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Thursday, Oct 6, 2022

Diversified Concessions Contractors Replacing Monopoly at Airport

Lindbergh Field’s concessions are getting a makeover in more ways than one.

In conjunction with a capital improvement plan to expand and upgrade the number of retail and eatery outlets from 55 to 87, the airport is also revamping the way the concessions are selected and owned.

“What we’re doing is creating competition,” said Bhavesh Patel, manager of concessions development for the San Diego County Regional Airport Authority, the agency that manages Lindbergh Field.

Last week, airport officials held a pre-bid submittal session with potential concessionaires, allowing them to meet and talk with prime concessionaires and engineering and architectural firms. The winning bidders would have to hire the latter to build out their stores to rigid specifications established by the agency.

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The airport authority decided last year to change from a master concessionaire model, which involves a single contractor, in favor of a hybrid model, which entails direct leasing and multiple prime contractors. The agency is lining up the new concessionaires ahead of the expiration of the master contract in 2012.

That contractor, HMS Host Corp., has held the master lease at Lindbergh since 1965. The company, a subsidiary of Italy-based Autogrill S.p.A., provides concession services at more than 111 airports around the world, including the 20 busiest in North America. It has more than 34,000 employees and annual sales of about $2.5 billion.

Bidders Prove Their Merits

Airport officials said potential concession bidders will have to prove they have the financial ability to build a quality store as well as the stability and experience to run an outlet over a multiyear contract. The operating cost for an airport concession is typically 20 percent to 30 percent higher than a business in the regular marketplace, Patel said.

The request for proposal for the new concessions program shows eight food concession packages and six retail concession packages, with each package containing several individual concepts.

For example, the first food-service package consists of six concepts including stores providing snack foods, hamburgers, casual dining, Italian cuisine and a bar. The total square footage in the first package is 8,571 and the minimum annual rent guarantee on the space is $988,100.

Officials said they hope to obtain a variety of concessionaires, and are particularly encouraging minority business owners to bid on the project.

The plan is to increase the number of food concessions at the airport from 32 to 46 and the retail outlets from 23 to 41.

The first retail package for 8,100 square feet includes such standbys as three news and gift outlets as well as stores for leather goods, sportswear, local concept and themed apparel, and jewelry. The minimum guaranteed rent for the space is $1.47 million.

Agency Reaping Benefits

The concession improvements are expected to generate increased sales to the airport. The agency takes in an average of 13 percent to 17 percent on gross sales, depending on the type of product or service.

For 2009, the most recent year concession data is available, the airport’s concessions generated a total of $67 million in gross sales, with food and beverage accounting for the largest part of that at $44 million.

If all goes according to plan, the expanded lineup should produce about $92 million in gross sales by 2014, or 37 percent above the total in 2009, Patel said.

HMS Host did not respond to inquiries whether it planned to bid on the revised concession program at Lindbergh, although airport officials said it would. Under the new plan, no single concessionaire could operate more than 30 percent of the available concessions.

Patel said the hybrid concession model isn’t new and that it has been adopted by nearly every major airport in the nation.

The timetable for the planned conversion calls for bid packages to be received by the airport by May 2. A seven-member review committee will make recommendations on the winning bids to the airport’s chief executive, Thella Bowen, who then forwards those recommendations to the authority board of directors for its approval in August. Actual construction of the outlets is expected to begin in June 2012, and they should open in early 2013 in tandem with the completion of the airport’s gate expansion project in Terminal 2, said spokesman Steve Shultz.


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