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National Airport: A New Terminal Takes Flight




Retail

Retail photo
As opening day approaches, merchants in the shops along the concourse level make ready. Here, Lisa Dallandorfer, property development director for Disney Stores, helps position display pieces.
Photo by Robert Reeder/TWP
Retailers, Restaurants
Aim to Grab Some of Travelers' Time


By Margaret Webb Pressler
Washington Post Staff Writer
Wednesday, July 16, 1997

T

he theory behind the boom in airport malls nationwide is simple: Give a captive audience something to buy, and they will buy it. Retailers have flourished at major hub airports, such as those in Pittsburgh and Denver, where passengers fill up time between flights by picking up all manner of gifts and gadgets, grateful for the diversion.

"When Pittsburgh [International Airport] opened, it really set a benchmark by which all other airport concessions are measured," said Judy B. Tuttle, vice president and director of leasing for Westfield Corp., the California real estate company that has leased all the retail space at National Airport.

So it was never a question that shopping would be an integral part of the new National Airport terminal -- the problem for the leasing agents was that National is not like other airports. About 95 percent of passengers who fly to National Airport end their travels there -- no connections, no downtime, no boredom. So the key for retailers and restaurants will be to lure departing passengers.

Moreover, the space allotted for stores in the new terminal is tiny, not only compared with space at shopping malls but also compared with that at other airports, meaning that each shop must pack more merchandise into a smaller space. National's 40 retail shops and 24 restaurants occupy only 65,000 square feet, about as much space as a large supermarket -- and much less than the 100,000 square feet of shops at Pittsburgh International, for example.

Those were just some of the challenges presented to Westfield and Host Marriott Services Corp., the Bethesda-based company that procured the food and beverage operators for the $450 million airport-cum-mall designed by architect Cesar Pelli. Through extensive research, connections, hand-holding and a little arm-twisting, though, the two companies were able to overcome obstacles to fill the airport with some of the best-known -- and newest -- names in restaurants and retailing.

"You had this really great project here, but convincing people that it was as great as you thought it was was pretty tough," said Paul A. Brown, general manager of Host Marriott's operation at National.

The result is that travelers will see not only retail names that have appeared in other airports, such as Gap and the Disney Store, but also chains making their airport debuts, such as Gymboree and Victoria's Secret. Several regionally themed stores and watering holes, including the Smithsonian Store, the National Zoo store and Charles Mann's All-Pro Grill, also will have a home in the new terminal.

The Need for Speed
Running a restaurant or store in an airport is very different from running one in a typical shopping center, said Tuttle, a longtime mall leasing agent. She received a crash course in those differences when Westfield -- which owns malls nationwide, including Montgomery Mall and Annapolis Mall -- won the contract in 1995 to lease the retail space at Dulles International and National airports.

"People are in the airport to fly, not in the airport to shop, so you have to make it easy for them," Tuttle said.

For example, she said, airport retailers must be intensely focused on speed in their transactions. They have to offer services that mall-based stores may not offer, such as shipping, which is even written into retailers' leases at National. Also, restaurants and shops in an airport are open longer hours, remain open 365 days a year and usually are smaller than those at non-airport locations. They also pay much higher rent.

The payoff, Tuttle said, is that airport stores can generate double or triple the revenue of a typical mall store, so they can end up being just as profitable as other locations, even after the higher outlay of costs and accompanying higher risk. A successful specialty store operating in a popular shopping mall in the Washington area typically has sales of about $300 a square foot annually and pays about $40 to $50 a square foot in rent, she said. At National, tenants are paying more than $100 a square foot in rent, but they are anticipating sales of about $800 a square foot, Tuttle said. Because airport stores often are one-third or half the size of a typical store, total revenue may equal that of mall-based locations.

"You can make your money back, but you have to execute," said Host Marriott's Brown. "You have to really gear it to the needs of the airport traveler, as opposed to the customer on the street."

At the airport's three new sit-down restaurants, that means creating menus of quickly prepared dishes. Carryout food operators, meanwhile, are required to use a special bag designed by Host Marriott that can hold both food and drink. And retail stores designed shops that could accommodate as much inventory as possible on the shelves -- there is no storage space -- while providing enough wiggle room for passengers and their carry-on luggage.

Walking around the unfinished retail shops in the airport last month, Tuttle also mentioned several ways that retailers will have to alter their product offerings, such as the airport Gap selling fewer styles of jeans than a typical Gap store.

"People just don't take off their pants in an airport," Tuttle said.

But sometimes it's tough for retailers to know just what changes to make, and altering the format of a tested concept can be expensive. For its debut airport store at National, Waldenbooks wanted to duplicate the layout of one of its mall stores, but in half the size. When that design was rejected by Westfield and the Metropolitan Washington Airports Authority, the chain agreed -- despite the extra cost -- to hire an outside architect and design its airport store from scratch, Tuttle said.

Chance for More Exposure
Many of the tenants at the new airport ultimately overcame their concerns about high costs because of the potential for wide exposure that can generate customers for other outlets in the chain.

"Having an airport restaurant kind of ties everything in; it's where a lot of your business travelers and regular customers have a lot of contact with you," said Roger Berkowitz, president of Legal Sea Foods, the Boston-based restaurant chain that will open its third Washington area location at National. "So it's as much a marketing deal as it is an economic deal."

Legal Sea Foods, which already has one airport restaurant in Boston, wasted little time in signing up for space in the new terminal -- as did the two other sit-down restaurants, TGIFriday's and California Pizza Kitchen. But other chains, particularly local restaurant operators, decided they couldn't stomach the financial risk.

Clyde's won't be in the new terminal, for example, even though Marriott was "relentless" in pursuing the popular local restaurant chain, said Tom Meyer, vice president of restaurant development for Washington-based Clyde's Restaurant Group.

Meyer said he worried that the new terminal has so many more food operators than the old one -- without an increase in flights -- that the business would just be sliced into smaller pieces.

"They think it's going to be like a destination," Meyer said. "But I can't see people going to the airport and accessing it for retail purposes."

But even officials of Host Marriott and Westfield have said publicly they are not counting on much retail traffic from non-travelers. Rather, tenants are relying on research by the airports authority -- which runs both National and Dulles -- indicating that travelers at National typically have 40 minutes or more to spare from the time they've checked in until they board a plane. That, the leasing agents say, will be the critical buying and eating time.

Catering to Different Tastes
Besides attracting the chains that could afford the risk and expense of opening at National, the leasing agents carefully considered which retailers they wanted for the airport.

On the south pier, one of three main departure sections in the airport, passengers on Delta Air Lines and the Delta shuttle "showed a higher preference for things like fruit and yogurt products," said Charlotte Sykes, a consultant who conducted the research with Host Marriott. So Frozen Fusion, which sells fruit and yogurt smoothies, is on the south pier.

Likewise, US Airways passengers, most of whom will leave from the north pier, said they wanted burgers and cheese steaks. Charles Mann's All-Pro Grill and the Great Steak & Potato Co. will be there to satisfy their cravings.

Westfield's Tuttle said her goal was to find stores that had a local flavor. So besides national chains, various local institutions -- National Geographic, the Smithsonian and the National Zoo -- have stores in the terminal. Because none of the three operated stand-alone retail stores, Westfield found contractors to run them.

Roland Banscher, acting senior business officer for the Smithsonian Institution, said he "thought it was a great idea from the beginning."

"We were walking a fine line, because we really didn't want it to look like a mall," Tuttle said. "Having the Smithsonian was very important to the airports authority; they really wanted it as part of creating the sense of place in Washington."

Read what shoppers think of the retail options.

© Copyright 1997 The Washington Post Company

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