- The Washington Times - Wednesday, June 25, 2003

Bethesda-based HMSHost Corp. could be ousted as Baltimore-Washington International Airport’s retail operator after 30 years as the airport looks for other companies to compete for the business in a bid to boost revenue.

Airport officials are expected to issue a request for proposals tomorrow that calls for a retail developer that will manage operations much like a shopping mall. HMS-Host runs 60 retail and food-and-beverage operations at BWI.

HMSHost had not seen the request for proposals as of press time said it wasn’t sure why BWI was planning the change.

“It has us scratching our heads,” spokesman David Milobsky said.

Mr. Milobsky says the company’s contract with BWI expires in April.

HMSHost raked in $56.1 million in sales last year at BWI. Although that is a small portion of the company’s overall $1.7 billion in annual revenue, Mr. Milobsky says, the contract is important for HMSHost.

“It’s a significant piece of business, especially with the airport growing rapidly,” he said. “It’s certainly an important account for us. We also happen to be a Maryland company.”

Maryland Aviation Administration officials declined to comment.

BWI serves 19 million passengers a year and is undergoing a $1.8 billion expansion. The airport makes about $7 million from retail and food and beverage sales a year.

The retail model that BWI is considering allows a developer to be the leasing agent and attract shops that would be owned and operated by the individual retailers. Industry observers say this “developer” model gives travelers more variety and increases revenue for the retailers and the airport.

Mr. Milobsky argued that the airport would receive less rent revenue under this model because the developer would be taking a cut.

HMSHost, which follows what is known as the “prime” model, has 492 employees at BWI. The company, which has contracts with more than 70 airports worldwide, has the rights to develop and operate brand-name retailers, including Starbucks, Burger King, Cinnabon, Brookstone, Victoria’s Secret and Wilsons Leather. A percentage of the revenue goes to the airport.

Most airports are using the prime model, but more are considering the developer model to increase revenue and help draw in more attractive retailers.

“The developer model gives an airport a company that is an expert at leasing and managing retail programs,” said Pauline Armbrust, publisher of Airport Revenue News, a monthly publication based in West Palm Beach, Fla. “A lot of larger airports see it as advantageous.”

Pittsburgh International Airport first introduced the developer concept with its Airmall in 1992. The Airmall, developed and managed by an affiliate of London-based BAA PLC, has shown a significant increase in per-customer spending. Airport revenues have escalated from $2.40 per visit to $9.02.

BAA, Westfield and Marketplace are the three biggest airport retail developers, Ms. Armbrust said.

Mr. Milobsky says the BWI bidding process should be a fair competition between prime contractors and developers.

“If folks believe the developer model is superior, why not let the two [models] compete in the bidding process?” he said.

“We just don’t understand why it’s so narrowly focused and noncompetitive.”

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