Three Questions: Joe DiDomizio, CEO, Hudson Group

Editor’s note: Hudson Group, a subsidiary of Dufry AG, issued an initial public offering on Thursday, Feb. 1, in a move that raised $749 million for the company. The photo above shows Joe DiDomizio, CEO of Hudson Group, and his father Mario DiDomizio, Hudson News founder, at the New York Stock Exchange. ARN’s Carol Ward spoke with Joe DiDomizio about the company’s plans going forward.

Ward: What are your key reasons for going public?

DiDomizio: The main reason is that it provides for financial and operational focus and flexibility. For the past 10 years we’ve been part of Dufry, and in fact, we operate the North American business, including all duty free, specialty retail, QSR and travel essentials stores. Since North America is primarily driven by the duty-paid business, this IPO [allows for] a great extension of what we currently operate. And as a result, we will continue to be very integrated with Dufry.

Ward: I know Dufry CEO Julian Diaz in the recent past signaled interest in expanding Hudson’s food and beverage business in North America through acquisitions. Will this money be used to further that goal?

DiDomizio: I would look at it this way. We have so much more runway to grow in travel retail in North America. Even though we are one of the largest travel retailers in the industry, we have about 37 percent of market share in a $4.5 billion industry. We have an opportunity to grow in airports we’re already in, and there are plenty of new concession opportunities that we’ll be very competitive for. First and foremost, that’s our focus.

Likewise, with respect to the retail business that we already operate, there are other types of travel concession opportunities in similar spaces. For example, we just opened at the Hard Rock Hotel & Casino in Las Vegas. This offers us a customer base very similar to the airport audience. The customers are guests with high propensity to spend, and the business is based on needs and impulse. We also operate in tourist destinations – places like NASA Space Center, the Empire State Building, the United Nations – all of which are very similar. These are souvenir-based, needs-based, impulse-based businesses where we can transport the core suite of services that we already provide into a similar facility outside of airports.

Another opportunity for us is in QSR-types of services and restaurant facilities – we already operate Dunkin’ Donuts and Jason’s Deli, for example. We’re currently expanding our proprietary “Traveler’s Best” program in all the Hudson stores – including beverages, sandwiches and salads.We’ve created our own recipes and our own branding, and we have some great providers around North America who can really help service this side of the business for us. We expect to gradually shift, but I think we have so much more runway to grow in our existing core business, and that’s going to be our focus first and foremost.

Ward: Does this give you more leverage to bid on larger, master-concessionaire or P3 projects in North America, similar to your contract at Midway Airport [(MDW)]?

DiDomizio: Midway was a great opportunity for Hudson Group. We took a very, very qualified food and beverage operator in SSP [America] and married it with the best travel retailer. We were able to focus on our core competencies. That model worked out extremely well for us. It happened to be what the city of Chicago was looking to achieve, and we’ve delivered that in the short term. This program is going to evolve once it’s fully complete over the course of the next couple of years.

We expect to pursue master-concessionaire opportunities as we grow, and we’ll need to make sure we have those competencies on board as we evolve. There are so many opportunities in airports – and there are terminal expansions and new terminals popping up – so it will be important to review each opportunity on a case-by-case basis.