Title
Terminal 4 South 1 (T4S1) Concourse Retail Concessions Phase I at Phoenix Sky Harbor International Airport Award Recommendation (Ordinance S-48378)
Description
Request to authorize the City Manager, or his designee, to enter into a Lease agreement with The Marshall Retail Group, LLC to develop, operate, and manage the T4S1 Phase 1 retail concessions at Phoenix Sky Harbor International Airport for 10 years with no options to extend. Further request to authorize the City Treasurer accept all funds related to this item.
Report
Summary
Phoenix Sky Harbor International Airport 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 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 Aviation Department to issue a Revenue Contract Solicitation (RCS) for a retail concession operator within the new concourse at Terminal 4. The goals of the RCS were to optimize sales and revenue over the term of the lease, provide quality and unique retail merchandise to passengers, emphasize local culture in the design of the facility, and select a respondent with experience operating successful retail concessions in the U.S. and/or abroad.
Procurement Information
Aviation issued the RCS on May 27, 2021, with responses due on Sept. 17, 2021. Five responses were received and deemed responsive. The evaluation panel met for the initial consensus meeting on Oct. 27, 2021 and respondent interviews were held on Nov. 16, 2021. The panel's award recommendation was posted to the City's public award website on Dec. 2, 2021.
The panel consensus scoring and ranking for each respondent is shown below:
- The Marshall Retail Group, LLC 880 Points
- Stellar LAM PHX III LLC 825 Points
- Paradies Lagardere at PHX, LLC 810 Points
- HG CYS PHX Retailers JV dba Hudson 790 Points
- Gideon Toal Management Services, LLC 650 Points
Contract Term
The term will be for 10 years with no options to extend.
Financial Impact
The estimated annual revenue to the City will be the established Minimum Annual Guarantee (MAG) or percentage of gross sales, whichever is greater. MAG for the first year will be set at $1,010,000. The MAG will be adjusted annually thereafter at 85 percent of the prior year's annual rent owed by the Lessee or 100 percent of MAG for the first Lease 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.