The New York area’s record number of air travelers have more time on their hands than ever, and concession operators want them to spend it shopping and eating. Airports are seeing more high-end fare designed to entice passengers, including upscale retail, spas and full-service restaurants.
Fashion brands like Lacoste and Hugo Boss are coming to New York terminals, as retailers see air passengers’ appetite for upscale retail and dining options, such as celebrity chef Todd English’s restaurant at LaGuardia Airport, taking off. The move is part of a push by New York’s overcrowded airports to redesign concession areas to generate more revenue as operating costs rise.
At John F. Kennedy International, Unison-Maximus, a Chicago-based concession operator, is redesigning the British Airways terminal to showcase higher-end brands and luxury items. The company is planning a space with kiosks selling upscale brands like Hermes.
Delta Airlines is updating Terminal 2 at Kennedy with new dining options. Balducci’s, a specialty food company, recently opened its first airport outpost there with an 800-square-foot store. On June 6, Todd English will open Bonfire Steakhouse, a new 84-seat, 2,033-square-foot restaurant.
The Port Authority of New York and New Jersey, which operates LaGuardia, Kennedy and Newark airports, relies on concessions for income, though most of it comes from the airlines that take off and land at their terminals. But as the airline industry’s profits shrink and several major carriers struggle to emerge from bankruptcy, concession revenue assumes greater importance.
The Westfield Group, which operates shopping centers and airport concessions, unveiled the second phase of a new American Airlines terminal at Newark Liberty International Airport last month.
George Giaquinto, vice president of development at the Westfield Group, said his company is bringing luxury brands like Lacoste and Hugo Boss to the terminal, which will have a shopping mall design with separate shops for each brand. Westfield is expanding the concession space in the terminal to 60,000 square feet, up from 36,000 square feet a few years ago.
Giaquinto noted that as a result of longer passenger wait times, travelers are looking for more sit-down dining. Westfield brought Gallagher’s Steakhouse to Newark several years ago. Other more upscale airport dining options include another Todd English venture, Fig Restaurant, which opened at LaGuardia in 2000.
Airports are also tapping into the popularity of spas, leasing space to businesses like XpresSpa at Kennedy and :10 Minute Manicure, coming this year to Kennedy and Newark. XpresSpa offers manicures, pedicures, massages, facials and waxing. In addition to manicures, :10 Minute Manicure offers other nail treatments and massages.
Fliers can also address their health needs while waiting to board. Harmony Pharmacy recently opened a branch at Newark airport that provides basic health services like blood pressure screenings and offers higher-end brands, including Crabtree & Evelyn and Lollia bath products.
Airport retailers are constantly trying to figure out how to turn transient travelers into paying customers. It’s no easy task when dealing with people who are often rushed, a bit stressed and unlikely to be a source of repeat business. Andrew Weddig, vice president of Unison-Maximus, which operates concessions at all three New York-area airports, said that travelers “will forego shopping if it’s inconvenient.”
But the number of potential customers is increasing. Last year, JFK, Newark and LaGuardia saw a record number of passengers — about 104 million fliers, up from about 100 million in 2005 and around 81 million in 2001. The airports are projecting a combined 125 million passengers annually by 2015.
Pasquale DiFulco, a spokesman for the Port Authority, estimates that two-thirds of passengers flying in and out of New York are leisure travelers who have more time on their hands and like to shop. And Marketplace Development, which operates concessions at LaGuardia, says leisure travelers at that airport have jumped from 55 percent in 2004 to 64 percent last year.
While passenger traffic has grown, average sales per departing passenger have also increased — from about $3 per square foot in the late 1980s to $9 to $10 a square foot today, said Giaquinto. At the same time, he said that in the past decade the average space for an airport store has risen from 800 to 1,000 square feet.
Rental agreements at airports generally use a structure similar to those in large shopping malls, where stores hand over a certain percentage of their profits, with a minimum annual guarantee.
The percentages vary widely, said Ken Corroon, CEO of Harmony Pharmacy, but are usually upwards of 10 percent of profits. He declined to say what Harmony pays for its 1,438 square feet at the New Jersey airport, but he noted that the 15 percent O’Hare International Airport in Chicago charges is considered high.
Giaquinto of Westfield also declined to give airport rent figures. He said the space is “not cheap” and rivals some rates in Manhattan, though not, he conceded, the rents on Madison or Fifth avenues.
The New York airports, unlike airports in other cities, don’t report their rent figures to Airport Revenue News, an industry trade publication. The magazine reported rent revenue from concessions at Los Angeles International Airport in 2005 (the latest available) was $37 million. Concessions there occupy 155,000 square feet, which translates to an average rent of about $238 per square foot. At Miami International Airport, rent revenue was $16.4 million for concessions that occupy 145,000 square feet, equaling an average of $113 per square foot.
Giaquinto said airports have been steadily reclaiming inefficient areas and converting them into retail space, especially in space-starved New York. Newark has 144,000 square feet for concessions; Kennedy, the largest airport, has 202,000 square feet for these non-essential services; and LaGuardia, only 77,000 square feet.
A decade ago, Terminal C at Newark had 40,000 square feet devoted to concessions, Giaquinto said. It added space by repositioning non-concession functions.
Space in airports is highly sought after, though it can be tough for developers to build there. “Development costs are a lot higher because it’s difficult to work in airports,” Weddig said, since tight security makes it hard to bring workmen and materials to the work site, and the small units can be tricky to design.