July 27th, 2009
Naming Official Brands could bring Metro Airport Big Bucks
By Katherine Yung
Detroit Free Press
$9.8-million deal with Pepsi proposed
If the operator of Detroit Metropolitan Airport gets its way, sports leagues and stadiums won’t be the only ones with official brands.
In an effort to boost revenues, the Wayne County Airport Authority is considering forming exclusive sales and advertising deals with companies to create official brands for North America’s 13th-busiest airport, according to documents obtained by the Free Press.
If this marketing move is approved by the authority’s board, the airport’s first deal is likely to be with the Pepsi Bottling Group, documents show. The authority’s staff has recommended approval of a 7-year contract in which Pepsi would become Metro Airport’s official beverage sponsor starting Aug. 1.
If approved, the contract would bring in more than $1.4 million in its first year and more than $9.8 million over the life of the agreement. Airport staff selected Pepsi’s proposal over one from Coca-Cola Enterprises.
Victoria Houghton, a spokeswoman for the North America Airports Council International, said she isn’t aware of any airports with official brand sponsors.
Such agreements could help offset the costs of financial assistance that Metro Airport’s officials are considering providing to struggling businesses in its terminals.
The first-year revenues alone from the Pepsi contract would more than offset the $1.3 million in fee deferrals the airport is considering granting three businesses in its North Terminal: Borders Inc., HDS & Partners at DTW LLC (which operates USA Today Travel Zones and Relay stores) and Brookstone Stores.
Borders declined to comment, and HDS and Brookstone did not return calls and e-mails. Metro Airport’s officials did not want to discuss these marketing initiatives until after the airport authority’s board meeting Tuesday, said Michael Conway, a spokesman for the airport.
Metro Airport has 120 shops and restaurants. Many of the stores at the McNamara Terminal have leases that expire next year.
The move to designate official brands comes on the heels of an unsuccessful effort thus far to sell naming rights for the North Terminal, which opened in September 2008.
The national recession and Michigan’s economic woes have hurt operations at Metro Airport. From October 2008 through the end of May, the number of outgoing passengers dropped by 11% and the average number of daily departures shrank by 32 flights.
Although the airport’s revenue from airlines has been growing, non-airline revenue from October 2008 through the end of May fell almost 9% compared with the year-ago period.
As a result, the airport’s staff has developed a so-called hardship plan to help 37 businesses. Besides deferring some fees for three companies, the plan would extend by 24 months lease agreements for 19 businesses in the McNamara Terminal. It also would renew for a 3-year period the current leases for 18 businesses at both terminals.
Research conducted by the airport authority’s staff found that the average 18% concession fee at Metro Airport is 3% higher than what similar airports charge.