No Mere Flight of Fancy : Mall-Style Retailing Helps Airports Land New Income

With more than 800 flights to and from Sacramento under his belt, Assemblyman Gil Ferguson (R-Newport Beach) has encountered more than his share of second-rate airport food.

“You were sure the Sacramento airport was open 24 hours a day because whatever it was that they were serving you looked like it was 24 hours old,” he said. “You slid your tray down the line, they’d give you something, and you’d wonder what it was. My advice for most airports is: Don’t eat.”

The politician’s ruminations will ring true for frequent fliers who have braved an airport cafeteria line--or paid too much for a paperback novel at an airport newsstand as well.

But poor food and overpriced souvenir stands gradually are giving way to attractively decorated restaurant and retail operations that use competitive pricing and service to win sales.

Changes are being driven by the growing realization that travelers generally have both time and money on their hands, a combination that’s “the magic formula for retailing,” according to Monica Nassif, a spokeswoman for Miami-based Sun Glass Hut, which operates 11 stores at airports.

Airport executives and retailers say that truly competitive pricing is the key to success.

“The other day at an airport I paid $2.75 for a Whopper that I’d only pay 99 cents for at a Burger King restaurant,” said Mike Epstein, marketing vice president for San Diego-based Creative Croissants, which operates a coffee stand at John Wayne Airport. “That’s why airports are starting to go to street pricing. Customers won’t stand for (high prices) anymore.”

Pittsburgh’s innovative “air mall” is the acknowledged leader in airport retail operations. The 2-year-old terminal is home to more than 80 restaurants and retail shops, including TGI Fridays, Nature Company, the Body Shop, Upper Deck Authenticated and Sun Glass Hut.

Pittsburgh officials offer a simple measure of the mall’s success: Sales per boarded passenger have soared to nearly $7, up from just $2.40 per visit before the new airport terminal opened.

Another gauge of its popularity is that up to 5% of monthly sales at the airport mall go to local residents who view the airport as an alternate shopping center.

Pittsburgh’s successful experiment with “street pricing” has prompted the Dallas-Fort Worth airport and others to adopt rules that require retailers and restaurants to charge prices equivalent to those at off-airport sites. But Los Angeles International Airport is instead banking on competition to keep prices low when its new culinary lineup is completed in 1995.

And competition for Los Angeles airport’s retail slots has been fierce. Hundreds of restaurant operators and food companies, including Wolfgang Puck, Kentucky Fried Chicken, Creative Croissants, Panda Express and Haagen-Dazs, responded last spring when the airport announced that it would revitalize its restaurants through competitive bidding.

Airport operators expect the revamped restaurant operation to dramatically increase the amount of revenue that flows to LAX. At present, food and beverage operations generate about $50 million in gross revenue, and operators pass through about $6 million in payments to the airport.

LAX wants to create a blend of national brand names and local favorites that will provide “a real reflection of Los Angeles,” said airport contracts manager Ramon Olivares. The airport, which earlier revamped its retail operations, will start to unveil its new list of restaurant and kiosk operators early next year, and travelers should notice a dramatic change by year’s end.

Similarly, the Dallas-Fort Worth airport is sorting through a short list of 150 companies that want to operate restaurants and shops at the Texas airport. In a hint of what’s to come, one concessionaire has opened a small retail court featuring the best of Sharper Image, Christian Dior and Timberland.

Some older airports won’t easily lend themselves to increased retail operations. Pittsburgh’s new terminal owes much of its success to its design--passengers are funneled through its centrally located mall, an option that’s typically not available to older airports.

And airports must tackle the thorny question of leasing costs before opting for street pricing. If lease rates are too high, product prices often follow.

“Airport rentals are coming down, but they’re still three times what the normal mall retailer pays,” said Gregg Paradies, vice president and co-owner of Atlanta-based Paradies Shops, which operates the Dallas retail court as well as shops at John Wayne and Burbank airports.

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But when it’s possible to make the change, the mall-like approach can be a godsend for cash-strapped airport operators who collect fees from restaurants and retailers. “This is all new dollars being spent,” said Lowry Davison, director of commercial development at Dallas-Fort Worth International Airport. “People have the money and they’re willing to spend it, given the chance.”

What is attracting retailers and restaurants to airports is that travelers generally have money.

Host Marriott in Bethesda, Md., which operates in nearly 80 airports, reports that the average traveler spends about an hour in airports before and after flights. That traveler’s $65,000 average annual income exceeds the average mall-goer’s.

“It’s a captive audience in the true sense of the word,” said Bruce Schroder, a vice president at Irvine-based Taco Bell, which operates restaurants and snack bars in about 40 airports. “And travelers tend to be higher-income people for whom price is not as much of an issue.”

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While McDonald’s, Taco Bell and Burger King are increasingly common at airports, operators now are seasoning the restaurant mix with lesser-known, regional favorites. Boston’s Logan Airport features Legal Seafoods, and Host Marriott has invited Wild Goose Ale House, a popular brew pub in the Northwest, to operate restaurants on the East Coast.

The latest wave in restaurant and retail development has debunked the “old theory that (travelers) will buy whatever it was you decided to put on the shelves,” Paradies said. Travelers will always buy toothbrushes, newspapers, cigarettes and souvenirs, Paradies said. But, given the chance, they’ll also buy much more. Sharper Image’s airport shop at DFW in Dallas has sold a handful of massage chairs--hefty pieces of furniture that retail for $2,895.

Charley Shin, a Columbus, Ohio, businessman who’s eaten his fair share of really bad airport food, also views airports’ retail areas as potentially lucrative opportunities.

Any initial doubts that Shin had about opening a Charley’s Steakery in Pittsburgh’s air mall disappeared after the restaurant blossomed into one of his 30-unit chain’s top performers. Shin reports another plus: Airport locations are giving his chain “the high visibility and instant credibility” needed to expand into highly competitive markets, such as Southern California, where he operates just one restaurant, at Westminster Mall.

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The new approach of multiple, brand-name retailers and local favorites is a far cry from the days when airport operators awarded contracts to a single, large concessionaire.

“In the old days, it wasn’t a bad idea to have one commissary take care of the whole airport,” said Tarun Kapoor, a Cal Poly Pomona professor who studies the hospitality industry. “Having a single operator made it possible to make sure there’s a bar in every part of the terminal, but it ignores what the public really wants now.”

“Slowly,” Kapoor said, “the institutional mind-set of airport food service is giving way to something that’s much more sophisticated.”

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American airports are now taking a page from their European counterparts, particularly English airfields “which are something of a department store,” Lowry said.

Airport operators in the United States don’t expect to steal great numbers of shoppers from malls because airports typically aren’t located in heavily populated neighborhoods and usually charge high fees for parking.

A good chunk of spending at airports goes for impulse purchases, a fact that’s not lost on vendors of high-priced sports memorabilia. The National Football League and the Professional Golf Assn. are opening sports-oriented airport shops that will cater to affluent male business travelers.

Carlsbad-based Upper Deck Authenticated, the sports souvenir retailer, is counting on spontaneous purchases at a shop it opened a year ago in Pittsburgh.

“It seems like the perfect place to be,” said spokesman Camron Bussard. “Airports haven’t been a venue for us in the past, but when you look at the amount of traffic, it’s a good opportunity, and we’re looking at other locations.”

Despite the flurry of activity nationwide, croissants, Starbucks coffee and designer yogurt are the exception rather than the rule, particularly at smaller airports.

“The cafeteria line is still the most common approach,” Kapoor said. “And then you’ve got the places . . . where they have the traditional hot dog and potato chips . . . what I call the cholesterol diet.”