Item No.:      7a_Supp_ 
Date of Meeting: 12/13/2011 



Concessions Principles & Practices 
Aviation Concessions Business 
December 13, 2011

2004 - 2005 Redevelopment 
All 84 units constructed or reconstructed since 2004. 
Transition from master concessionaire to hybrid 
64% of units operated by prime concessionaires 
13% by ACDBE subtenants of primes 
18% by direct lessees 
5% by ACDBE direct lessees 
Dramatic results of change 
Sales up 75.5%; revenues to Port up 82% since 2003 
Employment up by more than 100% (732 to 1508) 
Enplanements up 10% 
Industry-wide recognition for excellence 
ACI: Griesbach Award for Overall Excellence 
ARN: Best Concessions Program 
2

Current Operators 
Three Food & Beverage Prime Concessionaires: 
HMSHost 
Seattle Restaurant Associates (operated by HMSHost) 
Concessions International 
One News/Gift & Retail Prime Concessionaire: 
Hudson News Group 
Duty Free (short-term agreement; RFP to be released in 2012): 
HG Retail LLC 
ACDBE Subtenant Concessionaires: 
Six firms, eleven units 
Direct Lease Operators (including ACDBEs) 
19 operators/locations 
3

Locally Owned and Operated 
Butter London 
Dilettante Chocolates & Mocha Bar 
Diva Espresso 
ExOfficio 
Fireworks 
Ivar's Seafood Bar 
Massage Bar 
Pallino Pastaria 
Tully's Coffee 
Quizno's Subs 
Waji's 

4

Benefit of New Concessions
Strategy Development 
2004  2005             Outcomes of
Redevelopment           Development 
1970  2004 Master
Local Flavor                       Higher Sales 
Concession           Street Pricing               Higher Revenues 
Agreement            Competition               More Jobs 
Direct Leases                      Better Customer Service 
Small Businesses                  National Recognition 




5

Prospective Changes/Challenges 
Up to 10 new units to be leased over next 3 years 
Leasing agent / consultant on board in January, 2012 
90% of leases expire in 2015-2017 
Dramatically different perspectives of various stakeholders on key
issues 



6

Connection with Century Agenda
Preliminary Goals 
100,000 New Jobs 
Increase Small Business Opportunities 
Clean, Energy-Efficient Facility 




7

Concessions Stakeholder Process 
Airlines 
Current Independent Operators 
Labor Representatives 
Prime Concessionaires (large concessions companies) 
Prospective Local Operators 
Small/Disadvantaged Business Enterprises 
Traveling Public 


8

Principles & Practices for Discussion 
Customer
Experience 

Social and
Financial
Environmental
Stewardship 
Responsibility 

Selection
Process 

9

Process Components 
Staff workshops to develop draft principles and practices 
Research of concessions industry best practices 
Six meetings with individual stakeholder groups 
Business and leisure traveler focus groups 
Compilation and integration of the input from the initial meetings 
Two meetings with all stakeholder groups 
Summary of prevalent and divergent views on the issues 


10

Areas of Agreement 
There should be a mix of offerings at Sea-Tac Airport 
Important to encourage a strong sense of place 
"Green" practices and sustainability 
The selection process should be efficient and fair and limit barriers to
entry 
The cost of doing business at the Airport is high and policies should
reflect this reality 

11

Areas of Disagreement 
Issue 1: How should the Port balance the mix of multi-unit operators
("prime concessionaires") and direct leases? 
Direct leasing has improved overall program performance 
All operators want opportunities structured for open competition 
Labor seeks two-three prime operators with 90% of employees 
Many local businesses believe local ownership should dominate 
Issue 2: How should the Port maintain (or increase) participation by small
and/or ACDBE businesses? 
Current goal 20% of gross sales  modest in comparison to some airports 
Prime subtenants prefer direct lease, better opportunities/locations 
Direct lease ACDBEs generate 29% of total ACDBE sales 

12

Areas of Disagreement 
Issue 3: How can the Port reduce high costs of investment, and other barriers? 
2004-05 development costs were quite high  above other airports 
Operators cite inefficient, lengthy Port approvals process as primary reason 
Request for Proposals process presents a barrier to small businesses 
Issue 4: Should the Port continue to require 'street pricing'? 
Some operators advocate higher than street pricing to offset high development
and/or operating costs 
Local Seattle operators "must" price the same as their street-side locations 
Labor advocates for premium pricing (up to 'street plus 15%') if devoted to
better worker wages/benefits 
Street pricing important to customers 
Ongoing industry dispute over impact on sales and revenue 
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Areas of Disagreement 
Issue 5: Should the Port place requirements on the labor practices of
concessionaires? 
Labor representatives advocate Port Commission adoption of a
resolution for worker retention and labor harmony 
Small number of airports have such policies; varied application and
impacts 
Significant legal risk, including prospect of concessionaire litigation 
Prevalent view of stakeholders is that the Port should not place
mandates regarding hiring and firing practices 
Continuity of employment for concessions workers has never been an
issue at Sea-Tac 

14

Worker Retention Issue 
Legal Analysis / Risk 
Previous Litigation / Federal Injunction 
Prospects of Litigation 
Successorship Doctrine 
Negative Impacts on Concessions Recruitment 
Stakeholder Views 
2004-05 Transition 
Employment Mobility / Security 
Other Airports' Experience 


15

Recommendation Summary 
These recommendations are intended be consistent with future Century Agenda
goals promoting job creation and business opportunity 
1.  Manage program via a hybrid structure with a 50/50 mix of multi-unit
contracts (six or more units) with small packages (three units or less) 
2.  Meet or exceed current 20% gross sales goal for ACDBE through direct
leases, and seek additional small business participation 
3.  Revise the tenant build-out review process to reduce capital costs. Port
should provide all infrastructure to the lease line 
4.  Study the overall cost picture for concessionaires prior to finalizing
street pricing policy for 2015-17 RFPs and recruitment 
5.  Encourage new employers to hire current workers but do not adopt
worker retention or labor harmony requirement 
16