With good reason, airport executives are constantly looking for innovative ways to generate new, significant and recurring non-aeronautical revenue.
This is effort is becoming more critical due to uncertainties related to parking revenue, which has traditionally been one of the highest contributors to non-aeronautical revenue at an airport. This uncertainty is caused by the impact of ride hailing companies (Uber, Lyft, etc.) and the advent of autonomous vehicles.
Where does an airport turn for new, non-aeronautical revenue?
There’s no shortage of vendors offering a new app or a new service that seem promising, but very few check all three of the following boxes:
- Truly new revenue (i.e., not just a slight enhancement of an existing stream),
- Truly significant revenue (i.e. potentially millions and not just thousands), and
- Truly recurring revenue (i.e., reliable income you can budget for years to come).
An exclusive or near-exclusive pouring rights agreement (or “beverage deal”)) between an airport and either Coca-Cola or Pepsi have begun to play a more important role in filling budget holes faced by airports. And pouring rights are destined to become more commonplace in the airport sector precisely because a pouring rights agreement checks all three boxes, and because pouring rights program are already a proven best practice in almost every other industry sector that serves beverages.
Virtually every college, university, theme park, sports stadium, arena, convention center, casino, hotel chain and restaurant chain in the world already has pouring rights in place. Many of these properties are public entities, receive public funds or are quasi-public entities, just like most airports in the United States.
Also, like airports, many of these properties don’t allow beverages to be brought on-site, past a security checkpoint. Think about every convention center you’ve visited for a conference/expo. Think about every stadium you’ve ever entered to watch a professional football game or baseball game. Think about every arena you’ve ever entered to watch an NHL or NBA game, or attend a major music concert.
Additionally, just like airports, many of these same public or private properties outsource all or part of their food, beverage and retail operations to third-party concessionaires. In fact, some of the same concessionaires that operate alongside pouring rights programs at universities, stadiums, convention centers, etc. also currently operate at airports.
What’s available to airports?
A few airports have had pouring rights agreements in place for many years (notably DFW and DTW), and many more are currently either in the process of attaining one, or have laid the groundwork for doing so. It’s estimated that DFW has earned more than $50 million in direct funding from pouring rights agreements as well as millions more in “in kind” funding that has helped to improve the customer experience.
There’s no reason to believe that similar levels of money and the type of customer experience support that DFW enjoys would not be available to other mid-size and large airports from beverage companies (at least on a similar per passenger payment basis).
While every pouring rights agreement at an airport is customized to meet the particular needs of that specific airport, below are five main areas of support that beverage companies have provided to airports:
1. Sponsorship payment:
This funding is like a typical advertising or marketing payment, i.e., paid directly to the airport to be used as it sees fit. Depending on the size of your airport, this payment can range from several hundred thousand per year to several million annually.
2. Customer engagement funding:
These are dollars paid by the beverage company to implement programs or build amenities that improve the traveler’s journey. These efforts are usually “mutually agreed to” by the airport and the beverage company (but the money will be spent at the airport).
3. Funding to increase beverage sales:
Increasing beverage sales is critical to concessionaires, the airport and the beverage company. Increasing beverage sales takes effort. And the beverage company partner is usually required to put financial and human resources toward increasing beverage sales. This includes efforts like merchandising, advertising, consumer engagement strategies (i.e., sampling), crew incentives for cashiers and servers, and many more tactics.
4. Monies to help with sustainability initiatives:
This funding can be to improve recycling efforts, better manage energy use or be directed at specific projects that are important to the airport.
5. Insights to help nudge passengers to healthier beverage choices:
Airports have challenged beverage companies to present new ways to “nudge” consumers toward healthier beverage choices. The beverage companies have begun to diversify their product portfolio to meet consumer demand for healthier beverage options. It is expected that a combination of an expanded portfolio and efforts to nudge consumers toward healthier beverage choices will result in consumers choosing healthier beverages.
So, if your airport is facing a budget shortfall (or expects to during the next economic downturn), the question now is not whether you should seriously explore pouring rights for your airport, but how soon can you get one in place.