Orlando talks retail as it builds $1.8bn terminal

By Charlotte Turner |

Orlando-Airport-leadAs Orlando International Airport (MCO) proceeds with the construction of its new $1.8bn South Terminal Complex, the Greater Orlando Aviation Authority (GOAA) tells TRBusiness that revenue from its concessions represents 10% and over $48 million, of the airport’s total ‘budgeted revenues’, at $471.4m.

For the year ended 30 September 2015, the GOAA registered nearly $52m in concession revenue – including advertising, food & beverage, general merchandise and services – which accounted for 12% of the authority’s total operating revenue ($430m).

Last month, Tracy Harris Manager of Concessions and Carolyn M. Fennell Senior Director of Public Affairs and Community Relations, from the Greater Orlando Aviation Authority (GOAA) took TRBusiness on a tour of MCO and talked of plans for the new terminal.

In March 2016, the GOAA Board unanimously approved a revised Capital Improvement Plan (CIP) for FY 2016-2023 that included the $1.8bn South Terminal Complex (STC).

Orlando-Airport-wide

With an overall total of 38.8m annual passengers, MCO is the second busiest airport in Florida and 14th busiest in the US.

 

‘AN INTERNATIONAL TRAVEL GATEWAY’

At the time, Frank Kruppenbacher, Chairman of the airport authority said: “The CIP reflects the growth of our global appeal as an international travel gateway for business and leisure.

 

“To enhance our capacity to accommodate projected passenger increases, it is essential we move forward with South Terminal construction sooner rather than later.”

 

With an overall total of 38.8m annual passengers, MCO is the second busiest airport in Florida and 14th busiest in the US.

 

As concession revenue makes up around 12% of total operating revenue at MCO, TRBusiness understands that retail & F&B at the new South Terminal will play an important role. However, GOAA executives tell this publication that concession plans are yet to be drawn up.

 

Orlando-Airport-Sea-World-store

SeaWorld park retail store at Orlando International Airport.

 

CONCESSIONS AWARDED BY THE BOARD

“We award concessions in one of three ways; that involves requests for bids, requests for proposal and direct negotiations,” Harris told TRBusiness recently. “The majority of what we do is a competitive process so it’s either a request for bid or request for proposals based on what type of concession it is.”

 

“Certainly there’s number of criteria that we look at when we launch an RFP bidders have to follow including the design, the concept. We really try to take a look at the location of the space and what is the market for that space. So what is the traffic mix, what sorts of opportunities might we have in our programme that haven’t already been fulfilled. That sort of thing.”

 

However, Harris does not make the decision to award concession contracts; this is all handled by the authority’s board members of which there are seven.Two of the members include the Mayor of the city and the Mayor of the country.

 

Orlando-MCO-Nuance-store

The Nuance and DFASS JV had its seven-year agreement – which was originally due to expire in 2019 – extended to 2022 in 2014.

 

“The policy decisions are made by that board and then our Executive Director, Phil Brown, manages and operates this airport and an executive airport about 11 miles away.”

 

Referring to concession space at the airport’s North terminal has set spaces, Harris points out that it has a food court, a sit-down restaurant and numerous retail corridors.

Orlando-MCO-Mac

Harris believes that when it comes to duty free, the American passengers are still learning and that they believe that they can only enter if they are travelling internationally.

 

MORE THAN 50 CONTRACTS

“We have a hybrid model in our leasing structure,” reveals Harris.

 

“So we have a prime food and beverage operator who manages a portion of our food and beverage offer, but not all; we have a master developer (Westfield) who manages a portion of our landside retail and then the authority directly works with the majority of concessionaires really.

 

Orlando-MCO-Nuance-beauty

The P&C area of the Nuance/DFASS store at Orlando International Airport.

 

“We probably manage upwards of 50 contracts. Two of those are the prime food & beverage and the master developer.”

 

Specialty retail outlets occupy spaces in the landside corridors in between the various theme park stores, which are very important to the airport’s retail portfolio.

 

Orlando-Airport-Mango

Apparel store from European high-street retailer, Mango.

 

MORE THAN 120 STORES

“Our retail is very strong…We work closely with all of them to determine what the right mix is,” adds Harris. “We look at our whole programme and decide what we need. We ask ourselves if we need more apparel, or accessories or whatever.”

 

MCO boasts around 120 stores across its three existing terminals and these are split equally between retail and F&B units.

 

Orlando-Airport-Lush-cosmetics

MCO boasts around 120 stores across its three existing terminals and these are split equally between retail and F&B units.

 

“Our themed retail merchandise is really a big seller for us…it works for the community too these theme park retail shops. It creates a sense of place. That’s just one example.”

 

Harris tells TRBusiness that technology items sell particularly well at the airport, which she attributes to a positive price perception.

 

APPAREL CHALLENGES

MCO also offers apparel, but admits that it is tricky in terms of spacing and it can be difficult to ensure enough room for the stocking of garments in several sizes.

 

Orlando-Airport-Disney-store

“Our themed retail merchandise is really a big seller for us…it works for the community too these theme park retail shops. It creates a sense of place. That’s just one example,” says Harris.

 

“Another category that does really well for us, and it might not do as well in other parts of the country, are sunglasses,” says Harris. “This category presents a big opportunity for us. We see quite a focus on sunglass sales.”

 

Orlando-Airport-Sketchers

Sketchers fits in with the airport’s ‘casual environment’.

 

Harris concedes that MCO provides ‘a casual environment’ to a certain extent so a lot of the apparel reflects that. Harris highlights the beachwear brand Ron John and European high-street retailer, Mango.

 

NEW CANDY CONCEPT AND GAME ROOM

Harris reveals that a new candy concept, coupled with a game room will be shortly introduced to the North terminal. “We certainly look at adjacencies to see what makes sense,” adds Harris.

 

Orlando-Airport-Inmotion

Electronics sell well at MCO says Harris.

In terms of guidelines and stipulations to concessionaires, Harris says that MCO doesn’t allow really bold price-off communication, which is part of the airport’s ‘design criteria’.

 

However, promotions are encouraged; especially from the MCO’s duty free operator, which is a joint venture between Dufry-owned Nuance and DFASS.

 

Harris believes that when it comes to duty free, the American passengers are still learning and that they believe that they can only enter if they are travelling internationally.

 

EDUCATING PASSENGERS

“It’s an educational process for us as well, to try and let everyone know that they can go in…There are only certain things you can’t buy if you’re a domestic passenger.”

 

The Nuance and DFASS JV had its seven-year agreement – which was originally due to expire in 2019 – extended to 2022 in 2014, helping to cover the investment it made in expanding its Airside 1 store to appeal more to the airport’s growing number of South American passengers.

 

Orlando-Airport-Swarovski

Popular Austrian crystal jewellery brand, Swarovski takes advantage of a strong international traveller base at MCO.

 

Orlando Airport’s stores have long sold merchandise to both international and domestic customers, but clearer nationality and demographic customer profiles are now dictating the product mix and promotions in these stores.

 

The Airside 1 outlet is now catering for more Latin Americans, while Airside 4 focuses more heavily on European travellers – and UK passengers in particular.

 

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