There’s a nicely balanced (gasp) piece in the KC Star today discussion the question of retail amenities at KCI. This has become a larger part of the conversation lately and this makes for a good opportunity to clarify some things.
A lot of attention has been given lately to the fact that KCI ranks last on a list of “peer airports” for concession revenue. Actually, we’re told that we are “dead last” not simply last. KCI earns an average of 66-cents per departing passenger. The average for the peer group is $1.58. Thus, we are told, if everyone simply spent a dollar more, we would earn an extra $5,000,000 a year. (chump change still compared to a new $70 million dollar annual debt service on a new terminal but I digress.)
There is a major math flaw in that argument though. The above numbers represent only KCI’s share, not gross sales. KCI employs a third party operator to manage retail and restaurant concessions and then takes a cut of the proceeds. I have asked for a copy of the agreement to see how large the cut is but have not received it yet. I did review one that I found online from another airport and the airport cut averaged around 15% with the same operator used at KCI.
Assuming that KCI being “dead last” is not simply the result of us having a lousy deal with the operator compared to others, the only way we would get to that average figure is for passengers to spend $10.53 each instead of the $4.40 they spend now ($4.40 x 15% = 66-cents). Clearly that is more than “simply spending a dollar more.”
Thus the calls come for more retail and dining options (aka build it and they will eat). But those calls fail to consider the bigger picture.
- We already have more restaurants past security and they are far from operating at capacity so where is the demand?
- TSA told us that KCI passengers arrive at the last minute because they know they can. Thus they don’t have time to shop and eat meaning the only way to give them that time is to make the airport less convenient for everyone.
- We have not heard from the concession operator, HMSHost, during our hearings and we need to. They will be the ones on the hook for making a profit and will approach it from a realistic business perspective. Do they think there is demand in this market?
- Again, even if wildly successful, we’re talking about a small fraction of the annual revenue needed to cover the payments on a new terminal.
Retail can’t wag the KCI dog.
As a local, who flies out of KCI, I only eat and drink there, if my departing flight is late (and last time I did do, the food was crap, btw). Yes, my departing flight was late more than once, but not so much that I care for more food options. What I do care about is having more non-stops to more destinations. I’m not convinced that single-terminal airport will improve that.
Today I asked a Backyard Burger worker in the Memphis airport how business was since Delta pulled its hub.
Pointing at a largely empty food court she said, “Just like this, all the time. They’ve closed a lot of places in here.”
The food court in MEM Terminal B used to be jammed. As I write this around 12:30pm, seating for about one hundred is occupied by 7 people.
I don’t know what makes management at KCI think people will shop and eat at the airport in larger numbers than they do now.
How much has concession revenue dropped per passenger at MEM since Delta pulled its hub?
As I walked through MEM at 6:00pm tonight, it appeared that passengers without connections have no reason to eat or shop at the airport; they just want to get in and out.
Don’t really care about your 3rd class airport or the entire metro area of Kansas city as a matter of fact my hometown airport MSY are building a brand new beautiful new 830 million terminal to be open by 2018 and my hometown already has a great streetcar system Kansas city is still in the late 70s lol !!!!!!!
MSY? New Orleans?
Ooookay then. I guarantee anything that NO is getting massive amounts of help…subsidies, a ton of federal funding, to help fund that project. Federal funding that pretty much doesn’t exist for projects like this anymore. So, congrats.
NO and the state of La doesn’t have the resources necessary to go it alone.
NO may have the Quarter, with a good thing going in that district, but I would seriously refrain from talking too much smack. It’s not as if NO’s poo doesn’t stink.
@ mike I’ll say what I please about Kansas city ,yes new Orleans has it problems as well – at least Kansas city is building a new modern streetcar system which will be great for the city I have traveled overseas and in the USA , Portland Oregon and Seattle both have great transit systems…. los Angeles does too so why doesn’t Kansas city ? I have flown out ta kci a few times …. short TSA lines r the only positives to this dump of an airport ..
Look at it this way; the more air travel looks and feels like high speed bus travel, the more retail at the terminal will head toward those vending machines and a couple of watering holes.
What would have balanced the Star piece would have been some analysis on where the extra revenue would come from – it should be obvious that the cost would be borne by the same people who presently like to show up at the last minute (perhaps in part to resist that impulse buying urge).
Mr. Stephens’ and Mr. Long are evidently reading from their promoter job descriptions while pitching the “good old days” (and at places like Pittsburgh that “never were” in the first place). I expect people in those positions to be looking forward on the basis or reasonably credible projects of future usage – not a hint of that from them in the Star piece.
Failing that up tick in discretionary spending, by an already cost conscious traveling public – how do you even get a positive multiplier out of this equation? If the multiplier is negative under overall increasing costs (e.g. fuel for planes) then in the long run those people would end up paying in higher fares.
Of course we could end up with a bunch of empty kiosks and food mall outlet spaces – now would that make for an eyesore or what?