Title
Request to Issue Terminal 4 South 1 Concourse Retail Revenue Contract Solicitation
Description
Request to authorize the City Manager, or his designee, to issue a Revenue Contract Solicitation for contracting opportunities for Retail Concessions in the new Terminal 4 South 1 Concourse at Phoenix Sky Harbor International Airport.
Report
Summary
The new Terminal 4 South 1 (T4 S1) Concourse at Phoenix Sky Harbor International Airport (PHX) is scheduled to be operational Summer 2022 and will be home to Southwest Airlines. With the addition of the S1 concourse at T4, the Aviation Department (Aviation) staff has developed a Concessions Leasing Strategy in preparation for the release of a Revenue Contract Solicitation (RCS) to procure Retail concession contracts. This strategy is the foundation for T4 S1’s concession procurement. In order to ensure we provide optimal opportunities that will bring in a variety of options for our passengers, staff has: reviewed enplanement forecast and construction schedules, determined optimal concessions square footage, programmed concession space, identified contracting opportunities and limitations, and created a timeline for the RCS. This timeline includes business information discussions with the industry. All existing services in the terminal will continue during this time.
The PHX concession program goals include: encouraging competition; including national, regional, and local brands and concepts as well as current trends; optimizing sales and revenues; increasing opportunities for local and small business participation; raising the quality and uniqueness of retail selections to create options for passengers that reflect our local community; and partnering with companies that value their employees. In addition, the solicitation will incorporate sustainability requirements to enhance the airport experience for our customers as we demonstrate our environmental responsibility to our community. The City’s policies covering diversity and equity will also be reflected in the solicitation.
Procurement Information
Aviation plans to issue the solicitation in Spring 2021 for contracting opportunities in two separate phases, with Phase 1 contracts estimated to begin in December 2021 and Phase 2 contracts estimated for 2022/2023.
Phase 1 will include:
- News/Convenience and will include a Store-within-a-Store; and
- High Tech Shop or other proposal.
Phase 2 will include:
- Specialty Retail or other proposal; and
- News/Convenience or other proposal.
The solicitation will allow contracting opportunities for companies of all sizes, including the opportunity for subleasing, joint ventures, and licensing agreements. The solicitation will include opportunities for small businesses, whether through contracting directly with Aviation or through partnerships with other firms.
The evaluation criteria will include:
- Proposed Concept(s) and Merchandise Plan;
- Design and Quality of Tenant Improvements;
- Innovation and Technology Enhancements;
- Management, Marketing and Operations Plans;
- Experience and Qualifications;
- Proposed Business Plan;
- Financial Return to the City; and
- Employee wages and benefits with a focus on health insurance affordability and quality.
The highest ranked Respondent for each opportunity 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. Percentage of gross sales will be dependent on the concession category and range from 10 percent to 16 percent. There will be a minimum capital investment of $350 per square foot for Retail concessions.
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.