Luxury handbags were a tough sell during the darker days of the COVID-19 pandemic last year at DFW International Airport.
And it’s still tough for Duty Free Americas, which operates luxury retailers in the international terminal such as Mont Blanc, Kate Spade, Michael Kors and Coach.
“Pleasure travelers are not the kind of customers we usually cater for,” said Denise Erickson, general manager of the aviation division of the Hollywood, Florida-based retail company. “They are international travelers, usually those coming from outside the country.”
North Texas airports brought in over $ 740 million in COVID-19 stimulus cash
DFW International Airport has paid out $ 50 million over the past 19 months to ensure that stores and restaurants like those owned by Duty Free Americas don’t end up empty and bankrupt by the time passengers are ready to get back on the plane.
For the most part, those rent cuts ended in late September, but DFW is working to approve additional rent savings of $ 20 million for tenants at Terminal D, which houses most of the airport’s international departures. . It would help tenants from October to March.
Starting in March 2020, just after the pandemic hit the United States, airport operators lowered minimum rent rates for stores, restaurants and services, taking only a percentage of sales. For many businesses that remained closed for the duration of the pandemic, that often meant paying no rent. Other stores that returned with fewer sales or had to cut their hours due to staffing issues also paid less rent.
“It was a better plan than letting them go and having a blank space,” said Ken Buchanan, executive vice president of revenue management and customer experience at DFW. “We wanted to support them because all of these things that were happening were not their fault.”
The COVID-19 pandemic has been a roller coaster for airports across the country which have seen traffic fluctuate on a dramatic scale with the vagaries of the virus. And for airport companies that invest thousands of dollars and sign long-term leases, it was sometimes difficult to stay open with fewer passengers at the airport.
The rent concessions were also somewhat selfish on the part of airport management. It takes a lot of work to get new stores and restaurants into the airport, especially with a public bidding process for the space. If hundreds of stores and restaurants were to pull out or default on leases, there would be no convenience for passengers when resuming the flight.
DFW has received a lot of help in making the rent cuts a reality. DFW has been a major recipient of federal stimulus grants, bringing in over $ 611 million in the past 19 months. At least $ 30 million has been set aside specifically to help dealerships such as retailers and restaurants.
Airlines have also received help. The airport has lowered landing and take-off fee tariffs so that airlines only pay about as much as they did by air in 2019 before the pandemic. The airport also lowered rental fees for boarding gates and terminals, a move to help keep airlines afloat as many were in financial crisis. DFW reduced all airline fees to $ 0 for the month of September, at an estimated cost of $ 7.7 million.
There are 195 businesses in DFW, mostly shops and restaurants as well as services such as shoe shiners, money exchangers, and masseuses. Typically, airport companies pay a percentage of airport sales, on average around 16% but it varies depending on the type of business. There are also minimum rent payments, but this rarely matters, as viable businesses will earn enough to pay the percentage of the sale rate.
Nearly 90% of retailers and restaurants are now open, Buchanan said, and the goal is to reopen them all by the end of the year.
Nowhere will this be more of a challenge than in the International Terminal, the crown jewel of DFW International Airport with its sit-down restaurants, duty-free shops and high-end retailers. So far for 2021, DFW’s total passenger traffic is still down by around 22%, much better than many competing airports such as Los Angeles International or JFK International in New York. But international flights have been hit the hardest thanks to travel restrictions that are still in place in most parts of the world.
International traffic has been 45% lower in the first seven months of 2021 than it was in 2019. And most of that traffic is actually Americans going to leisure destinations in Mexico and In the Caribbean.
These are not the kind of high-end travelers that retailers and restaurateurs rely on.
The airport retailer Hudson, which operates newsstands and restaurants at the airport, said DFW had started offering rent cuts earlier and more aggressively than other airports across the country.
“They were a role model for everyone,” said Brian Quinn, executive vice president and assistant general manager of Hudson.
Dallas restaurateur Michael Bugatti has three of his four DFW airport restaurants in Terminal D. He had to close two at the worst of the pandemic, but has since been able to reopen one. The latest, Whitetail, is emerging as another concept.
“I don’t know where I would be right now without it,” Bugatti said of the rent cuts.
This summer, when passenger traffic rebounded enough that restaurants and retailers began to reopen, many, including Bugatti, faced a massive shortage of workers. Many have started offering hiring bonuses of $ 300 to $ 1,000 to encourage people to return to work at the airport. This was a bigger challenge as other customer service companies are also scrambling for workers, and airport employers have the added hurdle of getting workers to the airport and terminal.
The airport has tried to streamline the process by offering a single app for each airport business. Bugatti said it was better, but it could still use another 50 employees.
“The customers are back and they are happy,” Buggati said. “We just need more workers to serve them. “