(A collaboration between The Moodie Davitt Report and ARRA)
Dawn Hunter, Seattle-Tacoma International Airport
Bill Wyatt, Salt Lake City International Airport
Nick Crews, Crews Hospitality
Pat Murray, SSP America
What a conversation! Dermot Davitt and Andy Weddig co-hosted four of our industry’s most brilliant minds for a special session during The Moodie Davitt Report’s 2022 Food and Beverage Conference and Awards. And our guests did not disappoint! Our wide-ranging, profound conversation about the depths of the pandemic, the current recovery, and a vision of the future “new normal” lays out a road map for the evolution of the airport-concessionaire business framework.
Motivating this conversation are many changes in the aviation industry – and the broader economy – that followed the pandemic and continue in the recovery. Many of these changes are likely permanent. Higher wages are not rolling back. Lower inflation does not mean lower costs. The changes frame the overriding challenge – perhaps crisis – the concessions industry faces: the ability to make money in a new economic environment. In other words, how does our industry continue to provide food, beverages, goods, and services to the traveling public, yet earn sufficient profits to attract capital? The solutions to this question define our new normal.
What Dawn, Bill, Nick, and Pat said during our panel merits reflection and action. We did not find all the solutions, but new ideas for progressing to a sustainable future for all participants in this industry emerged – new ideas to refresh an industry that is so vital to achieving a memorable passenger travel experience.
Here are three key takeaways:
These are just three important takeaways. Our panel offered many more profound insights and bold ideas. We encourage you to watch the replay here.
This session at FAB 2022 was a collaboration between The Moodie Davitt Report and the Airport Restaurant & Retail Association. You can read The Moodie Davitt Report’s session by session coverage of FAB 2022, “People, Planet, Partnership and Progress,” at this link.
Of course, the “topic du jour” is inflation. At the mid-point of the pandemic, 12 to 18 months ago, there were signs that inflation was permeating the economy. But other signals suggested the inflationary signs were just part of coming out of the pandemic, and the U.S. economy would be getting back to normal soon enough – hence the conclusion, inflation is “transitory.” We now know that inflation has been “sticky,” more broad-based, and, possibly, more permanent. Beating back inflation is now the Federal Reserve’s “Job #1,” but there could be widespread consequences – namely, recession.
Inflation, recession, and the outlook for the economy at-large, as well as the aviation ecosystem, were the topics of ARRA’s August Forum with Ajay Thomas, Senior Managing Director and National Head of Public Finance for FHN Financial. We talked with Ajay about the state of financial markets, the economy, Federal Reserve policies, and how public finance markets view airports and concessions.
Despite the various challenges of ongoing pandemic, supply chains, labor shortages, inflationary pressures, and a likely recession, Ajay observes the aviation ecosystem is resilient. The good news: although our industry is not yet recovered, he sees positive trends and a strong foundation to recover from.
Here are three Forum takeaways:
These are just three important takeaways. We encourage you to watch the replay below. And see Ajay’s full slide deck here – there is much informative and useful data.
We’re at an “important crossroads.” The airport concessions industry is in a “reset mode.” It’s time for a “collaborative, transparent conversation.” These sentiments ran throughout our July Forum with Riley Lagesen, chair of Greenberg Traurig’s Global Restaurant Industry Group, and Rich Schneider, COO of Areas USA.
Today’s prevalent concessions model is based on the street: we wish to present a street-side experience to our passengers: street brands, street experiences, street prices. The idea is good, but does it work in the distinctly non-street environment of an airport? Especially in our post-Covid economic environment.
For ARRA’s July Forum, we asked the question: “Streetside-Airside, What’s the Difference?” Riley and Rich answered the top-line question: there are many differences. The differences are stark. And, more ominously, without collaborative action, the differences threaten the future of our industry as we know it today.
Here are three Forum takeaways:
· The big elephant in the room is occupancy costs. Occupancy cost in an airport – especially as a percentage of sales – is generally significantly higher than any place on the street. Absent unusual circumstances, everybody on the street keeps occupancy under 10%. You won’t find that in an airport. Moreover, in the airport, numerous other costs pile on top of rent to greatly increase occupancy cost.
· The brand model is at risk. Both parties – brand and operator – need to succeed for a successful licensing relationship. However, the economics of operating in an airport are pushing operators too hard to have a successful brand relationship. Rents are different, labor is different, capital is different – there’s not much left to pay a royalty and that’s where brands aren’t going to want to do these deals anymore.
· The labor challenge is with us forever – we’re never going to say, “we’re settled.” The industry must adapt to a new labor environment: accepting flexibility in scheduling; making the airport more attractive and easier as a place to work; introducing technology, not as a substitute for labor, but to enhance labor; working together to fix this challenge.
These are just three important topics; there were many more, too many to highlight here. We encourage you to watch the replay to learn more about the challenges airport concessions operators face as they work to enhance the passenger journey.
For its June 2022 Forum, the Airport Restaurant & Retail Association (ARRA) continued its “mini-series” looking at the state of the airport concessions industry two years into the pandemic. We welcomed two veteran ACDBE concessionaires – Bill Swift of Business Traveler Services and Greg Plummer of Concord Collective. They discussed the ACDBE perspective of the impacts of the pandemic, state of the recovery, and future for this important segment of the concessions industry.
A principal theme: our industry is not recovered. There remains debt from the past two years to work through, as well as a need to create tools to stabilize the industry and prepare for future disruptions.
For its May 2022 Forum, the Airport Restaurant & Retail Association (ARRA) welcomed two industry CEOs –Gregg Paradies of Paradies Lagardère and Michael Svagdis of SSP America. They discussed the industry recovery from the pandemic in the face of the new operating challenges of labor shortages, supply chains, and inflation. A common theme: the industry’s recovery is underway but remains a work in progress. Gregg and Michael also noted long-term positive impacts that came out of the pandemic: there is a greater degree of collaboration between airports and concessionaires, as well as a greater focus on the customer experience.
At its April 2022 Forum, the Airport Restaurant & Retail Association (ARRA) welcomed Matt Cornelius and Annie Russo of Airports Council International - North America to discuss how airports are faring in their recovery at the two-year mark of the pandemic. Matt and Annie discussed financial recovery, labor shortages, restoring full operations, and federal legislative priorities. Here are three takeaways: