 a large and lucrative opportunity to operate restaurants, bars and retail shops in the domestic terminals at the nation’s second-busiest airport. Terminals 1, 2 and 3 are home to O’Hare International Airport’s largest carriers, including United and American airlines, and generated about $320 million in gross sales in 2019, before the COVID-19 pandemic dramatically reduced air travel.
A request for proposal is expected to go out late this year or in early 2023, the Department of Aviation says.
It’s one of the largest the largest concession packages in the industry, says Stephen Freibrun of ICF International, an aviation consultant that works primarily for airports and airlines. “It’s a big opportunity with a demographic that has shown capacity to spend,” he says.
It also marks the first time in more than two decades that the food and beverage contract, which tops $250 million in annual sales, has come up for bid after several false starts. Whether it will continue to be a single contract, or broken up, remains to be seen.
“Everybody has been waiting for this for years now,” says Ezequiel "Zeke" Flores, CEO of Chicago-based Flying Concessions, which operates food and retail shops at O’Hare and is opening soon at Midway. “I’m crossing my fingers that it’s finally going to happen.”
Concessions are a small but important part of funding operations of O’Hare, like other large airports, which rely on restaurants, bars and retail shops to entice travelers but also provide revenue that reduces the amount of money paid by airlines in landing fees and rent to pay for the cost of operating the airport. They’re also a major source of jobs. About 1,300 people work in concessions in the domestic terminals.
In 2019, O’Hare got $86.7 million, 6.9% of its total revenue, from restaurant, bar and retail sales.
HMS Host of Bethesda, Md., has had the food and beverage contract since 1999. It pays the city 16.75% of its gross sales. In 2019, that worked out to $42 million in rent on $252 million in revenue. HMS Host declined to say how much its net revenue was.
Hudson Group, based in East Rutherford, N.J., operates retail shops in the domestic terminals under a contract that was awarded in 2013. In 2019, Hudson’s newsstand shops generated $66.6 million in sales, and it paid the airport $17.7 million.
There are about a half-dozen large companies that typically bid on airport-concessions that typically team up with various partners, including local restaurants. Potential partners already are talking, industry insiders say, and the incumbents are likely to bid, as well. Several concession operators contacted by Crain’s said they were aware of the potential contract at O’Hare coming up for bid but declined to comment on their plans.
HMS Host’s contract expired in 2012, but the process of putting it out for bid has been delayed by various forces, from negotiating a new long-term lease with airlines that included the overhaul one of the airport’s three domestic terminals, a change in mayors and, most recently, a global pandemic that crushed air travel.
Hudson’s lease began in 2013 and expired in 2020.
Both leases, along with those held other airport concessionaires, were extended during COVID-19 and expire March 31.
It’s not clear what the next contract will look like. Over the years, airport officials have floated the idea of breaking it up into smaller pieces, which would instill competition and bring different types of restaurants, bars and retail shops to the airport, potentially making it more inviting and producing more revenue than a single contract.
Traditionally, O’Hare has leased concession space in terminals to a single operator or developer that pays the airport rent and/or a percentage of sales.
More than a decade ago, the city signed a 20-year deal with Westfield, now known as Unibail-Rodamco-Westfield, which partnered with concessions operators Hudson and Areas in a $26 million overhaul of the concessions space in Terminal 5.
Another option is for individual restaurants to have leases directly with the city.
The city declined to comment on what the requests for proposal might look like.
POST-PANDEMIC REALITIES
The domestic terminal deals are the first major concession contract put up for bid at O’Hare since the COVID-19 pandemic emerged in early 2020. O’Hare passenger volume is rising, but it’s still 21% below pre-pandemic levels.
The pandemic has brought some changes to concessions, such as touchless or contactless ordering, including vending machines and mobile food ordering and delivery for travelers. “You might not see as many storefronts. You might see ‘ghost kitchens’ and virtual food halls,” says Freibrun, pointing to an example at Raleigh-Durham International Airport.
“In a post-COVID world, we’ll likely see lower percentage rents due to myriad factors—inflation, the cost of fitting and finishing space, increased cost of labor—that put pressure on the (financials) of concessionaires,” he adds. “The only levers the airport has to help a concessionaire is to require less rent, extend their term of agreement, or contribute toward a capital investment that’s required to create a high level of finished concession space.”
Another complication is the city’s plan to demolish the existing Terminal 2, the oldest of the three domestic terminals, and add two satellite terminals, by 2030. It’s the centerpiece of a massive, $8.5 billion project that could change the amount of passengers and the economics of concessions. The new terminal will serve passengers arriving on international flights by American and United.
Also expect the city to pay close attention to the involvement of local vendors owned by women and minorities, a priority of Mayor Lori Lightfoot and the City Council. When the city awarded a concessions contract at Midway five years ago, more than half the revenue went to disadvantaged business, which was well above its 32% target.CEX exchange provides advanced trading tools for professional find out who owns the inn such as margin trading. This is because bitcoin value in 2014 are several fees that can contribute to the cost of your transaction, not only from the crypto broker but also from your card issuer. The trading fees for using the credit card option are a bit high when compared with other cryptocurrency exchanges, especially against Coinbase.
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