Travel Markets Insider / October 2003
By Larry Luxner
Westfield isn't a household name in the United States, and if Americans think of the company at all, glitzy shopping malls generally come to mind.
That's just fine with George Giaquinto Jr. He thinks Westfield's prominence in the shopping-mall industry can only help the Los Angeles-based developer as it pursues half a dozen airport retail opportunities from Houston to Miami to Washington, D.C.
"We are the only true shopping center development firm in the airport industry," he said. "What that means for airports is that our main focus is developing the concession program in the same manner we would our own shopping centers. That's our company's sole focus, and because of that, it's our strength."
Giaquinto is director of airport development for Westfield Concession Management, a wholly owned subsidiary of giant Australian conglomerate Westfield Holding Ltd.
In the United States alone, Westfield's 65 malls encompass more than 65 million square feet of gross leasable area and over 8,500 store locations. Half of these malls are in California; the rest are in Florida, Illinois, Maryland and 10 other states. The company has 1,700 direct U.S. employees and has been in the airport retail business since 1997.
"There's certainly a clear understanding on our end that an airport is not a shopping center. But some of the tenets of successful retailing that apply to shopping malls apply to airports, too," Giaquinto told Travel Markets Insider in a phone interview from Newark, N.J., where Westfield's airport division has its headquarters. "Give them choices at reasonable prices and great customer service. That's what we bring to the table."
In addition, said Giaquinto, "we are the only shopping-mall developer with its own in-house staff of architects and tenant coordinators, which means we get involved in tenant design. We don't need to go out and contract separately with an architecture firm or marketing company because we do all of that in-house."
Besides its shopping-mall business, Westfield also manages retail concessions at some of the country's busiest airports.
Total retail sales in 2002, the latest year for which statistics are available, were as follows: Newark International (with 63,600 square feet of leasable space), $78.6 million; Washington Dulles (23,000 square feet and $24.1 million); Washington Reagan National (31,000 square feet and $23.5 million); San Antonio International (31,000 square feet and $15.5 million); Boston-Logan International (16,000 square feet and $13.3 million) and Orlando International (27,000 square feet and $4.3 million).
These airports are also among the most lucrative when it comes to per-passenger retail expenditures. According to Airport Revenue News, the average passenger at Newark Liberty spent $7.79 in retail purchases last year; for JFK the figure was $7.66, and for Reagan National it was $7.64.
Gross sales from Westfield's airport retail programs in 2002 (excluding Houston's George Bush Intercontinental Airport, the latest to come onstream) totaled $159.3 million. For 2003, the company is projecting $195 million in annual gross sales for its airport division.
"That would put us at 260,000 square feet under management at seven airports," said Giaquinto, though he wouldn't discuss profits. "Let's just say we're very profitable."
As big as that sounds, this $195 million in sales represents only 1% of Westfield's $18 billion in assets under management. The company's huge portfolio includes 113 shopping malls in the United States, Australia, New Zealand and Great Britain, and its shares are traded on the Australian Stock Exchange.
Giaquinto has headed Westfield's airport division for two years. Before that, he managed 200,000 square feet of commercial space for New York's Columbia University; he also worked for the Port Authority of New York & New Jersey.
"The industry is slowly moving in a direction that makes sense, in terms of airports beginning to realize that in order to maximize revenue potential of their commercial programs, they need expertise, and that's what we provide."
When it comes to airport food service, it's clear which direction the industry is headed.
"Healthier alternatives are a must," he said. "Passengers today are much more health-conscious than only a few years ago. In the past, if you had a food court with four options and one was a fast-food hamburger outlet, that would be your high seller. But now, Asian food has become more prevalent; so has healthy Mexican food."
The fact that airline meals are so skimpy these days has also helped the industry.
"Less and less food is served on the plane, so we believe it's a growth area for us," he said, adding that "we've tried to develop more efficient means of having passengers carry food onto the plane."
As a full-service developer and manager of premier retail properties, Westfield offers leasing, DBE programs, tenant coordination, operations management, marketing and promotions, design and construction, legal and lease administration, and finance and accounting.
The company claims it's able to attract a wide range of national, regional and specialized local retailers not typically found in airports.
For example, he said that as early as next January or February, Saks Fifth Avenue will open a 3,300-square-foot outlet at Newark International Airport.
"This will be the first airport store of its kind anywhere, and will focus on cosmetics and personal-care products," he said. "They've figured out that the No. 1 thing all their customers have in common is travel, and that their clientele who shop at Saks in the city will also want to shop there when they travel."
And although the decrease in post-9/11 passenger traffic hurt everyone, the fact that tight security now forces people to wait around in the airport longer seems to have more than compensated for the dropoff in overall business.
"Dwell times are much higher, around 15 to 20 minutes," said Giaquinto. "Because of that, the greatest inroads we have made have been in specialty retail — especially national branded and unique local concepts such as Kindred Spirits (New Age items) and Taxco Sterling (silver jewelry), both of which are located at Reagan National."
Giaquinto says average sales per emplanement at Reagan now stands at just over $3.60 per passenger, compared to $3.40-3.50 before 9/11.
"At Reagan, frequent fliers know there's not much shopping beyond security, so if they're dwelling at all, they're dwelling pre-security, and that's where the bulk of our stores are."
At Newark, he said, "we've monitored passengers, and international traffic has not declined in Terminal C at all since 9/11. Duty-free sales have declined slightly, but we're trying to determine whether that's been brought about by a shift of where the traffic has been. We are addressing it by opening a larger duty-free store."
The new outlet, being developed in conjunction with Weitnauer America, will cover 1,500 square feet, compared to the old store, which measured 600 square feet.
At Houston's George Bush Intercontinental Airport, Westfield is overseeing a project that will expand total retail space from 20,000 to just under 40,000 square feet. New shops will open as early as next year, with the entire program open by early 2006. The retail program will go from having a single prime concessionaire to supporting six operators — two prime concessionaires with multiple locations, and four direct leases.
As such, retail sales are expected to jump to $2.60 per emplaned passenger in 2006, a 60% increase over 2002 figures.
In addition, Giaquinto says Westfield is in the process of being named a developer at American Airlines' 65,000-square-foot terminal at JFK. The project was supposed to be 85,000 square feet, "but right now, American is working on a smaller footprint, at least for the immediate future, so they're not planning on building a part of the terminal they thought they were going to need."
Perhaps Westfield's biggest success story, however, will unfold at Miami International Airport — following a controversial bidding process involving Westfield and its two biggest rivals, BAA USA and Unison-Maximus.
Earlier this month, the Miami-Dade Aviation Department announced it would begin negotiating with Westfield to develop 30,000 square feet of retail space — after first having chosen BAA USA, which was disqualified because of mathematical errors in the scoring process, and then Unison-Maximus, which was booted out following Westfield's protests that Unison didn't have the experience required in the original bidding documents.
With the controversy gradually receding into the past, says Giaquinto, Westfield plans to turn its attention to "giving Miami-Dade County what it wants," which is a variety of local, national and international tenants at affordable prices.
"Our company has believed for a long time that Miami represents a great opportunity for us," he said. "We appreciate this chance the county has given us, and we certainly won't squander it."