This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ Explore more of Starbucks at Starbucks.com. http://www.starbucks.com/default.asp?ci=1015 \----------------------------------------------------------/ Retail Experience at the Airport July 2, 2003 By TERRY PRISTIN BOSTON - A new drugstore called Basics opened here recently with a bit of fanfare, even though its carries the same stock, at about the same prices, as a chain pharmacy - nearly a dozen brands of hand lotion and deodorant in various sizes, for example, as well laundry detergent and household cleaners. What makes Basics stand out is its location, in Logan International Airport's new Terminal E. One of the few drugstores operating at an American airport, Basics is part of Airmall, a shopping center developed for the sleek and glassy terminal by BAA USA, the company that changed the face of airport shopping in the United States in 1992 with its mall at Pittsburgh International Airport. Located in a single terminal, Logan's Airmall, which is not finished, has about a dozen stores and restaurants so far, but its design reflects the new reality in air travel. Traffic is down, but security checks have become more intensive, requiring passengers to arrive earlier. That has increased the amount of time passengers spend in the terminal. Airport retail experts say, however, that most passengers are unlikely to become captive customers until they have cleared the security checkpoint. So unlike Basics, which is near the ticket counters and which officials say caters to the 16,000 people who work at the airport, most of the new stores and restaurants in Logan's Terminal E are beyond the security checkpoint. "Airport retail has changed dramatically," said Thomas J. Kinton Jr., Logan's director of aviation, while standing in front of a 1,400-square-foot Borders book store between Gates 6 and 7. "When you build a new terminal like we've done here, we've tried to move as much of the offering as we could on this side." BAA USA is one of several airport retail developers in a business that has grown increasingly competitive since Pittsburgh's Airmall opened. More than a decade later, Pittsburgh still has the highest sales revenue - $8.63 for each passenger getting on a plane, according to Airport Revenue News, a monthly trade magazine that collected 2002 sales figures from 81 airports. (Duty-free shops are excluded from the calculation because not every airport has one.) Logan, which is not a hub airport like Pittsburgh, reported sales of $6.18 a passenger. Airport retail, which once was little more than newspapers, magazines, aspirin, bland food and burnt coffee, is now a $3.5 billion business, said Pauline Armbrust, the magazine's editor. Airport stores average about $1,000 in annual sales per square foot, about three times the sales at shopping centers, she said. Rents are based on a guaranteed minimum or a percentage of sales, whichever is higher, and vacancies are rare. Today's airports are attracting familiar names - Brooks Brothers, Mont Blanc and Johnston & Murphy - while also striving to offer tourists some local flavor. At Philadelphia International Airport, passengers can pick up a tin of caviar from a local retailer, Caviar Assouline. At Logan, they can order live lobsters from Legal Sea Foods, the venerable Boston-based restaurant chain. The newest retail operations are designed to look like upscale suburban shopping centers. At a number of airports, merchants are not permitted to charge more than they would at a traditional mall. With tighter restrictions on what can be brought on board a plane, shipping is now standard. European airports have long been a magnet for shoppers, so it is perhaps not surprising that some foreign airport operators are now taking their expertise abroad. Terminal E's developer is a a subsidiary of BAA P.L.C., which owns seven British airports, including Heathrow and Gatwick in London. Schiphol USA, whose parent company - Schiphol Group - owns the Amsterdam Airport Schiphol in the Netherlands, developed the highly successful retail operation at Kennedy Airport's Terminal 4 in partnership with LCOR, a real estate developer, and Lehman Brothers. Aer Rianta International, the owner of Ireland's three major airports, is about to open 14 shops at Terminal 4 in a venture with Saveria, an Austrian airport retail company. Vancouver Airport Services, a subsidiary of the Vancouver International Airport Authority, also active overseas. In recent years, however, some developers and managers of traditional shopping centers have also entered the field, including Westfield Concession Management, a subsidiary of Westfield Corporation, the Australian real estate investment trust that operates 108 shopping centers around the world. Westfield developed the stores - but not the restaurants - at Boston Landing, the mall at Logan's Terminal C. A Philadelphia-based retail management company, Redwood Advisory, is a partner in the shopping center at Philadelphia International Airport with Marketplace Development, a Boston-based company that specializes in airport retail. Some airports today still lease space directly to their concessionaires while others rely on "master concessionaires," like HMS Host, formerly known as Host Marriott Services, which operates most of the food-service outlets at Logan's Terminal C. HMS Host, a subsidiary of Autogrill, an Italian company that runs highway rest stops and airport restaurants, has created proprietary brands like Simply Books and Home Turf Sports Bars and forms joint ventures with other partners. But larger airports are increasingly forming partnerships with development companies that invest in the retail operation but have no stake in the individual stores. Under this model, an airport has to pay the developer, but it also stands to gain more from the outside company's relationship with high-profile retailers that can generate higher sales, said Sheldon A. Klapper, the president of Center for Airport Management, a research and consulting company in Portland, Ore. "The airport is saying, `I have to pay a fee I never had to pay before,' " Mr. Klapper said, " `but then I don't have to staff up and I can generate more sales that I would have with the stores that I could have brought in.' " The new emphasis on shopping after having passed through security has posed a challenge for shopping centers that are largely in areas preceding the security checkpoints, like Westfield's Terminal C at Logan, said George Giaquinto Jr., Westfield's director of airport development. "It is much more difficult to convince people to take presecurity space, particularly national tenants," he said. But he said these misgivings are often unjustified. Westfield's retail operation in areas in front of the security checkpoints at Washington's Ronald Reagan National Airport has not suffered, he said, because the area drew experienced passengers who knew just how much time they actually needed to pass through security. At Kennedy Airport's Terminal 4, passengers' fears are allayed because they can see the security line, said Victor van der Chijs, the president of Schiphol USA. But because some people "just want to cross security," he said, the company plans to add retail space on the other side. The Philadelphia airport's Marketplace is accessible to passengers at four of its six terminals, but even so, sales at its shops, which are related to the number of travelers, have declined as much as 8 percent, said Clarence A. LeJeune, the general manager of the shopping center. By contrast, he said, the restaurants have experienced sales increases in the double digits as customers while away the time before their flight. As airlines reduce or eliminate food services, airport restaurants are filling the gap by offering "grab-and-go" meals, said Brett McAllister, a principal associate at Leigh Fisher Associates, a management consulting company specializing in airports. But in the ever-changing field of airport retail, the carriers themselves are now also beginning to sell food. "That's competition that wasn't there before," he said. http://www.nytimes.com/2003/07/02/business/02PROP.html?ex=1058152561&ei=1&en=02a75bbc018084ec --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! Click here: http://www.nytimes.com/ads/nytcirc/index.html HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company