our concession programs, not only here [at PHX] but across the country,” Reynolds said. “We all experienced it differently, but in similar ways and it has been traumatic for all airports. I remember 9/11, and it seems looking back now a temporary of event. This has been an event that has lasted the past 14 to 16 months and we still don’t know what the future holds for airports and concessions.
“We still have a long way to go in this recovery, but definitely we want to see business travelers back because it makes a huge difference, not only for the airport, but the airlines and the concessions program as well,” she added.
Reynolds also said PHX and its concessionaire partners are experiencing significant labor challenges. Other airports are in a similar situation, with workers unwilling to return to employment within the airport due to health and safety concerns, convenience or reliance on the currently robust unemployment benefits packages.
“Right now, what we try to do is work with our community and economic development department to help find workers in the airport,” Reynolds said, adding that the airport recently hosted an onsite vaccination event to try to give workers a level of confidence in returning to work. “Having those frontline essential workers returned [is crucial] because we can’t serve our customers and we can’t open our concepts if we don’t have the workforce that is needed to provide the customer experience that we want to have at the airport.”