To be clear, Airport Restaurant & Retail Association (ARRA) members support livable wages for their valued associates. In fact, ARRA members at many airports – including Los Angeles International – offer wages and benefits that exceed minimums set under various living wage ordinances. But we warn of unspoken and unintended consequences of well-intentioned efforts to legislatively impose wage rates. In a recent opinion column in the Los Angeles Daily News, ARRA board member Greg Plummer cautions that Los Angeles’ proposed $30 minimum wage is not a boon, but rather a threat to hospitality and airport workers and their employers.


Greg cites a number of potential unintended consequences of the proposed 66% increase in the City’s minimum wage for only some – not all – of its businesses: the increased minimum wage disproportionately impacts small businesses; research consultancy Oxford Economics predicts lower tourist spending and reduced local tax revenue; and heightened risk of business bankruptcy and subsequent job losses. Moreover, the consequences are worse for airport businesses who have, as Greg describes, “nuanced contract terms” that effectively prohibit cost recovery. ARRA supports livable wages. Nonetheless, any additional increase in statutory minimum wages and benefits must be combined with a stable business framework for the mutual benefit of traveling public, associates, airports, and concessionaires.


There is much to consider. We urge you to read Greg’s column in the Los Angeles Daily News here.

ARRA was well represented at the Airport Experience Conference in Denver earlier this year. ARRA member Peter Amaro (Master ConcessionAir) and Board member Greg Plummer (Concord Collective) participated on the ACDBE Evolution: Strategies from Program Leaders and Graduates panel. Peter and Greg shared the stories of developing their businesses to, in Peter’s case, successfully graduate from the ACDBE program to Greg’s success of being the first ACDBE to purchase an entire airport portfolio from a prime concessionaire.

The panel Pandemic Wanes but Problems Persist – Addressing Long-Term Challenges for Airport Concessionaires featured ARRA Board member Kevin Westlye (High Flying Foods) and ARRA Executive Director Andy Weddig (along with our airport friends Cheryl Nashir and Pam Dechant). Kevin and Andy noted that the pandemic opened up much more communication between airports and concessionaires but, despite improving business, the industry is still not fully recovered.

There is much more from these two panels – as well as two others focusing on the concessions industry. We invite you to read the full recap “Concessionaires in the Spotlight” by Sally Kral and Sarah Beling in the 2023 Conference Wrap-Up issue of Airport Experience News here.

Although the labor shortage is now less dire than six to nine months ago, hiring and retaining employees remains challenging for concessionaires. A recent survey of ARRA members showed the magnitude of the hiring challenge: all respondents had fewer employees today than in 2019; 50% of respondents need 11% to 20% more employees; and another 28% of respondents need more than 20% more employees to consider themselves fully staffed. And, as is often the case, necessity inspires creativity!

In his recent Airport Experience News article, “Staffing Up,” Senior Reporter Andy Tellijohn tells of creative solutions ARRA members High Flying Foods, LaTrelle’s Management, Paradies Lagardère, and SSP America have used to meet the recruiting and retention challenge our industry faces. Just a few examples:

• Engagement with employment assistance agencies for outreach to historically underrepresented groups in the working population including veterans and persons with disabilities
• Dedicated recruiting staff to augment human resources departments
• On-the-job training in pre-security and off-airport locations while waiting on security badges
• Stipends to employees to cover their parking, public transit, and other transportation costs to often distant and inconvenient airports
• Airport subsidies to support employee bonuses and transportation costs

The creative solutions mentioned in the article demonstrate the dedication of concessionaires to serving the traveling public. They also highlight the importance of partnership between concessionaires and airports to achieve our shared goals.

There is much to learn here. We urge you to read the full article from the Fall 2022 issue of Airport Experience News here.

​Ten days ago, the U.S. Bureau of Labor Statistics’ Consumer Price Index report showed inflation remained “hot” and exceeded expectations in September. At 8.2% over the past 12 months, the current overall rate of inflation continues at its highest since 1982. High inflation affects everybody – consumers and businesses. But there’s more in the details. ARRA calls your attention to other labor and inflation facts that reveal significant financial disruptions in the airport concessions industry continue unabated.
 

• In its most recent Job Openings and Labor Turnover report, the BLS reported more than 1.2 million unfilled jobs in the accommodation and food service industry. Although this is a small improvement from a month earlier, it still represents 8.3% of total employment in the industry. Moreover, the industry is suffering from increased turnover: more than 1.0 million workers left their jobs in the industry in August, slightly more than were hired.

 

• The BLS also recently reported the Employment Cost Index (wages and salaries) for accommodation and food service industry increased 8.5% from the second quarter of 2021 to the second quarter this year.

 

• In the past 12 months, the Producer Price Indices for food and alcohol wholesaling and merchant wholesalers of non-durable goods – proxies for cost of goods for concessionaires – increased 14% and 16%, respectively.

 

• The September CPI report shows restaurant prices increased only 8.5% over the past 12 months. Although a high rate that affects everyone, it is also less than the growth rate of many restaurant operator costs indicating that profits are getting squeezed.

 
We report these facts simply to highlight a critical challenge the airport concessions industry faces: with widespread pricing restrictions in the industry, concessionaires increasingly cannot recover costs. For a perspective on the impact of increasing costs on concessionaire finances, we encourage you to re-visit our March 2022 Forum: “A Concessionaire’s Bottom Line.” In this webinar, John Cugasi (Paradies Lagardère) and Chris Demitz (SSP America) explain how increasing costs affect concessions. Watch the Forum here.
 
The facts described above outline the challenges concessionaires face to make money in this business – while still recovering from two years of losses during the pandemic. It’s difficult … and threatening. The long-term viability of this industry is at stake. Collectively evolving a sustainable business framework for concessions – for serving the traveling public – is the challenge we must accept!
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By Andrew Weddig, Executive Director, ARRA
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​In her recent article for Aviation Pros, Margaret Martin, President of Martin Airport Law LLC and former Chief Development Officer of Nashville International Airport, notes that the ultimate goal of an airport concessions program is to provide food, beverage, retail, and services for passengers. She also notes the challenging circumstances ARRA members and other concessionaires face including soaring construction costs, supply-chain woes, and labor shortages and accelerating cost. Margaret observes that airport contracting practices have not adjusted to current market conditions and, indeed, end up exacerbating the challenges. She calls it “a perfect storm.”
 
Margaret advises airports to re-consider their contracting terms by honestly assessing the impact of airport decisions on operators, differences between street and airport, or how airport policies may shift costs to concessionaires without adding equivalent value. She concludes that airports should be more flexible and creative to better meet the goal of enhancing the passenger travel experience.
 
Margaret’s article is a concise analysis of our industry’s pressing challenges. We encourage you to read it at this link to Aviation Pros. 

ARRA Encourages Operational Flexibility as Recovery Slows

Air travel news this summer has been dominated by headlines about cancellations, delays, pilot shortages, and frustrated passengers. It has been a summer of discontent! But …

… Lurking in the background is a more serious threat to our industry’s recovery: as reported in a recent article in the Washington Post, American consumers are pulling back on travel. Adobe Analytics reports that U.S. flight bookings were down 2.3% in May from a month earlier. A Barclays Bank analysis of credit card transactions shows spending on services like travel has slowed to half the pace seen at the beginning of the year. Charles Schwab notes “travel-related spending ls weakening.” The Post further reports flight searches on Kayak are down 13% in comparison to the same period in 2019.

The Airport Restaurant & Retail Association (ARRA) urges airports to relax concessions pricing policies in this period of high inflation in order to avoid a second financial crisis for airport restaurateurs and retailers. ARRA recommends airports:

• Waive contract restrictions on the frequency of price changes
• Waive contract approval requirements of price changes
• Adopt adaptive pricing that permits individual concessionaires to respond as necessary to cost pressures and market conditions

By William Swelbar, Chief Industry Analyst, Swelbar-Zhong Consultancy

The Airport Restaurant & Retail Association (ARRA) asked Swelbar-Zhong Consultancy to provide analysis and commentary on happenings in the U.S. commercial aviation space. The following is the first of occasional articles about trends and events that affect the aviation ecosystem, information you can use as we all make our way through the industry’s recovery.

The Swelbar-Zhong Consultancy is a commercial aviation economic analysis and research firm. They specialize in complex issues regarding airlines, airports, and the aviation network; however, the fundamental focus always begins with changed airline thinking and how that might impact airports and the supply chain that supports the industry.

On March 29, the Wall Street Journal reporters Allison Pohle and Lauren Weber wrote that “Big corporate travel-management companies are hovering around 50% of 2019 booking levels, much of which is due to the lack of international travel.” In the same article, Delta Air Lines said “large corporate contracted travel business, primarily Fortune 500 companies, is about 65% of what it was compared with 2019. Travel for small and medium enterprises is about 5 to 10 percentage points higher, which has been consistent throughout the pandemic.”

The Airport Restaurant & Retail Association (ARRA) today announced changes to its board of directors for 2022, led by the election of Brian Quinn to serve as new board chair. Quinn is executive vice president and deputy chief executive officer of Hudson, where he has worked for more than 30 years in roles of growing responsibility for the travel retailer. Quinn succeeds Patrick Murray, deputy chief executive officer of SSP America, who will now serve as immediate past chair for ARRA. ​