Boston Logan Embraces Specialty Concessions

Author: 
Victoria Soukup Jensen
Published in: 
January-February
2013


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Project: Specialty Concessions

Location: Boston Logan
Int’l Airport

Vendor Management: AIRMALL Boston; Westfield
Concession Management

Concessions Revenue:
3% of Total Income

Sample Vendors: Vino Volo wine bar; iStore digital
electronics; XpresSpa nail, massage & facial salon

Vendor Requirement: Street pricing

As passengers adjust their arrival times to allow for post-9/11 security measures, airport operators are adjusting concessions programs to capitalize on that extra time. Gone are the days when travelers rush through the concourse, perhaps grabbing a quick cup of coffee or newspaper before running to their gates. These days, they have more time for browsing, relaxing and shopping, and airports are enjoying the additional sales opportunities the new norm creates.

According to the Airports Council International - North America, revenue from U.S. and Canadian terminal concessions rose 12% from 2010 to 2011, reaching a new high of $1.51 billion.

Boston Logan International Airport (BOS) is one of many facilities embracing the change by adding specialty retail and food/beverage options. "We have many unique stores in our airport terminals," says Leah Teeven, business manager for airport concessions at BOS. "The concession program has been growing. Every year, we are increasing. We are offering more stores, more businesses."

The last decade has seen "big changes" at many U.S. airports, notes Teeven. Gone are the days of only offering staples such as coffee and soft drinks, snacks and sandwiches, paperbacks and location-related trinkets. Concessions now include high-end wine bars, electronics stores and spa services - all of which have found a profitable home at BOS. And like other airports, BOS now concentrates most of its concessions post-Security to encourage more relaxed shopping and noshing.

Staples First, Specialty Second

Massachusetts Port Authority (Massport), which owns and operates BOS, uses surveys and demographic data to determine which businesses will suit BOS' customer base. It also works closely with AIRMALL Boston and Westfield Concession Management, which lease space to individual vendors and help administer the overall concessions program. Depending on a vendor's contract, the airport collects concessions revenue in one of three ways: a flat rental fee, a percentage of gross sales or a percentage of passenger traffic.

Before selecting specialty shops and services, Massport and its concession partners ensure that staples such as newsstands, coffee shops, "grab-and-go" snack vendors and other traditional concessions are in place.

"We are more targeted to the passenger on-the go," explains BOS' Teeven. "They want things quickly (and) we try to pair up the concessions with the traveler. Once those core necessities are met, we branch into specialty retail."

Having high-end and unique stores appeals to both business travelers and vacationing customers, says Karen Cavallo, director of operations for AIRMALL Boston. While business travelers look for products or services they are used to having and will spend money on them at the airport, leisure travelers in "vacation mode" are also ready to spend, Cavallo explains.

"Everything here is an impulse purchase, excluding food," she says. "People have time in the airports. Once they get through Security and they've eaten, they have some time on their hands. This is appealing to them. It's more convenient, and it's certainly different than it used to be."

At BOS, for instance, a wine bar has proved to be a popular addition. Vino Volo offers its signature tasting flights as well as wines by the glass or bottle from vineyards around the world. The concept was founded when the company's chief executive officer was looking for a place to enjoy a glass of fine wine with business associates while waiting for a flight.

"There was nowhere to go," says Carla Wytmar, Vino Volo's director of development. "There were a lot of business and leisure travelers who were looking for upscale options."

The first Vino Volo, which opened at Washington's Dulles International in 2005, was an immediate success, recalls Wytmar. "We dramatically outperformed the previous concept (a coffee shop and bar) during the first year," she explains.

Still in expansion mode, Vino Volo currently has locations at 15 North American airports. Each highlights hand-selected wines and food to pair with it such as artisan cheeses, dry-cured meats and smoked salmon and crabmeat crostini.

Locations also promote the Vino Chart, a patented process that helps customers understand wines and learn their individual preferences. "We try to take all the intimidation out of wine," Wytmar relates. "It's an oasis for a great glass of wine and delicious food along with the opportunity to pick up a bottle of wine and take it on the airplane."

According to Teeven, BOS' customers have been so pleased with Vino Volo that the airport is considering adding a second location. "It's been extremely successful - to the point that they have had wait times," she reports.

Vino Volo also recently opened its first non-airport location in Bethesda, MD.

Big-Ticket Offerings

Joel Teitelbaum, CEO of iStore, directly connects his company's April 2012 foray into BOS with the extra browsing time created by evolving security requirements.

"In recent years, and certainly post 9/11, people find themselves spending more time at airports," explains Teitelbaum. "By the time they get through Security, they end up finding themselves with some extra time. And retail is all about finding consumers with time."

Flight delays can also work in concessionaires' favor by creating unanticipated shopping and eating/drinking opportunities. According to the federal Bureau of Transportation, more than 17% of all U.S. flight departures were delayed in 2011.

A Canadian creation, iStore describes itself as a "digital lifestyle destination" and features a variety of electronics and accessories, including Apple iPads, Amazon Kindles and Sony cameras. The company spread its focus beyond traditional street side stores after Apple redirected representatives from Montreal's Pierre Elliott Trudeau International Airport who inquired to the computer giant about the possibility of an Apple store at their airport.

"We realized we had a business opportunity here, given that Apple was not well represented in airports," Teitelbaum recalls, noting the company's status as an authorized Apple reseller. 

Customer response was so strong, iStore opened locations in five other Canadian airports within three years through a partnership with LS Travel Retail North America.

Subsequently expanding into the U.S. airport market was an easy decision, Teitelbaum notes. "Sales are exceeding our expectations," he reports. "The performance at Boston has given us increased confidence with our national sales ideas." The company plans to be in at least six other U.S. airport locations by the middle of 2013, he adds.

The success of iStore and other specialty vendors is vital to officials at BOS. Besides wanting options that occupy and entertain customers, they also want to deliver healthy revenue to Massport. According to Teeven, concessions account for nearly 3% of BOS' total annual income. 

Service Sector

BOS has also added service concessionaires designed to help customers relax. XpresSpa, which opened its first airport location at New York City's John F. Kennedy International Airport in 2004, now offers manicures, pedicures, massages and facials at numerous airports, including BOS. By the end of 2013, XpresSpa expects to have 60 locations in major U.S. airports as well as at Amsterdam's Schiphol Airport, reports Moreton Binn, the company's chairman and chief executive officer.

"Oftentimes, people are so busy, they don't have time to get their nails done (before a trip), so they get them done here," Teeven notes. "Some even plan ahead and call for an appointment. It's all about time management. People want these services and don't have time in their daily lives to get these things done."

Binn relates the company's success to the "difficult environments" some airports have become. "Planes continue to fly with fuller loads and less amenities, adding further stress to passengers," he adds. "XpresSpa offers a healthy alternative to 'eat, drink, read' and provides airport operators with a revenue stream that complements and does not compete with other offerings."

According to Binn, the traveling public has welcomed XpresSpa and the opportunity to receive personal care services during their airport downtime. "XpresSpa's business model is a hands-on, on-demand, no-reservation proposal for travelers," he explains. "With an open look and feel, both spa regulars and first-time visitors can enjoy the pampering personal service and benefits that massage delivers."

Airports have evolved to the point where consumers appreciate finding familiar names and services, he adds: "Moving from generic offerings to well-known brands has improved travelers' experiences and provided airports with an important income stream."

No Airport Markup

Teeven credits much of BOS' concessions success to the airport's commitment to street pricing. All items sold at the airport - food, merchandise and services - must be priced the same as they are in nearby Boston or Cambridge malls, she explains.

"It's a very big challenge, but Massport felt it was important," Teeven notes. "Just because the traveling public is using our facility, we felt we should not overcharge them."

Teitelbaum says that he is pleased with iStore's move into BOS and believes the time is right for North American airports to move into specialty retail and dining. "In Europe and Asia, airport shopping has been a huge segment of retail for many years," he remarks. "North America is finally catching onto the trend of unique and upscale airport concessions."

Michael Caro, vice president of AIRMALL Boston, agrees. He says that today's traveler arrives at the airport with different experiences - and expectations - than travelers had a decade ago. "Whether on a business trip or traveling on vacation, today's passenger knows this isn't the travel experience of the past," Caro says. "They are seeking high-quality, well-known shopping and dining options on the go. Today's passenger simply has a higher expectation for everything concessions-related."

Subcategory: 
Concessions/Retail

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