Title
Terminal 4 South 1 (T4S1) Common-Use Airport Lounge Award Recommendation (Ordinance S-48379)
Description
Request to authorize the City Manager, or his designee, to enter into a lease with AD Partnership LLC dba Sapphire Lounge by The Club for the development, operation and management of a Common-Use Airport Lounge Concession in the new Terminal 4 South 1 Concourse at Phoenix Sky Harbor International Airport for 10 years. Further request to authorize the City Treasurer accept all funds related to this item.
Report
Summary
Phoenix Sky Harbor International Airport (PHX) is among the busiest airports in the United States, serving over 46 million passengers in 2019 and approximately 22 million passengers in 2020 due to the impact of the COVID-19 pandemic. With increased passenger projections as the airport recovers from the pandemic comes the need to grow the airport's footprint and concessions program. The Aviation Department received approval to construct a new eight-gate concourse at Terminal 4 in 2016. The new Terminal 4 South 1 Concourse (T4S1) concourse is scheduled to be operational in the Summer of 2022 and will be home to Southwest Airlines.
On March 17, 2021, Phoenix City Council authorized the issuance of a Revenue Contract Solicitation (RCS) for a Common-Use Airport Lounge (Lounge) in the new T4S1 concourse. The goals of the RCS were to optimize sales and revenue over the term of the lease, develop the quality and uniqueness of the lounge facility, emphasize local culture in the design of the facility and in food and beverage offerings, and select a respondent with experience operating successful airport lounges in the U.S. and/or abroad. In addition, the lounge must offer access to passengers of its partnering airlines and other clients or customers wishing to pay for lounge access at PHX.
Procurement Information
Aviation issued the RCS May 27, 2021, with responses due Sept. 17, 2021. Four responses were received. Three responses were deemed responsive. One response was deemed non-responsive as they did not meet the minimum qualification for experience operating a lounge in a large-hub airport. The evaluation panel met for the initial consensus meeting on Oct. 20, 2021 and respondent interviews were held on Oct. 28, 2021. The panel’s award recommendation was posted to the City’s public award website on Dec. 2, 2021.
The consensus score and ranking for each Respondent is shown below:
- AD Partnership LLC dba Sapphire Lounge by The Club 925 Points
- Joint Billion USA Holdings LLC dba Capital One | Plaza Premium Lounge LLC 818 Points
- MAG US Lounge Management LLC dba Escape Lounges 764 Points
The panel recommendation was reached by consensus in consideration of the above criteria.
Contract Term
The term will be 10 years with no options to extend.
Financial Impact
The estimated annual revenue to the City will be the greater of a Minimum Annual Guarantee (MAG) or 13 percent of gross sales, whichever is greater. MAG for the first year will be $1.8 million. The MAG will be adjusted annually thereafter at 85 percent of the prior year’s annual rent revenues or 103 percent of MAG for the prior year, whichever is greater.
Concurrence/Previous Council Action
The Transportation, Infrastructure and Planning Subcommittee recommended approval of this item on Feb. 16, 2022, by a vote of 4-0.
Public Outreach
This solicitation process included all standard and required outreach efforts, including advertising in Aviation industry publications.
Location
Phoenix Sky Harbor International Airport - 3400 E. Sky Harbor Blvd.
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Aviation Department.