USA. The Board of the Port Authority of New York and New Jersey (PANYNJ) has unanimously passed a motion to allow concessionaires in three of the major airports under its jurisdiction to charge ‘street pricing plus 10%’ for products and services.
The successful motion provides a welcome boost to retailers and food & beverage operators at New York John F. Kennedy International, New York LaGuardia and Newark Liberty International airports, which had been restricted to comparable street pricing despite significantly higher costs than their local counterparts.
The change comes against a backdrop of revised minimum wage rules for airport workers, which will culminate in a US$19 per hour minimum wage at the three airports by 2023. The move towards higher airport wages began in September 2018 after PANYNJ acted to address the rising cost of living and a high turnover of in-airport staff.
During the public consultation period ahead of the wage rise process, airport concessionaires had advised that the existing street pricing policy would “unreasonably limit their ability to cover labour costs that would be increasingly higher than those of merchants located outside the airports”.
PANYNJ appointed InterVISTAS Consulting Group to evaluate the impacts of the revised minimum wage policy on airport concessionaires and make recommendations.
The consulting firm reported that a “street pricing plus” policy (generally 10% above) is a standard operating procedure across most of the busiest 25 airports in the US.
It also found that the cost of running an airport business is higher than the cost of running a comparable off-airport business, largely due to higher security and operating costs.
Following on from InterVISTAS’ work, PANYNJ Director of Aviation Huntley Lawrence made three recommendations to the Board:
- That the Port Authority adopt a “street pricing plus 10%” policy in all existing and future concessionaire agreements at the three airports
- That food & beverage concessionaires be required to provide “value-for-money” options as part of their offerings at the three airports
- That proactive measures be implemented by the Port Authority to ensure that concessionaires comply with the revised street pricing policy
Presenting the recommendations to PANYNJ’s Committee of Operations ahead of a unanimous Board vote in favour, Lawrence said: “Street pricing plus 10% policy grants us two objectives: It ensures that airport customers are not overcharged but also allows the airport concessionaires a reasonable chance to thrive even as they face higher operating costs than off-airport businesses.
“Addressing these concerns is critical to maintaining both the long-term viability of airport concessionaires and continued success in implementing the airport’s higher minimum wages.
“Along with the ability to charge street pricing plus 10%, concessionaires would be required to offer value-based options. This approach would help to develop and maintain high quality concessions programmes and it would help to ensure that customers have access to value for money food & beverage options.”
