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Winter 2011 Specialty Retail Soars at Airports

Specialty leasing professionals from around the country weighed in on the benefits and challenges of operating in an airport environment as well as the current state of the industry.

Airports have always been a popular location for specialty retail businesses, but it can still be a little intimidating for the kiosk operator looking to enter the airport market for the first time. If increased security regulations and the vagaries of the travel industry have you hesitating to be a part of the airport specialty retail market, think again. High traffic and a captive audience can be just the perfect combination for your retail concept.

Airports vs. malls

The specialty retail program at Philadelphia International Airport, operated by Marketplace Philadelphia Management, consists of 39 RMUs spread out amongst the airport’s seven concourses.

“At the airport you need to consider many matters that you don’t have to consider in a mall, such as the hiring process, restricted merchandise, operating hours and deliveries, just to mention a few,” says Sonia Del Rosario, its specialty retail manager. “Since airports are open 365 days a year, there are no days off. It’s not like a mall where you can close on holidays. You need someone to be here every day.”

Ellery Plowman, vice president of business development and leasing for Westfield Concessions Management, which currently operates specialty retail and concessions programs at eight major U.S. airports, says that while airports were created for the purpose of moving passengers from street to aircraft in the most efficient manner possible, their potential as places to shop at, are increasingly being recognized. “As airports have begun to recognize and appreciate the value of alternative revenue streams, robust concession programs have been created,” Plowman says.

Bernard Latimore, concessions supervisor at Hartsfield-Jackson Atlanta International Airport, works on requests for proposals for new tenants and assists in the leasing contract process for a specialty retail program that spans eight units. He points out that another key difference between mall and airport specialty retail programs is in the leasing process and ownership.

“Most airports in the United States are governed by municipalities, counties or port authorities whereas malls tend to be privately owned,” Latimore says. “Airport leasing often involves going through a solicitation process which is governed by federal, state or local procurement codes. Malls, on the other hand, can negotiate lease terms directly with their tenants.”

A different mindset

The difference in customer behavior is another thing to keep in mind when working in an airport. Airport shoppers are often stressed and in a hurry to catch flights, with limited time to browse. Training staff to work quickly and efficiently while keeping the traveling customer’s behavior in mind can be the key to closing a sale in the busy airport retail industry.

According to Del Rosario, “Shoppers at the mall have more time to walk around without the pressure of catching a flight. They also have different interests; airport shoppers usually buy something they might have forgotten or gifts for others. It’s a more fast-paced environment here.”

One of the main benefits of operating an airport kiosk, according to Del Rosario, is the captive audience. Travelers who arrive early, have a layover or a delayed flight have hours to spend waiting at the airport, and that means they are more likely to walk around and browse shops and kiosks.

Bill Swift, president of Atlanta-based Business Traveler Services, a company that develops retail concepts in airports across the United States, points out that the traveling public is more likely to have disposable income. “It’s been shown that the traveling public has a higher education level as well as a higher income level, many over $100,000,” he says. “They’re more likely to spend … on an unplanned purchase.”

The recession and airport leasing

Although the recession has greatly impacted the travel industry and the country as a whole, the upside is that some of those people who have lost their jobs are looking at new business opportunities—namely in specialty retail.

Del Rosario says that her program has been affected only very slightly by the recession. “Some tenants have gone and other new ones have come. I meet every week with new business owners interested in our specialty retail program. Some of those are people who lost their jobs and want to enter a new field by starting a business here at the airport.”

Latimore also has seen an increase in the number of new business owners at ATL. “In particular, we have seen more international retail operators enter the U.S. airport concessions market.” He adds that although the recession has impacted his program, it hasn’t been very bad, in part because ATL is such a large hub.

Westfield has conducted business outreach seminars in its market; the company has witnessed an increase in the number and quality of interested business owners as well. “The recession has changed the scope of how business is done,” Plowman says. “The entrepreneur and small business owner are still present and working more efficiently than ever before. We are seeing more and better concepts every day.”

Airport restrictions

One of the main concerns of someone entering an airport specialty retail program is the seemingly long and complicated list of rules regarding what can be brought into the airport.

Although the types of items that can be sold at an airport are restricted by the Transportation Security Administration (TSA), the good news to potential kiosk operators is that the list isn’t as restrictive as one might think. “Most retail merchandise can be shipped into and out of an airport without any issues. For example apparel, gift items and books,” Latimore says.

Each airport has its own rules and regulations, in addition to the TSA rules. At PHL, for example, there are no water hook-ups at the kiosks for workers to wash their hands, so food sales are restricted to wrapped or packaged items that do not require workers to handle them directly.

Another restriction to working in an airport environment is that all employees of a kiosk must be badged, which requires a screening process that can take weeks. This means if someone calls in sick or can’t make their shift, a cart owner couldn’t just call a friend to take over like they could at a mall location.

“This is why we tell all of our operators that they need at least four employees,” Del Rosario says. “You need back up. The hours here at PHL are longer than at a mall, 365 days a year, 7 a.m. to 10 p.m. You also need to be conscious about who you hire, because they will go through extensive background checks.” The process to screen and badge employees usually takes about two to four weeks at PHL.

Latimore admits that “the hiring process is more time consuming” at an airport, and at ATL can take anywhere from a week up to 30 days, depending on the situation.

Disadvantaged Business Enterprises

There is a program that can help many prospective specialty retailers. Owners who are socially or economically disadvantaged can often qualify as an Airport Concession Disadvantaged Business Enterprise (ACDBE). The U.S. Department of Transportation (DOT) defines an ACDBE as a for-profit small business where socially or economically disadvantaged individuals own at least a 51 percent interest and control management and daily business operations.

Airports receive financial assistance from the DOT through the Federal Aviation Administration to support their ACDBE programs. The objective of the ACDBE program is to remove barriers for socially and economically disadvantaged business operators and create a level playing field for all companies to compete.

Groups considered to be socially and economically disadvantaged are African Americans, Hispanics, Native Americans, Asian-Pacifics, Subcontinent Americans and women. To meet the requirements of “economically disadvantaged,” a business owner must have a personal net worth that is less than $750,000. Other companies can qualify as ACDBEs on a case-by-case basis. Interested operators apply through their state DOT agency.

Applying to be an ACDBE operator might not make sense for kiosk operators with a short-term lease, as the application review process can be lengthy. However, those who plan on operating in an airport for the long-term can find the program to be very worthwhile.

Pricing concerns

The majority of travelers automatically assume something is going to be overpriced if it’s purchased at an airport, but in most cases, this is untrue.
Westfield, PHL and ATL, in addition to many other airports, operate street pricing policies. This means that an airport business cannot charge a higher price for a similar item that would be sold in the surrounding metro area. For example, an airport GAP could not charge $50 for the same sweater that is sold at a GAP location for $40 in a nearby mall.

There are some exceptions to these rules. For example, Latimore says that “if the brand does not exist in the Atlanta metropolitan area, the operator may charge as much as street price plus 10 percent.”

Westfield’s policy mandates that prices at the airport must not exceed the average price of five comparable street price offers in the marketplace, while at PHL, street pricing is regulated by the city of Philadelphia. All PHL retail businesses are audited every quarter for prices and if a brand does not exist at a nearby location, the operator must price its goods based on a similar brand in the area.

Self-service: The future of specialty retail?

The prevalence of self-service kiosks is increasing at airports, with concepts from ZoomSystems as well as other brands popping up in many locations. ATL has seen a positive impact from this trend. “The self-service kiosks offer passengers an additional option and more variety to purchase the same or similar items that they would normally find at inline retail locations,” Latimore says.

At PHL there are not many self-service kiosks due to limited locations, but Del Rosario says that the property will be adding three ZoomSystems machines featuring Proactiv, Reebok and Best Buy products. The airport recently opened Nanny Caddy kiosks in terminals B and C, selling baby supplies such as wipes, bottles and diapers.

Plowman says that the increase in self-service kiosks has definitely impacted the specialty retail industry as a whole. “This trend has made way more space dedicated to concessions and increased the time passengers have to take advantage of the concessions offered.”

By all indications, specialty leasing at airports continues to soar to new heights.

Arm Candy – Philadelphia International Airport

This specialty handbag and accessory kiosk, which opened in September, is owned by Shereen Zakkout. It carries Nahui Ollin’s line of handbags, headbands, bracelets and wristlets made out of recycled candy wrappers.

Each bag is painstakingly handmade by Mayan artists and can take up to three days to make. A bag can use as many as four thousand candy wrappers, depending on the size. The price ranges from about $20 for small accessories like wristlets to $375 for a large handbag.

Shereen’s husband, Mazen Zakkout, says that the couple first saw the Nahui Ollin products at a gift show and thought they would be a good idea for a new specialty retail business. Zakkout operates a Go Pretzels cart at PHL, and formerly operated a Jack George’s location, so he and his wife were already familiar with the airport’s specialty leasing program.

As for Arm Candy’s typical customer, Zakkout said there is a wide range of people interested in the products. “We see all ages who enjoy this line, not just young women. People buy them for presents or for themselves, and I’ve seen customers purchase the smaller wristlet bags to use for a cell phone or to put a gift inside.”

Rosetta Stone – Hartsfield-Jackson Atlanta International Airport

Bill Swift, president of Business Traveler Services, Inc. got his start in the kiosk industry selling souvenirs at the old Yankee Stadium. He moved on to become the executive director of Dobbs-Paschal, which at the time managed the concessions program at ATL. “That job gave me an introduction [to] what was possible in that environment, which led me to decide to start kiosks in a niche area,” Swift says.

Swift says that to a large degree BTS doesn’t operate the units directly, but leases out the spaces to companies like Rosetta Stone, who handle the day-to-day operations such as hiring staff. “This works well because I can interact with all of the different players and give them the benefit of my years of experience working in an airport environment,” he says.

BTS has Rosetta Stone kiosks in both Concourse A and Concourse C in Atlanta and these locations carry on average 23 different language programs including Spanish, French, Italian, Russian, German, Japanese and Chinese.

According to Swift, the challenge of selling Rosetta Stone products is that the product is not typically an expenditure that a passenger would plan for in advance, and the average cost of the software is about $295. “The challenge is getting a customer to make an unexpected expenditure that could be equal or greater to the price of their ticket. We have to give a compelling presentation to suggest that this is a value proposition and a convenience for the traveler,” Swift says.

Swift’s advice to other kiosk operators is to be creative. “We’ve found spaces between bathrooms to place a cart; traffic is guaranteed. If you think out of the box and take a little time and effort you can really create revenue generators for a product or service that meets the need of the traveling public.”

Specialty retail to take off in Denver

Exciting news is on the horizon at Denver International Airport. The property is currently in contract negotiations to start its first specialty retail program. Currently the airport operates more than 140 concessions, including Brookstone, Radio Road, Rocky Mountain Chocolate, Timberline Steakhouse and New Belgium Hub.

In 2009, its concessions program generated more than $242 million in annual gross sales and more than $38 million in revenue to the airport.

The airport, which has 167,457 square feet of retail space, plans to include kiosks throughout all three concourses and the main building, according to Leah Older, manager of alternative revenue and concessions marketing.

“We’re looking at a large-scale program with about 26-34 RMUs and a mix of pre- and post-security locations,” she says.

The airport hasn’t operated a specialty retail program in the past, and Older, who comes from the shopping mall industry, is excited about the opportunity it presents. “We evaluated this decision internally for a few years, and I really think that specialty retail can enhance our current concessions program. It’s a good way to bring in some new products that require a focused format.”

Older said the staff at Denver International has taken into consideration the specialty retail programs other airports currently have in operation to see what works and what doesn’t. “We’ve talked to other airports and looked at what they have going on. We have three pretty large spaced out buildings, so we need to see what will work well for us,” Older says.

As for the types of tenants we can expect to see in Denver, Older says they aren’t that far along in the process yet. The airport issued an RFP for an asset manager in January, and hopes to have news in the coming months regarding an official specialty retail program announcement.

Kristin Larson Contino

Kristin Contino is a freelance writer and copy editor based in Philadelphia. She writes for a variety of print publications and blogs, and also covers women's fiction for

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