If you’ve ever been to an airport (and if you’re reading this, I assume you have), you know that food and beverage (F&B) at airports tend to cost more than they do “on the outside.” That’s why it’s ranked as one of the things you should never buy at airports (here are some others).
How expensive? Well, last year, restaurants in the three biggest airports in the New York City area, John F. Kennedy (JFK), LaGuardia (LGA), and Newark-Liberty (EWR), were all caught charging between $23 and $27 for beers. Thanks to a whistleblower, they got in trouble for that and supposedly aren’t charging as much now.
Beers at NY-area airports aren’t the only things that cost a lot, though. With few exceptions, virtually any food or beverage item you buy at any airport across the country, be it at a restaurant/bar, quick serve, or magazine/bookstore, will cost more than if you purchased it outside the airport.
I always figured airport facilities charge more simply because “they can.” You’re a captive audience, so they charge as much as they think they can get away with. Turns out there’s a little more involved.
How airport F&B costs are made:
Who decides how much F&B will cost at the airport & how they decide that number
Before we can really understand why airport F&B is so expensive, it helps to have a better grasp of who’s in charge of setting the prices. It may not be who you think it is.
Airport restaurants are owned by business owners (some are small and local, some are part of large concession corporations) who lease space from the airport (this is part of how airports make money. These are other ways). So you’d think these companies are the ones who set the prices. You’d also think they’d be going for the highest price they can get away with, as I mentioned above.
As it turns out, many airports do have restrictions on pricing for the companies that have businesses in their buildings. It’s called “street pricing.” This ensures that vendors don’t charge more than a certain percentage above what they would for the same products sold outside the airport (that’s what was supposed to be happening in NYC, BTW).
But if there’s no oversight (like what happened in NY), or the percentage is high, or if there are no restrictions, BOOM, you’ll be paying more for a bottle of water than what a whole case would cost at Sam’s Club. So you can blame the airports for that.
And then there’s rent…
Rent & commission?
A storefront in an airport doesn’t pay rent the same way you pay rent for an apartment, where they tell you how much the lease is per month and you agree (and move in) or not. And if you ever worked it retail, it’s not really like how that works, either. It’s really its own animal.
Instead of applying to operate in a commercial space via a property management company (like a business would do for, say, a strip mall), airport vendors must submit detailed Requests for Proposals (RFPs) (here’s an example of one, from 2017) An RDF essentially describes the vendor’s intended use of the property. Then, a designated committee selects vendors based on their business needs (i.e. a sit-down restaurant closed up so they want another sit-down place, not quick serve) and preferences (i.e. local, woman-owned, minority-owned, etc.).
If the airport’s committee decides to go forward with a particular business, they’ll receive a proposal from the airport that outlines a lease agreement. These lease agreements usually require a monthly rate plus a commission of sales. Using the commercial space rent at Portland International Airport (PDX) from 2019, they had a minimum annual guarantee of $80 per square foot per year or 10-18% commission on sales, whichever is greater.
According to a Portland commercial real estate report, the average cost of Class A rental space in the Portland, Oregon area was, at the time it was published (date not immediately offered but it looks like it from roughly 2022) $30.39 per square foot per year. So you’re looking at commercial space rental at airports being more than double that (probably more, since the example PDX rental was from 2019), with no cap on the price.
So yeah, for a food vendor, rent and commission alone at an airport is a significant cost. But there are other costs involved, too.
Food and supplies delivered to airport vendors on the secure side often charge more because of the time and inconvenience of delivering to them. They have to deal with operating procedures related to security (for example, each person they intend to go on the secure side of the airport will need to be vetted), limited delivery windows, and the extra time involved in making each delivery (i.e. trucks need to be searched before they enter secured areas of the airport, they need to drive further to get to the secure area, etc.
Storage space at airports is not as plentiful as it is at standalone stores. Whereas you may have 1/4 to 1/3 of a store’s total area for food & equipment storage, you don’t have that luxury in an airport space. So F&B vendors may need to rent storage space elsewhere, which is an extra cost. Plus the time of going back and forth to get said supplies.
Cost of securing employees
Each employee who will be working airside will need to be vetted to make sure they’re not a security risk – that’s paid for by the vendor. And remember how high turnover can be, especially at places then to pay lower rates…that’s a whole lot of background checks.
Employee parking becomes an added cost, as well. Airports don’t necessarily allow vendor employees to park for free, and employees generally don’t (or shouldn’t, if their bosses want them to stay. Remember that turnover rate) have to shoulder than burden – their employer pays for their employees to park on property. That’s another expense.
That’s a lot of expenses!
So yeah, between expensive airport rent fees & commission, plus higher delivery fees, plus having to pay extra for storage space, on top of the costs of security employees, and potentially giving them the benefit of paying for their parking, that’s quite a lot of costs.
I’m not saying I blame Hudson News for charging $4 for a bottle of water. But at least we know why they do.
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