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Flights of fancy

(03 November 2005 00:00)
plane at airport

Restaurants and cafés are pushing into travel sites but, let's face it, airports surely must have the most captive market. Statistics show that once passengers reach the departure lounge, they face an average of one hour and 20 minutes' wait before boarding a plane (and that's without delays).

Compare that with the mind-set of a motorway traveller who stops the car only for petrol, toilets or a quick meal. Or the time-pressed rail commuter grabbing a take-away bite or coffee before jumping on to a train.

Not only are the dynamics different, but the way the markets are performing is different, too. Airports are changing and growing at a rapid rate, while business flow at railways - and motorway service areas (MSAs) in particular - remains relatively static.

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So here's a great opportunity, boosted by the fact that airports are seeking new blood. Compass's SSP-UK and the Restaurant Group have traditionally held a high volume of concessions at airports, but this is changing.

At BAA, Colin Hargrave, managing director UK airport retail, confirms that the trend in recent years to bring in high-street brands will continue. This also reflects its retail offer, which has also moved towards high-street names, ranging from mainstream to luxury. "We've moved from institutional operations with specific airport offerings," he says.

To this end, the BAA team is checking out all concepts on the high street for new talent as well as using a survey of 250,000 customers. Among the niche players with which it has struck a deal are gastropub Geronimo Inns, which opened the Tin Goose in Heathrow Terminal 1 in May, Yo! Sushi at Gatwick North, and Lovejuice at Stansted.

"Air travel is a growing market," says Hargrave. "We know our customers well and can put more products in to grow the [catering] business."

Who's doing what?
Airports are virtually 24-hour, seven-days-a-week operations, with most flights before 10am, so all-day food - and breakfast in particular - is crucial. This is where some concepts, such as Yo! Sushi, have had to rethink their menus.

Meanwhile, Chez Gérard at Heathrow Terminal 3 and Gatwick's North Terminal is BAA's bid to tap into the more upmarket table-service dining marketplace.

Caviar House has been running its Seafood Bar operation for a decade, serving seafood and Champagne in a stool and bar area to passengers who want quality and fast service.

World brands such as Starbucks add an international flavour to terminals where foreign travellers might not recognise home-grown brands. Indeed, just as the coffee market is burgeoning on the high street, it's also thriving in airports, attracting Costa Coffee, O'Briens and Caffè Nero, which opened its first Gatwick store last year. The company is also building on its relationships with BAA, adding sites at Heathrow airport.

Pub operator JD Wetherspoon's recent opening at Liverpool's John Lennon airport typifies many operator problems in having limited kitchen space, so the menu is confined to sandwiches and panini. People stay about 45 minutes - less than in a regular pub - but turnover is fast.

The pubco is applying for 24-hour licences in pubs at Gatwick, Heathrow, Stansted and Edinburgh airports. Those sites are pretty much 24/7 operations, so arguably present a good opportunity.

Operators traditionally hold seven-year contracts. One problem with this is that some fail to invest towards the end of the tenancy and units start to look tired. The contract length is also a huge challenge to the BAA team, which has to identify brands that will still be growing several years down the line. Catherine Peachey, head of F&B at BAA Retail, does this by sifting through 30,000 customer feedback reports a year, using mystery shoppers and through a category development manager "who looks at what's hot and what's not".

Operators say there's a high cost to operating a 24-hour operation in the confined space and security-conscious environment of an airport, but the volume of trade means the rewards can be high. According to Hargrave, the most successful operations are seeing
takings up to three or four times higher than in the high street.

He cites the Starbucks outlet at Stansted airport as the busiest Starbucks in the world, and says Bagel Street at Heathrow Terminal 3 sells the most bagels in the UK. At Terminal 1, Geronimo Inn's Tin Goose serves 5,000 cups of coffee a week - more than all its other 15 pubs combined.

Restaurant operators derive another benefit from airport sites - they have access to a lot of consumer information. BAA can provide figures on exactly how many potential customers will be in the airport at various times. This is a big advantage over shopping malls, railway station caterers and MSA operators.

"We can segment who their customers are," says Hargrave. "And across the 13 terminals, we can segment again."

So it seems there are increasing opportunities for a range of caterers. Each airport has different customer profiles and therefore different catering needs. Gatwick South, for instance, is a holiday terminal, with catering demands from families, whereas Heathrow Terminal 1 has more business passengers, who often check in at the last minute and have less dwell time.

Heathrow Terminal 3 deals with long-haul flights. Some 30% of passengers have to wait up to four hours for transfer flights and so want a sit-down option such as Chez Gérard. Stansted has more European low-cost flights, so there is more demand for take-away food that passengers can carry on to the plane - cue operations such as Pret A Manger.

The costs and the contract
Some operators claim contracts are hard to negotiate at airports. There's certainly a lot for operators to weigh up - not least the high concession fees, which at BAA are based on a percentage of turnover. This, claims BAA, encourages both parties to develop the business and protects against downturn.

On top of this, health and safety, fire and security rules make fit-out costs expensive, particularly where units are in confined spaces. BAA recognises that the square footage and capital needed to fit out F&B outlets are greater than for retail, hence the seven-year contracts rather than the three or four years allotted to shops.

Staff wages can soar, too, because trading times are longer, although this is offset against higher turnover. The busiest times are 5am-10am, so staff are employed during antisocial hours and have to be shipped in from towns, which are inevitably some distance from the airport. If that's not enough to worry about, staff security checks are long-winded and involve extra administration.

Bear in mind that the consistency of quality and pricing of high-street brands is being used partly to reassure passengers, so caterers cannot charge more than on the high street.

However, despite the threat of terrorism, people are travelling more and more, so airport catering is a growing market. Customer volumes can generate huge turnover of up to three or four times more than the high street.

Future opportunities
Construction of Heathrow's £4.2b Terminal 5 is well past the halfway mark. The first phase is due to open in 2008 and it will ultimately increase the airport's capacity by about 30 million passengers a year. A further £3b will be invested in the four other terminals to improve facilities.

Hargrave says the new building has presented an opportunity to design catering units that fit the terminal and those designs will take into account more up-to-date cooking methods and consumer demand for healthier food, such as steam-heating and microwaving food that is prepped off-site.

More adventurous cooking methods won't happen, however. "Open flames are unlikely in any terminal," says Hargrave. "If anything, health and safety is getting tougher rather than softer."

Some observers predict that although it would be a great opportunity to be radical, at least 85% of space will follow the scripted format of brands. In response, Hargrave says: "We will continue the development of the strategy that has been successfully implemented in the last three years and allow for some of the space to be used in a more radical way - with the evolving global eating trends and reflecting changing passenger profiles."

Needless to say, caterers are clamouring for concessions in the new terminal, but Catherine Peachey, head of F&B at BAA Retail, says talks will not take place until early next year.

Other airports with space include Edinburgh Terminal 3 and, potentially, Gatwick South, she adds. Stansted will have space when existing contracts expire.

Several UK airports are scheduled for expansion or upgrade in the next few years and the UK's first new international airport for 30 years opened in April. Doncaster Robin Hood will handle 2.3 million passengers a year by 2014. Plans have also been announced for development at Southend airport to launch international flights handling one million passengers a year.

Case study - Lovejuice

Founder: John Heseltine
Type of operation: Freshly squeezed smoothies and fruit juices
Sites: Gatwick, Manchester and Stansted airports; Bluewater and Brent Cross shopping centres
Turnover: £3.5m this year
Staff: 12 per seven-day shift per site
Plans: To open seven more before Christmas, including two more at Manchester airport, the Bullring in Birmingham and Meadowhall near Sheffield
Average size of site: 300sq ft

Why do you focus on airport and shopping centre locations?
Partly the footfall and partly because they're air-conditioned environments, which helps cancel out the effect of the weather. People won't buy fruit juices on a cold high street if it's raining.

So you're not interested in high streets?
I don't think it's ready for juice and smoothies. The high street is very fickle and rents are expensive with long leases, which can be a risk for a young company. You also have more competition with the operator next door, which might be a big company with more experience.

Which of your locations are more lucrative?
On a daily basis we make more at airports, while in shopping centres, Saturdays can be manic. Shopping centre customers have a purpose, which is to shop, so they're more time-poor, plus they have more choice. At airports people are either in holiday or business mode, so have time and money. At Gatwick and Manchester, we're going to trial a range of snacks - which we'll call Lovefood - including soft pretzels and soup.

Which location has the most problems?
Airports have far more regulations than shopping centres. The constancy of business in itself brings problems because there can still be an influx - say at half-term - and you need to build that into your supply system. Our first ever site was at Stansted airport in 2003 and it was a baptism of fire. Business was so good that we ran out of oranges within a few hours and because trading hours are 4am-11pm, I slept in a van outside for the first two months. In short, the logistics and cost of fit-out (including sprinklers and alarms), health and safety, and getting supplies are difficult. You also have to find people who will get up at 3am and work long and difficult hours for an average wage.

Any tips for small chains considering expansion?
If you want an easy life, don't go into airports, but the trade-off is that it's more lucrative. The airport operators want people who can fit into an airport but bring a flavour of the high street, so sell them the bigger picture about your expansion plans. Think very carefully and be well prepared - or slightly mad.

Case study: Geronimo Inns

Geronimo Inns, the 15-strong London-based gastropub chain, heralded a new style of operator when it opened the 4,100sq ft Tin Goose at Heathrow Terminal 1 in May. The bar, which is located airside, has a "retro-traveller" decor, devised partly by a former designer at Ralph Lauren.

Rupert Cleveley, who founded the group, says its airport menus are shorter than on the high street and include a full English breakfast and Greek yogurt and raspberry compote to cover the busy period between 5am and 10am.

To get an idea of how busy this period is, the Tin Goose serves 60% of its meals before midday - and 70% of those are full English breakfast. Indeed, although it's a pub, dry sales account for 55% of business, with average spend £10 a head.

At the planning stage, Cleveley was aware speed and service would be the key issues, so the design layout took flow and volume into account. There's seating for singles - with call buttons and table service - and for larger tables there's immediate waiter service. Bills are brought immediately to avoid delays.

 But although business was brisk from the start, with 4,000 covers a week served within the first three months, the enterprise has not been without its challenges. For example, business is constant throughout the day, with no peaks and troughs. Also, Cleveley says it can be difficult to find staff with five years' worth of references, as stipulated by BAA.

The site cost £900,000 to develop and was funded by bank debt and new equity. Next year the group is expecting turnover to be £11.5m, rising to £20m in 2008.

Airport statistics

  • 140 million people pass through UK airports a year.
  • UK aviation is a growth area, generating 370,000 jobs. 
  • Foreign tourism is worth £12.5b a year to the UK economy. 
  • The catering market at UK airports is believed to be worth about £500m a year. 
  • At BAA's terminals alone, some 10% of retail revenue is accounted for by catering. 
  • Passengers themselves are believed to be factoring in more time airside because of the increase of shops and F&B outlets.
  • Starbucks at Stansted airport is the company's best-performing outlet in the world.

Airport Hot Spots

  • Heathrow Terminal 5.
  • Other BAA airports with space include Edinburgh Terminal 3 and Gatwick South. Stansted will have space as some existing contracts are due to expire.
  • The UK's first new international airport for 30 years opened in April. Doncaster Robin Hood will handle 2.3 million passengers by 2014. 
  • Several UK airports are due for expansion or an upgrade in the next few years and plans have been announced for the development at Southend airport to launch international flights handling a million passengers a year.

How do I get space?

Catherine Peachey, head of F&B, BAA Retail advises:

  • You need a sound business case.
  • Where possible, you need a proven concept.
  • You must show professional attitude to health and safety, food hygiene, training and customer service.
  • Prove that you could rise to the challenges of working in an airport.
  • Demonstrate that the business would be sustainable and grow with us.
  • Work with the BAA team, who would help with staff motivation and retention, promotions and maximising sales.

Source: Caterer & Hotelkeeper

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5th September 2008