Nashville International Airport Concessions

• BACKGROUND
• CHALLENGES
• OBJECTIVES
• APPROACH
• IMPLEMENTATION
• RESULTS
• LESSONS LEARNED

BACKGROUND

The Metropolitan Nashville Airport Authority (MNAA) retained PG Advisory in 2021 to evaluate why a developer-managed, 110,000 square-foot concessions program for Nashville International Airport (BNA)’s new main terminal was significantly behind schedule, underperforming, and at risk of not having all concessions open and ready for business when the $1.5 billion BNA Vision development program debuted in September 2023.

The scope of services included assessing reasons why the concessions program execution was behind schedule, earning poor customer feedback ratings, and underperforming according to financial goals established in a Request for Proposal (RFP) and final lease agreement.

PG Advisory’s scope subsequently was expanded to include staff augmentation services and direct management of the developer’s contract. PG Advisory also was asked to initiate a separate concession planning effort to directly lease additional concession offerings for an eight-gate Satellite Concourse also scheduled to open in Fall 2023.

CHALLENGES

The BNA Vision concessions program was at risk of not being completed by the planned September 2023 grand opening of the BNA Vision terminal development program, and existing BNA concessionaires were still recovering from COVID-19-era challenges. The program faced:

• Supply chain disruptions for store equipment and merchandise delivery.
• Severe labor shortages limiting contractor availability and concessionaire employee retention.
• Resistance by prospective concessionaires to commit Minimum Annual Guarantee (MAG) rent to airports.
• Prospective concession operators more selective in responding to airport solicitations
• And a need to align BNA’s airport concessions management processes with industry best practices.

OBJECTIVES

• Timely opening of new concession program.
• Increase BNA’s non-aeronautical revenue.
• Improve BNA’s passenger satisfaction ratings.
• Establish practices and procedures to ensure the BNA concessions program opened on schedule.
• Improve overall BNA concessions program department performance.

APPROACH

During the initial engagement, PG Advisory team members reviewed all MNAA concessions operating and management procedures, including the third-party developer contract terms and sublease agreements. PG Advisory recommended adjustments to multiple internal procedures to align with concessions best practices and increase oversight and compliance with concession contracts and operations. In addition, PG Advisory suggested streamlining the project management process to reduce decision-making timeframes.

IMPLEMENTATION

MNAA needed to implement industry best practices and procedures to guide the BNA concession program, advance performance of the concessions program team, improve passenger satisfaction, and increase revenue. To achieve this, PG Advisory implemented and executed the following strategies:

• Assessed and redefined the Tenant Improvement Design Approval and Construction Oversight Process.
• Developed a Risk Register to monitor and manage design/construction progress and communicate risk.
• Led daylong partnering session with the BNA concessions developer to foster trusted partnership mentality, review program issues and challenges, and develop mutually agreed upon solutions to improve program performance.
• Revised data collection and developed analytical reporting tools to track program sales performance and customer satisfaction ratings and improve financial reporting to MNAA executives.
• Ensured that RFP business terms were supported by airport data and structured to balance risk exposure for proposers and the airport.
• Implemented a robust marketing plan promoting concessions opportunities to the Nashville community to increase local participation and the airport concessionaire industry overall.

Following these recommendations, MNAA expanded PG Advisory’s contract scope and term to include management of the third-party developer contract for leasing and development to ensure the program would open on time. The expanded scope also included direct management of other terminal concession programs, including advertising and Wi-Fi services. PG Advisory was tasked with additional scope to complete the planning, analysis, business strategy, development, and execution of a direct lease RFP for a 12,000-square-foot concessions program supporting a new eight-gate Satellite Concourse that opened in
October 2023. PG Advisory designed and executed an extensive outreach program to attract interest from local businesses and airport industry concessionaire operators to the Satellite Concourse opportunity.

RESULTS

In 2023, MNAA celebrated the opening of BNA Vision, 85 new main terminal concession locations, and the Satellite Concourse with seven concessions units. Today, BNA concessions showcase unique Nashville offerings and the culture of Music City. Since opening, the program has seen the following results:

• BNA’s 2023 sales per enplaned passenger were $15.38, ranking among the highest in the industry.
• MNAA’s annual concessions revenues are up significantly compared with the prior program, with revenue per enplanement up 27% since our engagement began.
• PG provided strategic business recommendations to the Airport Executive team that resulted in improved business terms and revenue from the concession agreement.
• Customer satisfaction ratings also have increased with a Q4 2023 passenger rating for retail and dining services almost 20% higher than in 2021.
• The program was nominated for several 2024 concessions awards. BNA’s Green Room Lounge and Whiskey Bar won a 2024 Airport Experience (AXN) Award for Best Bar Experience in the Large Airports Division. The airport’s Fat Bottom Brewery was honored as a Regional winner in Moodie Davitt’s 2024 Airport Food & Beverage (FAB) + Hospitality Awards in the Airport Food & Beverage Offer Best Representing Sense of Place category.
• The Satellite Concourse leasing effort for the Satellite Concourse attracted multiple proposals, with most bidding percentage rents at high end of range.
• The selected operator exceeded the RFP ACDBE goal by 17%, and MNAA achieved its goal for local concept participation.

PG Advisory’s contract was extended again in August 2023 for an additional seven years as part of BNA New Horizon, a second $1.5 billion development program that includes extensions and improvements to two concourses, additional gates, moving walkways, and additional concessions. PG Advisory continues to advise MNAA on concessions business decisions for additional BNA concourse development.

LESSONS LEARNED

At BNA, PG Advisory has emphasized the critical importance of establishing best practice procedures and fostering a commitment to adhere to them as a path to delivering a complex concession program on time. Frequent, effective communications among all stakeholders, regular performance reporting, tenant oversight management, and contract administration attention are all key components. Roles and responsibilities of internal airport stakeholders must be clearly defined to execute a concessions program effectively.