By Izzy Kharasch.
“Trapped in a world they didn’t create…” That’s a good description of us when we are in airports. You and your clients have probably spent a good part of the year in airports. How do you feel about this?
Glass of wine? $19. Hot dog with fries? $15. Sometimes you are paying twice what you would pay for the same product in the outside world.
On almost any weekday, you can find me in an airport somewhere in the U.S., and sometimes I just have to eat … something. Recently, I had been at four airports in 10 days, and my stomach was growling. While cooling my heels at Midway, I decided to get a tuna sandwich and a Vitamin Water. They cost me over $18! At a local grocery store this would at most be $6.
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I received a sandwich on very dry bread with no more than three ounces of tuna and a 12-ounce drink. The total cost to the operator was probably less than $3. Infuriating, right?
Is it price gouging? Maybe. However, there are other factors that cause airport food and beverage prices to be higher than they would be a half-mile down the road.
Rent: The rent for a business that wishes to operate at Midway or O’Hare is $55 a square foot, which goes up by 3% every year, according to the CDA website. Meanwhile, the average commercial space just outside O’Hare in Rosemont is about $21 a square foot.
Commissions and fees: In addition to the rent, businesses are required to pay the greater of $100,000 (minimum annual guarantee) or 15% of sales. For annual sales of $800,000, the business is on the hook for $120,000. There are also marketing and central distribution fees.
There’s more. The business pays leasehold taxes to Cook County, utilities and six months of the minimum annual guarantee as a security deposit. Building out the space is running about $1,700 per square foot, again according to the CDA website.
Delivery fees: Food, equipment and supplies have to be delivered in the airport, past security, which can be a headache. This can cause distributors to charge higher delivery fees.
Employee parking: It costs $100 to $350 a month for an employee to use one of the O’Hare parking lots, a cost shouldered by the employer. It’s about $20 a month at Midway – if space is available.
Wholesale costs: When a wholesaler sees that a restaurant is operating in an airport, they assume it’s making big profits and may price their products higher than they would for other locations.
Even with all of these costs, the business is expected to offer prices that are competitive with those you’d find in downtown Chicago, not counting entertainment venues. It often doesn’t seem that way, but those are the rules.
We are captives
There is a segment of customers in the restaurant/hospitality/retail industry called the captive customer, and this applies to stadiums, casinos, cruise ships, resorts, convention centers and amusement parks, in addition to airports.
What all of these have in common is that you, the guest, have no other options for food and beverages when you are there. A glass of beer that would cost you $6 at your local bar costs $10 to $15 at many stadiums, and if it’s a major game, it could be more.
A hot dog that costs you $3 to $5 in a city might cost you $8 to $10 at local stadiums. This means if you take your family of four to a professional baseball game, the price for your meal (hot dog, soda, fries) will run about $20 x 4 = $80! If you bought this meal at a local vendor in Chicago, the total at the top end would be $10 per person for a total of $40.
What can we do?
We can pack our own food to avoid airport prices. You can’t bring liquids through security, obviously, but you can fill a water bottle afterward or buy a beverage. You can also bring solid snacks like sandwiches, protein bars, granola, candy, fruits and veggies. (If you travel with children, you probably already do this!)
It’s tempting to sit down at an airport restaurant or bar to have an adult beverage while waiting for your flight, but those drinks will be expensive. Better to wait until you’re at your destination and stop at a non-airport restaurant.
Airport and stadium food prices are rising and certainly outpacing inflation, making travel and entertainment ever more expensive, even with “street-pricing” guidelines. But don’t yell at the employee behind the counter – it’s not their fault.
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Izzy Kharasch, www.HospitalityWorks.com, is a consultant who flies just about every week to see clients around the country. He would like to hear your comments on this topic or assist you with any restaurant or business clients.
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Tags: airport, economy, inflation, Payroll, travel costs, travel expenses
