Transportation stations prove growth vehicle

World Views for May 14, 2012

Each year, some 65 million people pass through London’s Heathrow Airport. The city’s Victoria station, meanwhile, has three times the traffic of its nearest major shopping mall. And those figures are expected
to grow when an expected additional 1 million passengers travel through London’s stations each day during this summer’s Olympic Games. 


Fueled by those dramatic numbers — and the challenges traditional retail locations have faced in recent years — airports and train stations are emerging as one of the biggest new battlefields for restaurant operators. 


An increasing number of branded and independent companies are targeting these venues to benefit from the high volume of trade, raise brand awareness, reach new audiences and introduce new concepts. 


The potential is huge, but entering the market is not without its challenges. At London’s Gatwick Airport, one of Europe’s busiest, 70 percent of departing passengers choose to shop, drink or dine during their visit. But each of those customers wants something different. It is crucial that every concept at the airport appeal to all passenger groups, be it a family or couple that have the time to sit down for a meal, or those simply wanting to grab food and graze on the plane. 


Serving those varied groups was a crucial concern when securing space for Jamie Oliver’s latest venture at Gatwick, set to open this summer. The upcoming opening will include a Jamie’s Italian and two new concepts: Jamie’s Italian Bakery, which will offer a grab-and-go service, and the Union Jacks Bar, which will serve an all-British menu and U.K.-sourced wines and beers. 


Major U.K. restaurant chain 
Giraffe recently launched the Giraffe Stop at King’s Cross rail station in London. In contrast to its typical family-friendly, sit-in format, the Giraffe Stop offers a quick-service variation on the brand, exclusively tailored for train stations, airports and busy high-traffic commercial districts. The new brand serves people on the move with a primarily carryout menu and minimal seating.


Larger operators like European food travel expert SSP are juggling their own brands with the commercial catering franchises they have in their portfolios to find the right mix. For example, YO! Sushi has recently opened at Norway’s Oslo Airport under an agreement with SSP. London-based YO! Sushi has also announced its first franchisee in the United States at Union Station in Washington, D.C., opposite the Chipotle Mexican Grill, with local partner Sushi Company of North America LLC.


We advise our clients seeking to enter transportation centers to offer an eclectic mix of highly sought-after quality brands along with independent concepts with a unique stamp. To do this we look at the offerings of world-class retail destinations, such as London’s West End and Westfield London Shopping Centre, as well as important global transport hubs. It is imperative to model offerings after those cutting-edge eating and drinking spots rather than just other travel hubs, because they represent the ambitious and superior retail and dining mix that international travelers expect.


It’s not just the food that’s evolving. The stations themselves are getting upgrades. Following the hugely successful regeneration of St Pancras in London’s West End four years ago, neighboring King’s Cross station — the U.K.’s oldest and largest train station — also had to raise its game. What emerged was a model for destination stations with a wonderfully diverse range of restaurant concepts, featuring Giraffe Stop and other brands like Leon, Prezzo, Benito’s Hat and Yalla Yalla. 


Network Rail, which manages and owns 18 of Britain’s biggest stations, is now concentrating its attention on updating and developing Waterloo and Victoria stations. Waterloo will open in two phases this summer and will see the conversion of disused space into a new dining area. 


Network Rail reported a 3.85 percent rise in sales for the three months ended Sept. 30, driven by strong growth across its food and beverage categories. Bars reported growth of 10.4 percent during the period, followed by specialist food retailers at 10.2 percent and restaurants at 6.78 percent on the previous year, according to the M&C Report.


But London is not alone in recognizing the ability to create leisure destinations at transport hubs. In France stations are being turned into commercial precincts, where 2 billion passengers annually pass through some 3,000 stations via train, subway, tram, bus, car and bicycle. In Germany the 10 busiest stations handle 1 billion travelers and visitors a year, with food offerings dominated by snacks and coffee. Stations in Sweden, meanwhile, have been quick to harness new food trends and put a focus on healthy, organic and locally produced food. 


Generally, train-station landlords are moving away from the traditional long-term lease structure and are beginning to adopt a formal legal tender process on new restaurant space. The leases are structured on a percentage of sales, with a base rent set on predicted performance. So in a station where there is considerable footfall, the rent in cash terms can be particularly high. Operators can expect to pay up to one-fifth of their revenue in rent at a railway station versus 5 percent to 10 percent for more traditional retail locations.


However, the good news for would-be tenants is that where traditionally cash-rich and covenant-
strong operators were king, train-station landlords are now actively looking to diversify the tenant mix and consider operators that are breaking the old mold. 


We are seeing an increasing number of overseas operators considering expansion into Europe. Train stations and airports offer enormous potential, as they open up a whole new market for operators to showcase their brands. 


With all of these advantages in mind, it is a great time to get involved. All aboard!

David Coffer is chairman of 
London-based The Coffer Group, a 40-year-old consulting firm specializing in the leisure sector and comprising Davis Coffer Lyons, Coffer Corporate Leisure, Coffer Hotels and Coffer Leisure Investment Advisory.

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