Types of Concessions Typical in-terminal concessions at U.S.

airports often include the following six categories of offerings for passengers and other customers, including airport meeters/greeters, well wishers, and airline/airport employees: News/gift Newspapers and magazines Convenience items and sundries Specialty retail Apparel Souvenirs Gifts Sunglasses Jewelry Personal care/health products Entertainment products (movies, music, others) Prepackaged food and wines Food and beverage Food courts and other self-service units Full-service restaurants Cocktail lounges and bars Coffee stand Vending machines Duty-free shops Services Massage, spa Entertainment (arcades, movie rentals, others) Pay-per-use passenger lounges, business centers Currency exchange Luggage storage and wrapping

 Hair salon, barber Medical services Shoe shine Post office Advertising Planning Considerations 75 III.9.3.6 Trends in Terminal Concessions General and Retail Trends. Airport concession programs continue to mature and gain increasing importance as a source of revenues for airports large and small. The following general trends are affecting airport concessions programs around the world: Increased security concerns are affecting commercial sales directly and indirectly: Additional immigration and security inspection requirements are affecting some airport programs by limiting the time available for duty-free shopping and negatively impacting per-passenger duty-free sales. Restrictions on liquids, aerosols, and gels (LAG) and continued passenger uncertainty about LAG regulations could continue to constrain sales of certain products, while increasing others, such as the purchase of beverages at post-security locations. Specialty retail, including fragrance and cosmetics, candy, fashion items and accessories, and luxury goods, have shown the largest growth rates over the past several years. Some concessionaires are shifting focus from customer sales as commodity-based transactions to an interest in triggering desire. Operator marketing strategies include increased emphasis on the following: Gifting: Duty-free products as gifts for non-traveling family and friends. Aspirational demand: Products that convey the buyers socioeconomic status. Uniqueness/difference: Products and/or packaging that can be found only at this location (either this particular airport or this city/region). Service/comfort/happiness: Customer service associated with the transaction increases traveler comfort and helps to reduce the stresses that can be associated with travel. Increased focus on customer service and personal interaction with the customer that serves as a

key method for differentiating airport duty-free shops with Internet and other mail orderbased operations. Some concessionaires are increasing the entertainment value of the shopping experience by means of the following: In-store promotions. Entertainment, to encourage customers to remain in the shops. Blurring the boundaries between shop and public circulation and waiting areas. The preference for unique or customized (non-generic) products and the desire of suppliers to differentiate and promote their brands has led to increased segmentation of airport offerings. For example, large, multi-purpose retail shops will still exist, but the space within these shops will increasingly be divided by merchandise brands and differentiated visually. Food and Beverage Trends. Food and beverage concessions generate a significant share of airport revenues. Food and beverage activities help to (1) draw passengers to commercial clusters at which passengers and other customers pass by retail shops and services and (2) create high passenger satisfaction levels. The following general trends are affecting airport food and beverage concessions around the world: Passengers expect availability of internationally recognized brands, which do particularly well because of the instant recognition and positive associations they have for potential customers. However, passengers also want to experience successful local brands as part of their travel experience. The use of local brands also allows the airport operator to reinforce the passengers positive impression of the destination. Local brands usually enable the food and beverage operator to provide some flexibility in the types of products offeredglobal products (such as McDonalds) do not allow that same amount of flexibility in facility design and menu offering. 76 Airport Passenger Terminal Planning and Design Including a mix of recognized international brands and local brands allows the airport to maximize passenger satisfaction levels and to promote local operators and cuisine.

 Being part of an airports food and beverage concessions program (with international brands) increases the awareness and positive associations of local food operators and cuisines. The value of this positive association should not be undervalued. Duty-Free Trends. Duty-free product categories with high growth rates per passenger (sales per passenger are increasing) include the following: Perfume and cosmetics Fashion and luxury goods Candy and other luxury packaged food Product categories with low or negativegrowth rates per passenger (sales per passenger are flat or decreasing) include the following: Liquor and wine Tobacco Increased governmental efforts to restrict general tobacco consumption could have competing impacts on demand for tobacco products at airport duty-free shops: Increased taxes and duties imposed on nonduty-free sellers could increase demand for products sold without these costs as the disparity between duty-free (airport) and duty-paid (Main Street) prices widens. This effect may be more than offset by general efforts to reduce public consumption, by means of increased restrictions on tobacco advertising, marketing, and shop display of products. Therefore, overall demand per passenger for tobacco products at duty-free shops may continue to decline. Many on-airport duty-free operators face increased competition from off-airport operators, including Internet operators and sellers of gray market goods: Customer recognition of the airport duty-free operator/brand, especially by travelers from countries in which gray market and counterfeit goods are prevalent, will become increasingly important. On-airport duty-free operators will need to provide added value services to retain their competitive advantages over non-airport, Internet sellers. Duty-free concessionaires will need to increase their efforts to generate impulse purchases

and rely less on demand for bulk goods (such as tobacco and liquor), which are driven primarily by pricing advantages. The success of duty-free activities at a U.S. airport depends substantially on (1) a critical mass of international passengers and (2) the characteristics of these passengers. High demand for duty-free products is typically the result of the following: High duty tax rates at the country of destination and/or in the travelers home country Cultural norms, which may include significant levels of gift giving to friends and relatives upon return from a trip High personal income levels of travelers Large number of products available for sale at the airport Competitive duty-free prices Low amounts of competition from gray market or counterfeit products sold locally Unavailability of arrivals duty-free shops at the travelers final destination High share of passengers that are traveling non-stop to/from their final destination (i.e., traveling to/from the airport on an O&D basis). Planning Considerations 77 Duty-free sales per international enplanement can, at select AsiaPacific and Middle East airports, reach $50.00. Duty-free sales at U.S. airports average approximately $8.00 per international enplanement based on analysis prepared by The S-A-P Group in 2008 (28). III.9.3.7 Planning of Terminal Concessions A concessions plan should optimize the airports revenues and levels of customer service. Summarized below is a typical approach for developing a comprehensive airport concessions master plan: Calculate optimal concession space amounts for near- and long-term periods using supportable space analysis, space profitability analysis, and benchmarking. The analysis and benchmarking include assessments of space per enplanement (square feet per enplanement), sales per enplanement ($ sales amounts per enplanement), and sales per amount of space ($ sales amounts per square foot). Supportable space analysis incorporates assumptions for the amounts of space that can be

supported by anticipated sales volumes, as calculated on a per square foot of shop space basis. Shops with low sales volumes per square foot of shop space may be under-trading and generating low levels of profit for the shop operator, as well as constraining monies available to pay the airport landlord. Conversely, shops with high sales volumes per square foot ofshop space may be over-trading, an indication that additional shop space is needed to serve potential demand. Prepare detailed financial analyses (to assess the potential profitability of new commercial activities and space), which should include ad hoc costbenefit analyses to assist other terminal planners with identifying the implications of alternative terminal/concourse layouts on airport income. The airport case study presented previously provides an example of ad hoc costbenefit analysis that assisted planners with the development of optimal terminal facilities. Identify the optimal terminal and concessions layout configurations, which should be dependent on aeronautical operating considerations, concession and financial considerations, and passenger satisfaction. Consolidated passenger flows, consolidation of commercial activities into clusters, and visibility between gate seating areas and centrally located commercial areas are all essential components of a world-class concessions program. Integrate the concession clusters with primary passenger flows and in-terminal transport nodes (such as vertical circulation points, access to APM, and passenger convenience facilities, such as toilets and airline lounges). Aircraft gate locations (by aircraft size and daily utilization) affect concession space requirements, the ability to provide centrally located concession clusters, and concession spending and shop operator costs. Providing good shop visibility, while still providing intuitive wayfinding and minimal walking distances to gate holdrooms, will help to maximize overall retail sales and passenger satisfaction levels. Ensure that walking distances are minimized and post-security (airside) dwell times are maximizedthese factors affect both passenger satisfaction levels and airport operator income amounts.

 Passengers departing from gate holdrooms distant from main commercial clusters at an airport spend, on average, 20% less than passengers that depart from gates located immediately adjacent to commercial areas. The ability to see commercial facilities from gate seating areas helps to minimize passenger anxiety and also develop impulse purchasing. 78 Airport Passenger Terminal Planning and Design As such, terminal layout configurations that maximize the number of gate holdrooms close to commercial clusters will generate higher overall sales than will decentralized layouts. Airside dwell times significantly affect commercial sales. One extra minute of airside dwell time at an airport may increase commercial sales per passenger by approximately 1%. Assess the financial and other implications of development phasing on airport operator income levels. For example, accelerated development of certain terminal facilities could generate incremental revenues that exceed the incremental development and operating costs of providing the facilities in advance of passenger-driven demand. Determine appropriate shop locations and sizes by concessions activity (retail, food and beverage, services). Ensure flexibility in the terminal design. The concessions layout plan should provide flexibility for the future, in order to ensure that changes in passenger flows and customer demand can be accommodated with minimal financial burdens to the airport and concessionaires. Until demand warrants its use, planned retail space could be used on a near-term basis for storage or for temporary passenger services, such as corporate exhibit space. Provide for development phasing that minimizes construction impacts. The optimal concessions master plan should attempt to minimize affects on shop operators (financial and operational), the airport (financial), and customers/passengers (quality of service levels). Assess the successful attributes of the worlds leading airport commercial programs, including those inside and outside of the United States.