Airport foodservice sales soar amid record delays

Airport foodservice sales soar amid record delays

Air travel, buffeted by an unprecedented number of flight delays and cancellations, has become more nerve-wracking except among one particular flight-dependent contingent: the airport foodservice operators who are crediting sales increases of up to 30 percent to departure logjams at terminals nationwide.

Whether air travel chaos can be blamed on a burgeoning number of passengers, gridlock in the skies, an antiquated air traffic control system, extra security since 9/11 or bad weather, the fact remains that as passengers and airlines sing the blues, airport restaurateurs rejoice.

However, as more flyers belly up to bars and restaurants seeking meals, comfort and something to do while waiting out tardy liftoffs, airport concessionaires still face soaring challenges.

The flip side of the rosy foodservice sales picture stems from the fact that most domestic airlines no longer provide full meals aboard flights, putting pressure on operators on the ground to meet hungry passengers’ demands for more upscale, sophisticated foods and beverages. If established air terminal restaurateurs don’t do that, they risk losing their customers to a growing number of competitors now infiltrating the airport foodservice sector.

As record travel delays keep passengers on the ground longer, contract feeders are seeing sales take off with a greater variety of grab-and-go and upscale dining options

“I can tell you that in this industry, delays are a good thing,” says Karen Mirante, director of business operations for Philadelphia-based airport concessionaire OTG Management. “There’ve been quite a few weather delays around the country, and in all honesty, business has never been better.”

For the first half of 2007, all domestic airlines experienced delays in about 30 percent of their flights that averaged approximately 62 minutes in length, the U.S. Department of Transportation reported.

According to Vito Buscemi, culinary manager for Delaware North Cos. [3] of Buffalo, N.Y., its airport foodservice sales, especially in the grab-and-go category, have risen 30 percent over the past year. That’d translate into lots of quick meals for airline passengers, since the company’s Vito’s Gourmet Deli concept, which offers freshly prepared items to go at 20 airports in North America, sold more than 1 million sandwiches in 2006 alone. Those sales contributed to annual food and beverage sales of $236.5 million last year for Delaware North’s travel and hospitality division, which stands to see a substantial boost in that number for 2007 because of high-flying volumes at air terminals.

“The extended delays have kept business pretty aggressive,” Buscemi says. “Everyone is seeing strong increases, especially in grab-and-go because people are still hanging tight to the gate areas. In regard to the airline delays and difficulties, the increase in our sales can be attributed primarily to the airlines’ hold-over pattern at the terminals, where in most instances they delay [flights] an hour at a time and strongly encourage passengers to stay close to their gates. This results in consumers needing to eat food items that are quick to purchase, easy to eat, nutritious and of high quality.”

According to Stephen Van Beek, former executive vice president of policy for Airports International Council, North America, and current director of the Washington, D.C.-based aviation operations specialist Jacobs Consultancy, the record-high number of flight delays this summer, especially at busy U.S. hub airports, is having a huge impact on consumers and their purchasing habits.

“At connecting hubs, inside the security area, long delays are having a disproportionate impact on travelers, and increased dwell times are creating extra pressure to have good concessions for them,” he says.

Van Beek adds that this summer was the worst in terms of recorded delays since 2000, and that was before additional security measures were applied at airports after the Sept. 11, 2001, terrorist attacks.

“The volume of passengers is at record levels and airports haven’t yet caught up to the amount of traffic they have,” he says. “The industry’s delays are the worst we’ve had in seven years so what that really means is more people are waiting for their flights for a longer period of time in larger sterile areas. And with more people waiting this summer, more food and beverage [options] inside that area have become necessary.”

OTG Management’s Mirante says her company also is experiencing double-digit sales growth, much of that in grab-and-go items, thanks in large part to travelers’ increased dwell times.

“Generally, since foodservices aboard domestic flights are limited, it’s so important to be able to provide a good meal for them,” says Mirante, whose company has operations at New York’s JFK and LaGuardia airports as well as at the Philadelphia; Washington, D.C., Reagan; and Tucson, Ariz., International airports.

“If a passenger is delayed two or three hours, he or she is going to want a good meal. And as far as wanting to stay in the gate or go off to eat elsewhere, it depends on what the airline says to them,” she adds. “If they tell them to stick around for a quick departure, then quick-serve or the prepackaged route—where they can access food pretty quickly, eat it in the hold room or bring it aboard the flight and eat en route— are good choices.”

To compete in the grab-and-go market, OTG has deployed in airports its version of an upscale minigrocery, Cibo Express Gourmet Markets, which Mirante likens to a miniature Whole Foods market.

“It offers a number of products, everything from prepackaged salads to savory snacks to chocolates and cheeses, even 12 different types of bottled water. We have found that if you offer people choice it’ll make them happier and they’ll spend more money,” she says of the concept, which currently is available at New York’s JFK and LaGuardia airports as well as at Washington’s Dulles and Boston’s Logan airports. The company says it plans to open two more outposts in Orlando, Fla., and Chicago’s O’Hare airports next year. Cibo Express’ prices are street-value based, so the costs of items are essentially the same as what consumers pay elsewhere in each city. Mirante says the Cibo concept also tries to appeal to younger tastes with its newly introduced Kid Fresh menu, which offers health-oriented options for children.

“There are a lot of healthy alternatives,” she says, including “gluten-free, veggie and vegan, organic items. You can buy anything from a hardboiled egg to caviar.”

Bethesda, Md.-based travel concessionaire HMSHost Corp. [4] also offers an upscale supermarket option to passengers in the airports it serves. The company recently inked a licensing deal with New York-based Balducci’s Italian Market, opening a mini-version of that concept at JFK’s Terminal 2 while planning to open a second unit next month in the airport’s Terminal 7. The concept features a sampling of the same freshly made sandwiches, salads, upscale deli products, fruits, vegetables and artisanal breads and cheeses found in the Balducci’s chain’s full-sized stores. The items are similarly priced to those available at the high-end flagship store in Manhattan.

Pat Banducci, HMSHost’s senior vice president of business development, says the decision to roll out the market-style concept was a response to consumer demand for “healthier and fresher options with a very pleasant ambience.”

“That’s something we think Balducci’s brings,” Banducci says. “It’s a bona fide brand that’s successful in New York and gives that sense of place to JFK.”

Banducci, however, says that although grab-and-go items are wildly popular, HMSHost is seeing increased sales at its sit-down restaurants in airports, too.

“There has been an uptick in sit-down sales, especially at casual-dinnerhouse concepts,” he says. “People are more willing to sit and escape the harried airport mess, just get away from it for an hour or so.”

To that end, he notes, HMSHost has just debuted its latest concept, La Tapenade, a Mediterranean grill featuring made-to-order pizzas, sandwiches and paninis, at Chicago’s O’Hare International Airport.

“It’s a proprietary brand that addresses the trend for higher quality ingredients and fresher options,” Banducci says. “We’re looking at a couple of different locations, but [the concept] needs a minimum of 1,500 square feet, which may not seem like a lot but in an airport setting it can be.”

He adds that La Tapenade’s sales figures vary from airport to airport, with larger numbers coming from the “bigger hubs like Chicago, where delays have taken place.”

OTG’s Mirante says it’s good business sense to offer different concepts in order to appeal to the tastes and pocketbooks of all air travelers.

“We really try to do a combination of things,” she says. “You’ll see everything from sushi and steakhouses to quick-serve options like McDonald’s [5] and Burger King [6]. We serve business travelers with business accounts who want steak and a glass of wine and families who are more value-oriented and cost-conscious.”

For passengers with longer layovers, OTG offers made-to-order sushi at its Deep Blue Sushi restaurants, which feature sushi chefs, blue-patterned glass tables and overstuffed sofas that let weary guests rest while waiting to board their flights. Other sit-down options are the Cibo Bistro and Wine Bar, which offers authentic Italian cuisine, and Sky Asian Bistro, which specializes in pan-Asian food. Both concepts offer customers a choice of 32 varieties of wine by the bottle or glass.

“Consumers are very savvy,” Mirante says, “so we try to be innovative and creative. We know everyone loves to eat, and the more choices we offer, the better for us at the end of the day. Our approach is we don’t think of it as airport food; rather, it’s dining at the airport.”

One big change in foodservice, according to consultant Van Beek, is the switch from master-concessionaire agreements to smaller contracts spread among a variety of operators, with the host airports exerting more control over the offerings and claiming percentages of the profits.

“We are seeing more airports taking a little bit more control,” he says. “Under the master agreements, contractors took care of all the concessions and provided a certain amount of the overall revenues. But now there’s a tendency to bring in more national and local brands. For instance, an airport might award one contract to one company and another to an entirely different one. They see it as a way to provide more options for customers and generate more revenues for themselves. Non-air revenue is a big deal to airports.”

At Dallas-Fort Worth International Airport, whose foodservice outlets are self-operated by the airport, concessions executives estimate that annual sales for 2007 will hover around $105 million. The airport, a heavy connecting hub, in the first half of the year saw a huge jump in the number of flight delays and, in turn, a rise in restaurant sales.

“From the end of May through July, we’ve had 46 days of either cancellations or delays, versus 11 days from all of calendar year 2006,” says Zenola Campbell, DFW’s vice president of concessions. “And the delays are generating positive revenues on all fronts because passengers are spending more time in the terminals shopping and dining. Our sales, especially takeout, are better than ever.”

According to Ken Buchanan, the airport’s executive vice president of revenue management, the sales increase is directly related to recent record rainfalls in Texas.

“We do see an uptick in sales, based on time and what we can expose passengers to in the time they spend in the terminals,” he says. “For example, if a delay is less than 40 minutes, passengers will gravitate toward grab-and-go or quick serve, but if it’s 90 minutes or more they’ll go to the bars, taverns and sit-down restaurants. During inclement weather we’ve seen sales increases of between 15 percent and 20 percent at sit-downs and slightly higher numbers at bars.”

Buchanan also says he’s noticed that airport consumers, in addition to wanting higher-end fare, are gravitating toward more ethnic flavors.

“More people are seeking out authentic Asian and Mexican foods,” he notes. “We’ve been upgrading our restaurants, adding more higher-quality sit-downs. Our researchers have come back and told us that customers want more self-indulgent items, luxurious brands, higher-end products—things that will alleviate stress in general.”

And the competition to meet those needs is getting stronger. Contract feeders aren’t the only ones bidding for space in airport terminals. Commercial restaurateurs are getting in on the game, too.

Bruegger’s Bagels, the 259-unit, Burlington, Vt.-based bakery-cafe chain, is opening two airport outposts, one at Boston’s Logan International Airport and the other at Cincinnati/Northern Kentucky International Airport. Both stores are expected to be operational by November, and the Boston unit will offer wine and beer on its menu.

James Greco, the company’s chief executive says airports are “just another place where there’s a concentration of people, generally more affluent. It represents another trade area that should be covered like any other. It’s hard to remember the days when you rushed to the airport and got right on the plane. Customers want the same things they can find in their neighborhoods and at their offices that are quick, convenient and moderately priced. They want to feel good about what they’re eating.”

In addition, celebrity chef Tom Colicchio, proprietor of New York-based multiconcept restaurant operator Craft [7] Restaurants, is said to be interested in opening units of his ’Wichcraft sandwich chain at airport locations, though no deals have been finalized.

Scott Feldman, Colicchio’s agent, says the management of ’Wichcraft sees airports as “a great opportunity for multiple retail locations. I would say airports probably are in its future.”