Title
Terminal 3 Food and Beverage and Retail Revenue Contract Solicitation Award Recommendation (Ordinance S-44289)
Description
Request to authorize the City Manager, or his designee, to enter into Food and Beverage and Retail Concession Agreements at Phoenix Sky Harbor International Airport. The gross sales for all Agreements are estimated to produce $400 million over the 10-year term, resulting in approximately $51.6 million in revenue to the City.
Report
Summary
On May 10, 2017, Phoenix City Council authorized the issuance of a Revenue Contract Solicitation (RCS) for four Concession Agreements (Agreement) opportunities in Terminal 3, two Food and Beverage and two Retail. The goals of the solicitation were to encourage competition, reflect the region and include national, regional, local brands and concepts, optimize sales and revenue, increase opportunity for local and small business participation, raise quality and uniqueness of souvenir and gifts merchandise, and phase implementation to coincide with the Terminal 3 Modernization construction schedule.
The four Agreement opportunities were designed to achieve a diverse and balanced concession program. The opportunities consist of nine Food and Beverage locations and eleven Retail locations. Successful respondents may only be awarded one Food and Beverage Agreement and one Retail Agreement. Each Agreement will include an Employee Retention Policy, which will require the successful Respondent to hire current Terminal 3 Food and Beverage and Retail concession employees and retain those employees for at least 120 days in a similar job classification.
The RCS was issued on May 18, 2017, with responses due on Aug. 1, 2017.
Procurement Information
Eleven responses were received and reviewed for minimum qualifications; all responses were found to be responsive and responsible. The evaluation panel interviewed all Respondents on Dec. 4, 5, and 6, 2017. The panel members evaluated the responses based on the following criteria established in the RCS:
- Proposed Concepts, Menus or Merchandise Plan (0-250 points).
- Design and Quality of Tenant Improvements (0-225 points).
- Management, Marketing and Operations Plans (0-225 points).
- Experience and Qualifications of Respondent and Partners, if any (0-200 points).
- Proposed Business Plan (0-100 points).
The evaluation panel recommendations were reached by consensus in consideration of the above criteria. The following Respondents are recommended for award to enter into an Agreement:
- Food and Beverage - Package 1 (4 units): Host International, Inc.
- Food and Beverage - Package 2 (5 units): SSP America, Inc.
- Retail - Package 1 (6 units): HG PHX T3 Retailers 2017 JV
- Retail - Package 2 (5 units): Stellar Retail Group PHX, LLC
Tenant construction dates will coincide with the opening of Terminal 3 - Phase 2 Modernization project, which includes the new south concourse.
The City Transparency policy is in effect until all Agreements from this RCS are awarded.
Public Outreach
In collaboration with the Equal Opportunity Department (EOD), staff conducted two local and industry outreach meetings, one Fast-Pitch event, and an RCS pre-response meeting to generate interest and participation in this solicitation. This offering was advertised in both local and national industry publications.
Contract Term
Each Agreement will have a 10 year term, commencing when all units have been constructed and are open; the commencement date of each Agreement will align with the opening of Terminal 3.
Financial Impact
For each Agreement, the Tenant will pay Minimum Annual Guarantee (MAG) or percentage rent, whichever is greater. The gross sales for all Agreements are estimated to produce $400 million over the 10-year term, resulting in approximately $51.6 million in revenue to the City.
Concurrence/Previous Council Action
This item was recommended for approval by the Downtown, Aviation, Economy and Innovation Subcommittee on Feb. 7, 2018 by a vote of 4-0.
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 Deanna Jonovich and the Aviation Department.