7a exhibit b
Item Number: _7a_Exhibit B Date of Meeting: May 27, 2014 Realizing a Vision for Airport Dining & Retail at Sea-Tac Airport Public Briefing May 2014 Foundations for a Vision Century Agenda: Become Gateway of Choice for Travelers Create 100,000 New Jobs Aviation Division Strategic Goals: Become a Top 5 Airport in Customer Service in North America Maximize Non-Aeronautical Revenue 2 Foundations for a Vision Commission Direction (2/14/12 Motion) Reflect Northwest 'sense of place' Encourage competition, equally attractive to all Use two methods of leasing Third Party Competitive Evaluation smaller packages 'Request for Proposals' Process 4+ unit packages Foster employment continuity Grow small business & minority participation Continue 'street pricing' policy Make build-outs more efficient/affordable 3 Realizing the Vision in Airport Dining & Retail 2025 Create an experience customers rave about Offer diverse, quality restaurants and shops Grow revenues for investment in the airport's long-term future Increase economic opportunity for business and people Create a sustainable lease transition process 4 A New Program - A New Name Airport Dining & Retail "the business of restaurants and shops in an airport environment" 5 The Way We Were Prior to 2005 transition: Limited variety Low quality Generic concepts High prices No competition 6 Seafare Pizza & Snack Bar, 2001 Success on Every Measure Program Transformation Gross Sales Port Revenue Employment 250 30 28.2 2000 195.2 1,640 200 25 $22.3* 1500 20 150 $154.4* Millions $ 90 Millions $ 15 11.9 1000 100 732 10 Employees 500 50 5 0 0 0 2003 2013 2003 2013 2003 2013 117% Growth 136% Growth 124% Growth * Shown in 2003 constant dollars Industry Accolades: Best Overall Program, 2007 ACI-NA Best Airport Program, 2009 Airport Revenue News 7 Diversity of Operators 2003 Host 2013 Host/SRA 41 units 24 units CI (subtenant CI (prime) ACDBE) 10 units 5 units ACDBE ACDBE 18 units 18 units Independent Independent 6 units 19 units Hudson 22 units 2003: 75 total locations Dufry 2013: 92 total locations 4 units ACDBE includes prime subtenants Kiosks not included 8 Employment Opportunity Employment by Operation Representation Coffee 3% 5% Union 14% Full-Service Dining 42% 58% Non- Quick Serve 25% Union 26% Retail/Duty Free Full-Time/Part-Time 27% Passenger Services Support Full- 17% Time 83% Part- Time Total Employees = 1,640 9 Industry Performance $16.00 Median Sales Per Enplanement $14.00 All Airports: $8.41 Large Airports: $9.98 $12.00 Sea-Tac: $10.23 Sales per Enplanement $10.00 $8.00 $6.00 $4.00 $2.00 $- Sea-Tac is a top performer among the 25 largest US airports measured in 2012 sales per enplanement (excluding duty free). 10 What Our Travelers Want Known brands Greater variety Higher quality Reasonable prices More healthy choices More full-service experiences More retail More local flavor Sources: Passenger intercept surveys, focus groups, airport comment tracking Future South Central Terminal, Mezzanine Dining system, secondary research data Objectives for New Program Grow sales per enplanement 30% by 2025 Reach and remain in top 10 among top 50 airports by sales per enplanement (excl. duty free) Grow revenues by 25% Grow jobs 40% both union & non-union Grow local/small/ACDBE share of sales from 30% to 40% 12 The Path to the Vision Foundation for Vision Implementation 2011-2013 Master Plan Century Agenda Long-Term Demand Forecast Tenant Selection Aviation Strategic Goals Terminal Block Planning Transition Plans 2/14/12 Commission Motion Unit Plans and Sales Forecasts Build-out Process Stakeholder Involvement Employment Creation Forecast Lessons Learned Since 2004 Phasing and Leasing Plans 13 Priorities to Balance Operator Profitability Port Revenue Consumer Affordability Local Ownership Competition FAA Requirements Prime Operators Job Quality Job Growth Small/ACDBE Business Workforce Development Employment Stability Environmental Initiatives 14 Stakeholder Involvement 2011-12 Involved businesses (national primes, small, ACDBE), labor, airlines, traveling public Focus of discussion: Leasing structure Labor policies Balance of small, local and minority-owned vs. prime operators Build-out requirements, street pricing 15 Lessons Learned Since 2004 Have a flexible leasing process to attract diverse operators Provide infrastructure to lease line Have an efficient, affordable design & build-out process Lease directly with small and ACDBE tenants Have leasing strategy to balance operator risk Phase leases to avoid serious impacts 16 Foundation in Place for Next Steps Clear Commission vision and direction Valuable lessons learned since 2004 Extensive knowledge of customers Successful track record of leasing More than 10 years experience with newer facilities Keen understanding of transition phasing 17 Airport Dining & Retail Master Plan 18 Demand Analysis 2025 Location Existing Required* Square Square Square Footage Footage Footage Shortage Main Terminal 126,670 146,200 (19,530) South Satellite 16,800 36,500 (19,700) North Satellite 19,500 52,500 (33,000) Airport Total 162,970 235,200 (72,230) * Square footage required to meet passenger demand, initially completed in 2013; subject to change with ongoing terminal planning 19 Illustrative Terminal Block Planning Does not include: - North Satellite - South Satellite 20 Illustrative Unit Planning Current Central Terminal Current conditions: Poor grease duct venting Inadequate air circulation (HVAC) Inefficient space configurations Chronic queuing issues Inadequate unit frontage Anchor retail too small (currently Fireworks) 21 Illustrative Unit Planning Future Central Terminal Planning Considerations: Current operational problems Infrastructure capacity Demand analysis Checkpoint use/passenger flow Local spending trends Sea-Tac passenger surveys Local demographic data Focus groups 22 Illustrative Sales Forecasts 23 Employment Forecast 2500 2,296 Target 40% 2000 growth 1,640 1500 Employees 1000 732 500 0 2003 2013 2025 24 Airport Dining & Retail Master Plan 25 Sustainable Phasing Overview PHASE I PHASE II PHASE III 2014-2016 2017-2018 2019-2024 Early Returns Extensions Prime concessionaire Independent Independent food service and Direct Leases Direct Leases convenience retail = Duty Free 60 units 26 Adjusting Current Prime Leases Key to Phasing Prime Concessionaire Food Service (39 units, expiration 12/31/16): Early transition and re-concept of returned units New lease term for some units with investment requirement Phasing extensions for units, including subtenants, consistent with 9/11/12 ACDBE/small business motion - no new investment Continued operation of North & South Satellite units until facilities change Stability of approximately 400 jobs Continued work on leasing mechanics 27 Adjusting Current Prime Leases Key to Phasing Prime Concessionaire Convenience Retail (21 units, expiration 5/31/17): Early transition and re-concept of returned units New lease with extended expiration dates for some units in order to transition lease into two future packages Continued operation of North & South Satellite units until facilities change Stability of approximately 300 jobs Continued work on leasing mechanics 28 Post Phasing Plan Outcome IDEAL TRANSITION SCHEDULE Years 2025-2035 UP TO 10 UNITS ANNUALLY PROGRAM-WIDE Prime Packages and Independent Leases (food service & retail, including new development) 29 Leasing Plan Vision Continue diversity of operators and concepts similar to the current program Increase sales that will lift all types of operators Create at least five new prime packages (4+ units) (representing 50-60% gross sales) Create combination of single-unit and 2 to 3-unit packages (representing 40-50% gross sales) Competition will influence final outcome 30 Next Steps in 2014 1. Commission feedback on program phasing strategy 2. Approve prime concessionaire phasing leases/ adjustments to current leases (including subtenants) 3. Approve specific design scope for utility upgrades 4. Approve program leasing plan and review new RFP 31 Anticipated Commission Actions Authorization of Design Authorization of Prime Authorization of Lease Approve Leasing Plan 2014 Phase I Utility Lease Modifications S. Satellite Restaurant New RFP Review Upgrades 3rd Quarter 3rd Quarter 4th Quarter 4th Quarter Authorization of Phase Authorization of Leases Authorization of Leases Authorization of Leases 2015 I Utility Construction for Personal Services for Food & Beverage for Specialty Retail 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2015 Lease authorizations may include: Early returned food service and retail units 5-8 new restaurants 3-5 specialty retail units 2-4 units for spa/massage/manicure Packaging contingent on outcome of phasing plan 32
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