- The Washington Times - Monday, May 21, 2001

Retail is taking off in airports around the country. It?s turning the air travel portals into mini shopping malls accommodating the more than 665 million passengers who have some time to spare or those who want to fill up on a meal before boarding.
?There?s been such dramatic growth,? says Pauline Armbrust, editor and publisher of Airport Retail News, a biweekly publication based in West Palm Beach, Fla. ?It?s safe to say many airports have tripled the number of stores and restaurants they have.?
Nationally recognized retailers have jumped at the chance to be a part of the ever-growing air travel industry, realizing that airports are a great place to find people with money to burn and time to kill.
But its not all good news for retailers who are faced with a different experience than they would at a traditional mall ? like longer hours, higher rent and restrictions on everything from pricing and location to size and design.
But the benefits of a modernized retail scene for an airport are twofold: it keeps passengers satisfied with a variety of familiar brand names, products and eateries, and it generates more revenue for the airport to finance its growth.
The D.C. region?s three airports are following the national trend and beefing up their retail and restaurant landscape.
The inside of Ronald Reagan Washington National Airport, for instance, looks much more like the inside of a regional mall after the opening of ?National Hall? with more than 65 stores and restaurants in July 1997. Passengers have their choice of retailers like Brookstone, Waldenbooks, the Disney Store and Wilson?s Leather and eateries like California Pizza Kitchen and Legal Sea Foods.
Airport officials say they are accommodating passengers who want recognizable name brands rather than the generic book store and coffee shop that filled in airport vacancies years ago.
?Expectations are changing,? says Les Cappetta, senior vice president of North American Development at HMS Host, the Bethesda-based travel concessions operator. ?Travelers expect branded, upscale [concessions] and better customer service.?
Airport retailers already have a captive audience, although a passenger?s main reason for being there is to fly, not to shop. The trick is to turn those passengers into shoppers by offering them the kinds of shops and eateries where they want to spend their money, officials say.
?Airports try to create a sense of place … to turn a passenger into a shopper,? says Scott Samson, regional manager at Westfield Concession Management, which handles the retail mix at Washington Dulles International Airport and at Reagan Airport.
And there?s more passengers to convert into shoppers than ever before. Last year 665.5 million people took to the friendly skies ? nearly 118 million more than in 1995.
?With all the additional air travel, there?s been a greater pressure on airports to grow,? Mr. Cappetta says. ?The airports are assets of a city or a county and they need money to finance that growth.?
Airport officials have realized a better mix of tenants would get people to spend more money ? adding to the airport?s bottom line. Tenants contribute a certain percentage of their gross sales to the airport.
Retail and food went from being an afterthought tucked in a corner of an airport to a top-of-mind feature, Mr. Cappetta says.
Ms. Armbrust says airport officials started to realize in the early to mid-1990s that offering different retail and food locations was a good way to please passengers ? an airport?s No. 1 priority.
?At one point, you never saw that much that was different ? it was cafeteria food and generic gift shops,? says Gary Davies, director of commercial development at Baltimore-Washington International Airport. ?We are an industry that has gone in a totally different direction.?
Portland, Ore., International Airport was the first major airport to offer a mall concept to its passengers, Ms. Armbrust says.
Pittsburgh International Airport in the early 1990s was the next in line to take the concept to a new level. The airport?s ?Airmall? includes dozens of retail concepts and restaurants like the Gap, GNC, Tie Rack, Seattle?s Best Coffee, the Discovery Channel Store and T.G.I. Friday?s.
?Airports are often great followers,? Mr. Davies says. ?We?ve taken that [idea] and tried to create what people want.?
And it?s paying off for area airports.
Reagan Airport, which had 15.9 million passengers last year, raked in $6.7 million from food, beverages and retail sales last year. The airport collected $2.6 million from its tenants in 1996.
Dulles, which had 20.1 million passengers last year, made $9.3 million from concessions in 2000. The airport raked in $2.6 million in 1996.
Officials expect Dulles to bring in more money in the next couple of years because the airport is in the process of renovating parts of its facility and expanding other areas for more traffic and more retail and restaurants.
BWI, which had 19.6 million passengers in 2000, raked in a total of nearly $6 million in its fiscal year 2000, which ended in June, from both retail and food and beverage sales. The airport reported revenue of $3.4 million in fiscal year 1996.
BWI, which has been undergoing major construction and expansion, currently has more than 40 stores and eateries, including Starbucks, the Body Shop and Wilson?s Leather.
?People will spend money if the right concept is there,? Mr. Cappetta says.

Mixing it up

Finding the right mix of retailers and restaurants is a major challenge for airport officials.
?It?s a science,? Ms. Armbrust says. ?The Gap doesn?t work everywhere.?
The demographics vary at each of Washington?s airports. Reagan Airport, for example, tends to have business travelers who are shuttling in and out of the airport. Dulles and BWI tend to have passengers lingering around waiting for their flights with more families and vacation travelers compared to Reagan Airport.
?When you look at an airport project you want to develop an appropriate blend of national, regional and local brands,? Mr. Samson says.
More and more airports are trying to fill in their retail portfolio with local flavor ? adding businesses that represent their city.
Celebrate Maryland, which has five locations at BWI, offers everything from boxer shorts and hats to puzzles, flags and games ? all with a Maryland theme.
?I think people expect to find merchandise that is representative of the area,? says Melissa M. Fulton, president and chief executive officer of Columbia, Md.-based Regional Retail Concepts, which owns Celebrate Maryland, Discover DC and Just Plane Kids. ?The airport is showcasing the community it?s in.?
Reagan Airport has a taste of the District with such shops as the Smithsonian Store and the National Zoo Store.
?We want a dominant influence of local retailers,? says Margaret McKeough, vice president of business administration at the Metropolitan Washington Airports Authority, which runs both Dulles and Reagan National.
Olsson?s Books & Music is making its debut in the airport business later this summer at Reagan Airport.
The locally based book chain will open a 1,200-square foot location next to Legal Seafood near the security gates outside the US Airways terminal at Reagan Airport. It?s replacing one of two Waldenbooks locations at the airport.
?We?re always looking for new sites,? says Alicia Greene, marketing director at Olsson?s. ?We think this will help get our name out. [Olsson?s] isn?t known outside this area.?
Airport exposure is one of the best assets for a brand that already has made a name for itself nationally.
Legal Sea Foods, which has a cafe at Reagan Airport, uses that location as a marketing tool for its full-service restaurants in the area.
?It?s a great billboard from a marketing standpoint,? says Roger Berkowitz, president and chief executive of the Allston, Mass.-based seafood chain. ?It wouldn?t be worth it if I didn?t have other locations in the area.?
The company has restaurants on 7th Street, K Street in Northwest, Bethesda, Baltimore and another location opening in Crystal City this fall.
The airport cafe, which is profitable, has a modified menu compared to its full-service restaurants offering items that can be prepared quickly like soups, raw clams and lobster rolls.
In the airport business, ?you really have to understand a consumer?s anxiousness,? Mr. Berkowitz says. ?You?re mind-set is a little different.?

Trial and error

Having a national brand name doesn?t always work to a company?s advantage.
Sales at Cheesecake Factory?s Bakery Cafe, located at Reagan Airport, are either stagnant or below volumes from last year, says Howard Gordon, senior vice president of business development and marketing at the Calabasas Hills, Calif.-based restaurant chain.
Cheesecake?s airport location confuses customers who assume it is a full-service restaurant. In addition its location at Reagan Airport doesn?t draw enough business because people are constantly on the go there, Mr. Gordon says.
For now, the Cheesecake Factory has put its expansion into airports on hold.
Victoria?s Secret, which opened in July 1997 at Reagan Airport, did not renew its lease because of sluggish sales by the company?s standards, says Ms. McKeough. Company officials would not comment.
Ms. McKeough says the women?s lingerie shop was bringing in $1 million in sales a year but the company chose not to renew the lease.
Brooks Brothers will open in that location at the north end of National Hall this year.
A tenant?s location inside the airport is key to its profitability.
The Smithsonian Store, located at the Observation Gallery at BWI Airport, closed in December 1999 because it didn?t have the traffic it needed to survive.
Ms. Fulton agrees that location ? including multiple locations within an airport ? is key to a business? success. She is not worried about competition from other retailers ? like she would be at a traditional retail setting like a mall, rather she?s more concerned with what?s happening with the airline industry.
For example, the planned merger between US Airways and United will affect traffic flow at BWI and ultimately affect the success of her business.
Ms. Fulton says airlines are much like anchors at a mall ? the big draw for customers, just like the airlines are the reason the passenger is in the airport in the first place. If something happens to that airline ? like a strike or its shutdown ? it affects the foot traffic near that airline?s section of the airport.
Most airport tenants agree the restrictions, rules and cost can be a burden ? especially comparing it with a street location or a store in a mall.
Because of specific design standards, Legal Sea Foods spent 50 percent more money to design its location at Reagan Airport compared to a regular location. It?s not much different for other tenants.
?It?s very expensive to develop and operate in an airport,? says Mr. Cappetta from HMS Host, the Bethesda-based concessionaire that handles the exclusive airport development and operating rights for such brands as Starbucks, Cinnabon, Burger King and first rights to develop brands like California Pizza Kitchen and Chili?s.
Rent is far more expensive at an airport than at a mall. Tenants have to abide by more stringent rules including design and operations.
BWI, for example, has control over almost every aspect of a tenant?s business from approval of prices and standards on dress codes to hours of operation and architectural design.
?It?s a challenging business to be in,? says Ms. Fulton, whose company posted a 26 percent increase in sales in the first quarter compared with a year earlier. ?You always have to be managing your expenses carefully.?

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