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ARN News Flash | 5.18.07

DTW’s RFP Draws Concern from Potential Proposers
Certain provisions of Detroit Metro Wayne County Airport’s (DTW) latest RFP for food and retail opportunities has drawn concern from several potential proposers. Several concessionaires expressed their puzzlement over specific requirements in the document, mainly how the airport has devised its minimum annual guarantee (MAG) and the condition that the rent for each opportunity within the same package must be bid separately.

Several people who attended DTW’s pre-proposal meeting, which took place last week, took issue with the airport’s proviso that each operator pay a set “MAG” each month but there would be no reconciliation at the end of the year, in essence making it a minimum monthly guarantee. All those who spoke to ARN requested anonymity. Here are some of their comments:

“This is the antithesis of partnership thought. It is incredible that they are trying to rename the MAG nomenclature. This is really a minimum monthly guarantee, not an annual guarantee. It is paid monthly and there is no reconciliation at end of year.”

“The risk they have is that this will cause people to reduce the annual rent they’re willing to guarantee. It will actually have the opposite effect for which they intended.”

“The airport appears to be really for themselves and not looking at the rest of the industry to see the kind of deals that are working with tenants.”

Several potential proposers also said formulating a rent bid for each concept in the same package is an awkward and challenging exercise.

“For that kind of linear terminal which is about a half mile long, projecting the financials is problematic. If I’m at gates 30-35 and the airport decides to move my flights to gates 1-5, I’m in total trouble. There would be no pass-by traffic.”

“Only one entity can win but we have to bid on each store separately, we can’t bundle the MAG. If I’m bidding on a news café© or news store by itself the percentage rent and business formulas are different for all those. If I could bundle the rent, I can hedge in higher profit and operate higher MAGs. I walked away this thinking the airport is trying to get us. All this makes for a risky proposition.”

“They’re talking about a brand new terminal, with no comparison of existing business. So, all of our projections are very hypothetical. We are going to have to discount our rent and in a sense look at the sensitivity of each opportunity. What if our forecast is 10% wrong, what does that mean? It may end up resulting in a lower blended rent for them. This is a competitive process but nobody likes to lose money.”

DTW officials could not be reached for comment but ARN will be following up with the airport’s side of the story in an upcoming Newsflash.

SSP Appoints New CEO for Creative Host Services
SSP has announced that Les Cappetta will become CEO of its US division, Creative Host Services (Creative Host). Cappetta is currently executive vice president business development, design and construction for HMSHost and will assume his new role at Creative Host on June 4, 2007. He will be based at the company’s main office in Northern Virginia.

Les’ main objective will be to formulate plans with his US team to increase the presence of SSP within the North American market. “SSP clearly has a strong brands and concepts portfolio. I believe that the company has the commitment, tools and resources to grow effectively in North America. I’m really looking forward to working with my new colleagues in the US and abroad to help further our ambitious plans for expansion in the US and Canadian markets,” says Cappetta. “North America is a huge market – forecast to account for one quarter of all the world’s passengers by 2025. There is absolutely huge potential for growth and it’s my aim to ensure that Creative Host Services is positioned to optimize these opportunities. With the might of SSP behind us, I feel that Creative Host Services has a very exciting future ahead of it.”

Company executives abroad have embraced their new hire. “Les has a wealth of experience in our business. He has an excellent track record in winning contracts, developing strong relationships with clients, and optimizing the value of brands and concepts,” says SSP CEO Andrew Lynch. “With his strong leadership skills he is highly respected across our industry. Les is also appointed to the SSP Executive Board where I know he will also make an invaluable contribution to the development and implementation of the SSP Group strategy. We are delighted to be welcoming him to the SSP management team.”

Cappetta has been a key member of HMSHost’s senior executive team for the past eleven years. He first joined Marriott in 1984 and later transferred to HMSHost with the split into unique business lines in 1996 before assuming his current role. He spearheaded the growth of HMSHost’s North American concessions business. During the time he led development, sales grew from $1.3 billion in 1996 to $2.3 billion in 2006.

SSP is a provider of food and beverage services in travel locations worldwide. It operates a broad portfolio of international and national brands as well as its own tailor-made concepts in 27 countries around the world.

Creative Host Services runs 170 food and beverage outlets at 39 airports across the United States, and has over 20 years of experience in the travel market. In 2006, it merged with SSP.

Hudson Group Wows Customers with Airport-only Promo
With a unique marketing technique, Hudson Group has given its airport customer base a good reason to shop at its co-branded CNN airport news stores.

Beginning with the May 8 release of the paperback edition of Anderson Cooper’s Dispatches from the Edge: A Memoir of War, Disasters and Survival, customers buying the book in airports will receive a special edition available only in Hudson News and Hudson Booksellers while supplies last. Hudson partnered with CNN and publisher HarperCollins to offer the special edition, which includes a bound-in DVD featuring an exclusive interview with the news anchor in addition to video footage from Cooper’s Reporter’s Notebooks.

According to Laura Samuels, Hudson’s director, corporate communications, the deal comes a year after Hudson and CNN entered into a partnership to develop and operate exclusive co-branded newsstands in airports across North America.

Samuels says there could be similar events in the future but no deals have yet been signed. “We have had such a tremendous response to it I’m sure it won’t be a last, and we’ll certainly consider doing something similar in the future. There are a lot of blogs about Cooper out there, and he’s such a traveler and that seems to resonate really well with the traveling public.”

In a press release, Sara Hinckley, vice president, book buying and promotions for Hudson Bookseller said, “We anticipate that this book will be one of our top-selling paperbacks this year, and adding the free DVD is a great way to reward Hudson customers in a unique and meaningful way.”

Samuels says the deal came about when Hinckley and CNN “were looking for a way to light some fires with the paperback release. We definitely are very excited about it. CNN did a promo video on it with Anderson Cooper and used our airport stores in the video, which we will run a few more days in our stores.”

RFPs on the Street
jetBlue to Issue RFP Next Week
jetBlue has completed its RFP for retail & food service in Terminal 5 at John F. Kennedy International (JFK) and will issue the document next Wednesday, May 23, 2007, according to Raymond Smyth, supervisor of concessions for jetBlue. All interested parties that have inquired about the opportunities will be contacted via email with a link to the RFP, he says. “Everyone that has already contacted me should receive an email with a link to the RFP. For those interested but have not gotten in touch with us, please email me and we will put you on a distribution list and email you the information.” Smyth’s email is: [email protected]. His phone number: 718.709.3114; fax: 718.709.3602

Cleveland Seeking Developer
An official of Cleveland International has confirmed the airport is seeking a developer for its concessions program and will be releasing the RFP today, Friday, May 18th.