Title
Request to Issue Terminal 4 South 1 Common-Use Airport Lounge Revenue Contract Solicitation
Description
Request to authorize the City Manager, or his designee, to issue a Revenue Contract Solicitation 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, including evaluation criteria, related business requirements, and the airport contracting policy.
Report
Summary
The new Terminal 4 South 1 Concourse (T4 S1) Concourse at Phoenix Sky Harbor International Airport (PHX) is scheduled to be operational Summer 2022 and will be home to Southwest Airlines (WN). With the addition of the S1 concourse at T4, the Aviation Department (Aviation) is seeking a vendor to develop, operate, and manage a Common-Use Airport Lounge (Lounge) in T4 S1. Staff has developed a strategy to bring in a world-class Lounge for our passengers, by evaluating: enplanement forecast, optimal square footage, location, opportunities, and limitations. A timeline has been created for the Solicitation that includes business information discussions with the industry. The Revenue Contract Solicitation (RCS) will be issued to ensure a fair and competitive process, the goals of which are to:
- Optimize sales and revenue over the term of the lease;
- Develop the quality and uniqueness of the lounge facility, emphasizing local culture and Arizona destinations 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.
The primary area available is 3,500 square feet, with the opportunity for a phased opening, allowing the Successful Respondent to build out 50 percent in the first phase and the additional space once enplanements reach a specified amount.
The Successful Respondent will be required to develop, operate, and manage a lounge that:
- Offers access to customers flying on any airline, regardless of class of ticket, for a fee;
- Offers access to customers belonging to partner organizations (airlines, credit card companies, etc.) with complimentary lounge membership benefits;
- Has a variety of seating options, including desk workspaces, tables, at least one bar, and lounge chairs;
- Offers a variety of food options, including hot and cold items; and
- Offers a variety of beverage options, including hot and cold tea, soft drinks, wine, beer, and liquor.
Procurement Information
Aviation will conduct a RCS to select a vendor for the contract. There will be one contracting opportunity issued in Spring 2021, with estimated contract award in late 2021.
The evaluation criteria will include:
- Proposed Business Plan;
- Financial Return to the City;
- Qualifications and Experience;
- Business Operations; and
- Concept Design.
The highest ranked Respondent will be recommended for the concessions lease awards.
The City’s Transparency Policy will be in effect with the release of the RCS and throughout the process.
Contract Term
The term will be seven years with one, three-year renewal option to be exercised at the sole discretion of the Director of Aviation Services.
Financial Impact
Minimum Annual Guarantee (MAG) or Percentage Rent derived from gross sales, whichever is greater. Each respondent must propose a MAG, and minimum MAG will be determined using PHX historical and market data. There will be a minimum capital investment of $250 per square foot.
Concurrence/Previous Council Action
- The Phoenix Aviation Advisory Board recommended this item for approval on Feb. 18, 2021, by a vote of 6-0.
- The Transportation, Infrastructure and Innovation Subcommittee recommended approval of this item on March 3, 2021, by a vote of 4-0.
Public Outreach
This process will include all standard and required outreach efforts and conduct targeted outreach efforts to attract interest for each of these unique contracting opportunities.
Location
Phoenix Sky Harbor International Airport Terminal 4 - 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.