Title
Request to Issue Revenue Contract Solicitations for Terminal 3 North 2 Concourse Concessions - District 8
Description
Request the City Manager, or his designee, to authorize the Aviation Department to issue Revenue Contract Solicitations (RCS) for food and beverage concessions, retail concessions, and an airport lounge concession in the new North 2 Concourse in Terminal 3 at Phoenix Sky Harbor International Airport.
Report
Summary
The new Terminal 3 North 2 Concourse (T3N2) will be operational in 2027. With the addition of the N2 concourse, the Aviation Department has developed a concession leasing strategy to guide the procurement of contracts for food and beverage, retail, and airport lounge concessions. This strategy is designed to ensure the airport offers diverse, high-quality options that meet the needs of our passengers.
The strategic concession planning process included reviewing enplanement forecasts and concourse construction schedules, determining the optimal concession square footage, programming the concession spaces, identifying contracting opportunities, and developing a timeline for the solicitations. This timeline also incorporates industry discussions and outreach to small businesses to ensure broad participation.
The goals of this RCS are to foster healthy competition while increasing local and small business participation, reflect current airport retail market trends, and optimize sales and revenue. Additionally, the solicitations aim to elevate the quality and uniqueness of souvenir, gifts, and retail merchandise offerings and showcase food and beverage offerings that authentically reflect the local community's culinary heritage. The solicitation opportunities will also include requirements for participation in the Aviation Department's sustainability and airport concession marketing programs, and requirements to support the Aviation Department's workplace initiatives and customer experience programs.
Procurement Information
The Aviation Department intends to issue three separate solicitation packages that will result in a total of six contract awards in accordance with the City of Phoenix Administrative Regulation 3.10 as follows:
Food and beverage concession package:
- One full-service restaurant with bar;
- Two quick-serve restaurants and cafe bar; and
- One coffee cafe designated for a small business operator
Retail concession package:
- One retail convenience, news, and gift store; and
- One specialty retail boutique-style store
Airport lounge concession package:
Packages will allow contracting opportunities for companies of all sizes, including opportunity for subleasing, joint ventures, licensing agreements, and the inclusion of small businesses. One package will provide the opportunity for small business operators to compete and contract directly with the Aviation Department.
Responsive and responsible respondents will be evaluated according to the following criteria:
- Proposed Concept(s) and Menu / Merchandising Plan
- Design and Quality of Tenant Improvements
- Management, Marketing, Operations, and Technology Plans
- Experience and Qualifications of Respondent and Partners (if any)
- Proposed Business Plan
- Financial Return to the City (Airport Lounge Concession Package only)
The highest-ranked respondent for each opportunity will be recommended for the concessions lease awards. The Aviation Department intends to issue these solicitations on or about July 2025, with an estimated contract award on or about July 2026. The City's Transparency Policy will be in effect with the release of the RCS and throughout the process.
Public Outreach
This process will include all standard and required outreach efforts. The Aviation Department will conduct targeted outreach efforts to attract interest.
Contract Term
The proposed aggregate primary contract term for the airport lounge and food and beverage concepts will be between 12 to 15 years, and for the retail concepts will be between 10 to 12 years, which will be negotiated based on the respondent's planned capital investment.
Financial Impact
Rent for the food and beverage and retail concessions will be a percentage of gross sales. The percentage will be finalized upon RCS publication and will range between 8 percent to 18 percent depending on the concession category. Rent for the airport lounge concession will be a Minimum Annual Guarantee (MAG). The MAG will be finalized upon RCS publication.
Concurrence/Previous Council Action
The Phoenix Aviation Advisory Board Business Development Subcommittee recommended approval of this item by a vote of 3-0 on January 2, 2025.
The Phoenix Aviation Advisory Board recommended approval of this item by a vote of 7-0 on January 16, 2025.
The Transportation, Infrastructure, and Planning Subcommittee recommended approval of this item by a vote of 4-0 on February 19, 2025.
Location
Phoenix Sky Harbor International Airport: 2485 E. Buckeye Road
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Aviation Department.