High inflation has not gone away-neither has its impact

​​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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