TITLE
Recommendation to authorize City Manager to enter into a concession agreement with The Paradies Shops for provision of gift/news services at the Long Beach Airport. (District 5)
DISCUSSION
The Long Beach Airport Terminal facilities currently have 10,542 sq. ft. utilized for
concession service and sales, including food, beverage, gift, news and retail convenience
items. The current concession operator, El Dorado Services, has operated from January
30, 1994 under a IO-year {five-year plus five-year option) lease agreement, and for the past
year-and-a-half has been operating under a month-to-month holdover agreement.
In May 2004, Airport staff, working with Airport Concession Consultants (ACC), a nationally
known airport concessions consultant group, began the process of selecting a concession
operator(s) in order to upgrade product offerings, enhance revenue to the Airport Fund,
encourage investmenthpgrade in facilities, and maximize the potential to blend the
concession area theming with the Airport's rich history. A wide outreach was conducted
including local, regional, and national exposure.
Initially, interested food/beverage and gifthews operators were required to submit
background and financial statements, in order to be pre-qualified to continue in the process.
Sixteen companies, from all over the United States, became qualified. As is common in the
industry, interested parties were allowed to provide the pre-qualification information for the
food/beverage, giftshews, or both concession opportunities.
In April 2005, requests for proposals (RFPs) were given to the pre-qualified companies, and
a pre-bid meeting was held at SkyLinks Golf Course on April 18, 2005. Attendees were
briefed on the Airport's concession program selection criteria, which were developed from
customer feedback, Long Beach airline input, consultant's industry benchmarks and
consideration of the Terminal's historical context. These criteria include the following:
Proposed concepts, theming, product offerings, pricing, marketing plans
Facility design, quality of improvements, capital commitment, on-going maintenance
Experience, references
Financial return to the Airport Fund
Management/operations plan
Minimum bid requirements for gift/news/retail operators, based on industry standards, were:
MINIMUM capital investment: $2,000,000
MINIMUM annual guarantee (for year I) $450,000
MINIMUM annual guarantee (after year 1) 85% of previous year % rent
MINI MUM percentages: 10% on sale of news/convenience
items
15% on sale of gift items
TERM: 10 years
The RFP and proposed concession agreements are for existing concession areas in and
around the Airport Terminal. The gifthews agreement includes a provision that if additional
facilities are made available, the selected concession operators will have "first negotiating
rights" with the City for such space.
Four gift/news proposals were submitted on May 23.
El Dorado Services, the current Airport concessionaire, chose not to submit a proposal and
has notified the Airport of their willingness to work with the new concessionaire to ensure a
smooth transition.
Two of the gifthews proposals were both very responsive to the RFP, and were reviewed
by a team made up of:
1. One principal of ACC
2. The Acting Long Beach Historic Preservation Officer
3. A City of Long Beach marketinglbranding consultant
4. A recently retired Deputy Airport Director, who was in charge of terminal
concessions at an area airport
5. Public Works Project Manager
A member of the City Attorney's staff participated, in an advisory role, regarding the
selection process.
Based on the unanimous findings of the evaluation team, The Paradies Shops was selected
as the strongest and most responsive candidate for gifthews concession services at the
Long Beach Airport.
The Paradies Shops operates over 400 retail concessions at 60 United States airports, with
revenues of approximately $450 million. Their proposal of rent was based on 16 percent of
gross from newdretail and 20 percent of gross from retaiVgifts, and a minimum annual rent
guarantee of $1 00,000, along with a proposed capital investment of $748,400.
Given existing space constraints, Paradies' merchandising concepts were very appropriate,
including their "H20 & Paper to Go for $1" concept, allowing passengers to self-pay without
going through a cash register sale. Local merchandise ties were strong, including the sale
of Sweet Jill's prepackaged pastries and facility upgrades, which tie-in heavily to the
Airport's history. Paradies also offers a "read and return" program, which allows customers
to purchase books, read them and return them for a 50 percent refund (see attached
excerpts from The Paradies Shops proposal).
This matter was reviewed by Deputy City Attorney Everett L. Glenn and Budget
Management Officer David Wodynski on July 1,2005.
TIMING CONSIDERATIONS
Authorization to proceed at this time should permit commencement of new gift/news/retail
concession operators at Long Beach Airport within the AugustKepternber timefram
FISCAL IMPACT
Implementation of the new gifthews concessions agreement, in addition to the incremental
investment in gifthewshetail facilities and enhanced offerings to the public, will provide a
minimum first year revenue stream of $100,000 to the Airport Enterprise Fund (EF 320) in
the Department of Public Works (PW), compared to estimated Fiscal Year 2005
gift/news/retail revenue of $80,000.
SUGGESTED ACTION
Approve recommendation.
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Respectfully Submitted,
[Respectfully Submitted,]