In the early 1990s, people travelling through Philadelphia International Airport (PHL) did not have many options if they wanted to eat, drink or buy something while waiting to board a flight.
Back then, PHL, like most airports, offered typical airport fare: simple, limited-menu choices of the fast-food variety. Customers typically paid considerably – sometimes notoriously – more at the airport for food and beverages, which were purchased at dull concession stands designed to move people in and out quickly.
If someone wished to buy something other than food and beverages, their options were primarily restricted to newspapers, magazines, incidentals and some souvenirs.
Prior to the mid 1990s, people did not come to the airport expecting to pay reasonable prices for food and beverages that were high in quality and rich in variety. They certainly did not come to the airport expecting to pass the time prior to their flight browsing in the shops of national brands in a 'shopping mall' or enjoying a good meal in a restaurant.
Fortunately, in the last ten years, the airport landscape at PHL has changed dramatically. A comprehensive physical makeover, highlighted by the construction of two state-of-the-art terminals, has been complemented by a sweeping overhaul of the airport's concessions programme.
While overpriced items lacking quality and variety characterised PHL's concessions a decade ago, today it boasts an industry-acclaimed food, beverage and retail programme.
In the last few years, PHL's concessions have been recognised with numerous awards. In 2004, the airport's 155 food, beverage and retail locations generated unprecedented sales totalling nearly $108m, with revenue to the airport totalling $10.5m. These totals represent astounding increases of 474% and 190%, respectively, from a decade ago.
So how did PHL's concessions evolve from an underwhelming collection of primitive locations offering pricey airport fare to a hallmark of industry excellence?
By 1994, the city of Philadelphia, which owns and operates PHL, acknowledged that the airport's concessions needed to be completely revamped. The city entered into a long-term agreement with Marketplace Redwood LP (Marketplace) to develop, lease and manage PHL concessions.
Marketplace embarked on an ambitious plan to redevelop the airport's concessions programme. It focused on enhancing passenger satisfaction, optimising revenue, establishing PHL as a welcoming and impressive gateway and providing meaningful participation for disadvantaged business enterprises (DBEs). It sought to accomplish its mission by:
- Creating a first-class retail, food, beverage and services programme
- Increasing sales overall and sales per enplanement
- Offering a blend of national and local brands
- Providing opportunities for local businesses and DBE
- Imposing a street pricing policy and establishing a Philadelphia identity for the programme
The Marketplace blueprint encompassed 100,000ft² of retail space. The focus of the project was Philadelphia Marketplace at the Airport, an innovative design concept encompassing a 45,000ft² retail gallery 'town square' in the middle of the airport.
The Marketplace centrepiece is a spacious food court anchored by
TGI Friday's and complemented by an assortment of national and local eating establishments.
Like the food court, the Marketplace retail component was designed to incorporate a tenant mix of national and local brand names, mixed in with nationally recognised merchants.
The success of the PHL concessions programme has been underscored by the recognition it has consistently received from the aviation industry. In addition to the Griesbach Award for best overall concessions, the programme has won numerous other industry honours.
As the awards suggest, innovation is a driving force in the success and appeal of the PHL concessions programme. Marketplace has taken a daring approach to exploring and introducing new concepts into airport merchandising. The UPS Store and Airport Wireless / Palm One are just two examples.
The latter store's concept is particularly appealing to business travellers, who comprise more than 60% of PHL's passenger base. It is also worth noting that Airport Wireless / Palm One is the first permanent location in an airport for the retailer, and its arrival at PHL in April 2004 preceded by one month the opening at PHL of Krispy Kreme's first airport location.
THE 9/11 EFFECT
The dynamics of airport concessions programmes have changed dramatically in recent years. In the wake of 9/11, passengers are experiencing, on average, longer dwell times at the airport, so they pass time by browsing in shops. Airlines have eliminated or significantly curtailed in-flight meal service, so passengers are purchasing more food and beverages at the airport.
In the last couple of years, the air travel industry has experienced a significant boom in business, with unprecedented numbers of travellers taking advantage of low-cost airfares. Since 2003, passenger traffic at PHL has grown by 28% to a record 31.1 million.
The spike in passengers using PHL is due to the growth in demand for air travel, spurred primarily by the May 2004 arrival of Southwest Airlines, the nation's number one low-cost carrier.
These factors have had the cumulative effect of boosting record
concessions sales at PHL to nearly $108m. At the same time, it is evident that Marketplace continues to meet the needs and preferences of today's airport patron.
A study by Unison-Maximus, Inc revealed that 79% of PHL passengers purchase food and beverages and 62% purchase retail merchandise. In comparison, on average, only 51% of passengers at other airports purchase food and beverages, and 32% purchase retail merchandise.
Marketplace's leasing agreements include street pricing requirements to ensure that customers aren't paying excessive prices for food, beverages and retail merchandise. In addition, Marketplace's use clauses minimise product overlaps in merchandising.
The balanced mix of national and local retail, food, and beverage brands reflects Marketplace's philosophy and approach to redevelopment. Some 64% of PHL's concessions are comprised of non-national brands.
Unison has noted that this percentage is unusually high for most developer-managed programmes, which tend to favour large national chains.
A hallmark of the success of Marketplace's redevelopment plan is its DBE component. One of Marketplace's goals was to design a programme that invited the participation of minority and women-owned businesses.
The DBE plan, which is included in the airport's agreement with Marketplace, stipulates that Marketplace 'ensure meaningful and substantial participation of disadvantaged and minority and women business enterprises in all aspects and phases of the concession activities'.
In assessing the progress of the airport's DBE programme, Unison concluded that, based on its experience at 50 airports in the USA, the requirements placed on Marketplace through the DBE plan are industry leading.
The DBE goals established for PHL – up to 45% of concession sales – represent some of the highest participation goals in the country.
In 2004, Marketplace met or came within 5% of its DBE goals for concession sales in food, news and retail, and exceeded its goals for DBE locations in food, news and retail concessions.
In total, 51% of airport concession locations are operated in whole or in part by a DBE. In 2004, DBE sales accounted for 34% of total airport concession sales.
The DBE plan also calls for numerous initiatives for the benefit of DBEs, including an airport / DBE small business consultant, support services for new DBEs, outreach and assistance, a DBE advisory committee, a revolving loan fund, an incubation fund and ongoing business counselling, technical support, operational support and training.
THEN AND NOW
PHL's concessions programme today bears no resemblance to the programme of a decade ago. The PHL concessions programme will continue to evolve as it strives to keep pace with the sophisticated dynamics of consumer demands. The driving force in that evolution is, and will remain, innovation and excellence.