LAWA Redevelopment

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					   Concession Redevelopment
Los Angeles International Airport

 Board of Airport Commissioners
           May 17, 2010




                                    1
A National Context – Airport Concession Performance

   •       LAX concession performance is average
   •       Given its demographics, long-haul flights, and international passenger mix,
           LAX should be among the top performers.

                                  Concession Spend Rates for Large Hub Airports
                                   Concession Spend Rates for Large Hub Airports
                                            Food and Beverage and Retail Only
                                             Food and Beverage and Retail Only
                                                         2008
                                                          2008
 $14.00
  $14.00


 $12.00
  $12.00


 $10.00
  $10.00


  $8.00
   $8.00


  $6.00
   $6.00


  $4.00
   $4.00


  $2.00
   $2.00


  $-
    $-     FLL SLC ATL SAN CLT CLT MDW DFW DEN IAD PHX ORD PHL TPA LGA BWI LAX MSP DCA DTW MCO SEA MIA LAS BOS EWR SFO JFK PIT
            FLL SLC ATL SAN CLT CLT MDW DFW DEN IAD PHX ORD PHL TPA LGA BWI LAX MSP DCA DTW MCO SEA MIA LAS BOS EWR SFO JFK PIT
                                                                                                                                  2
Historical Context - Change since 1998


   •   LAX lags other large airports in growth in spend rate over the last decade
   •   Without a modified course of action LAX will likely continue to fall behind


                                  Change in Spend per Enplaned Passenger
                                                1998-2008
                                                                                                              164%

                                                                                                       145%


                                                                                         122%   124%
                                                                      112%   112% 114%
                                                               106%
                                                        102%
                                            96%   97%
                                      90%
                                79%
                    72%   74%
        64%   66%




        MCO   ATL   LAX   DEN   PHX   BWI   JFK   CLT   IAD    SEA    BOS    PHL   ORD   IAH    DFW    EWR    MSP




                                                                                                                     3
Future Potential – Improve Passenger Satisfaction and Revenue

                                                           Potential Sales Increase to LAWA from
                                                          Food & Beverage and Retail Concessions
• Passenger Satisfaction -                                      -- Excludes Duty Free Sales --
  Higher sales/passenger is the
  best available metric                          Potential increase from program
                                                 improvements


• Sales Potential –                              Current sales (including inflation for
                                                 2014)
  Operating at the higher end of                                                                               $108,009,240
  airport industry scale, LAX                                                                 $54,004,620
  should (x-duty free sales):
   – Realize $54m-$108m in
     additional annual sales
   – Results in $500m-$1.0b in
     additional sales over the life
     of the concession
     agreements                                                     $342,029,259               $342,029,259     $342,029,259

                                        $278,101,087
• LAWA Net Revenue -
  Improving concession fee
  structures will determine how
  much of the potential upside
  LAWA would receive

                                            2008                 2014 (CPI only)          2014 Low Range      2014 High Range
                                      Note: No increase in passenger enplanements assumed in figures.
                                                                                                                                4
  LAX Terminals – Different Needs and Opportunities

                                Passenger Terminal Concourse Condition and Appearance
                  Bad                                                                                      Good
         Least
   Constrained
                                                                                                        BW
                        T3                        T2
                                                                                               TBIT
                                                                                               Renov

LAWA Ability                 T1
  to Flexibly
 Re-program
    Terminal
       Space                       T6



                                                                            T8
                                                                     T7              T5
          Most
    Constrained                                                                               T4


                             = airline-developed terminal with concessions and public space reverted to LAWA

                             = LAWA-managed terminal                                                              5
Business Models Considered

      Direct Leasing            Terminal Commercial                Leasing Agent/Manager
   LAWA leases through               Manager                        Provides leasing & re-
   RFP process, oversees         Provides vision, leasing &             leasing, design
       tenant design,               re-leasing, design,             coordination, schedule
  construction, and tenants      construction, and tenant             compliance, tenant
                                      management                         management




        Terminals                      Terminals                      Bradley and
      4, 5, 7, and 8                 1, 2, 3, and 6                   Bradley West

 Changes since last update
 • Terminal 2 transaction
     –   Lease premises no longer constrained by LAXTWO lease
     –   Location of international airlines more in LAWA control
 • Expanding role for TCM in Bradley West construction
 • Management preference to have a more efficient competitive process
                                                                                             6
Planned Approach

  •   Employ TCM model for all remaining terminals
       –   Simplifies and expedites the competitive process

  •   Establish two opportunities:
       1. Bradley + Terminal 2 + Encounter
       2. Terminals 1, 3, and 6

  •   Why two?
       –   Construction/redevelopment requirements of Terminals 1, 3, and 6
       –   International versus domestic passenger mix in packages
       –   Minimizing effects of future airline relocations, both known and unknown
       –   Facilitates competition and creates more opportunity

  •   Run parallel competitive process for the two opportunities
  •   Constrained schedule:
       –   Construction deadlines for Bradley West
       –   Expiration of existing agreements in Terminals 1, 2, 3, 6
                                                                                      7
Proposed TCM Scope

  •   Required and Optional
      –   Design and construction of terminal improvements, including concession shell space
      –   Funding improvements
      –   Developing phasing and transition plans
      –   Managing initial and recurring subtenant leasing process
      –   Managing construction by subtenants
      –   Developing opportunities for subtenants providing the following services
           •   Food & beverage, retail, free wifi, vending, ATM, currency exchange, business
               services, per-use and common-use lounges
  •   Excluded
      –   Advertising/media
      –   Self-operation of concession areas
      –   Subleasing to duty free operations and pay phones (reverts to LAWA)
      –   Luggage carts

                                                                                               8
Competitive Process - Four Stages


   1. Qualify
       •   RFQ used to start process
       •   All qualified firms that respond would then be asked for proposals
   2. Propose
       •   RFP would require LAX-specific conceptual design, marketing plan, ACDBE
           program, transition plan, financial proposal, etc.
       •   Responses would be ranked by staff evaluation committee
   3. Negotiate
       •   Defined negotiation window for highest ranked TCM, with focus on finalizing
           development plan and investment requirements
       •   #2 ranked firm would be on stand-by, as would others, should initial
           negotiations fail to close a deal
       •   Completed negotiation and executed contracts to BOAC and City Council
   4. Implement
       –   Work with incumbent operators in each terminal after award
       –   Commence process for identifying concession concepts and TCM’s subtenants
       –   Undertake construction
                                                                                         9
Schedule



  •   Preliminary Schedule
      – Qualifying Stage – June
      – Proposal Stage – Through August
      – Negotiation Stage – Through November
      – Implementation Stage – December and thereafter




                                                         10

				
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