Airport Food: Why The High Prices Take Off

Airport food is notoriously expensive, and there are several reasons why. Firstly, airports are often located in remote areas, which increases the cost of delivering stock. Secondly, airport retail spaces are expensive to rent, and these costs are passed on to customers. Thirdly, there is a captive audience at airports, meaning customers have no choice but to pay higher prices. Additionally, there is high staff turnover at airport food outlets, leading to increased recruitment and training costs, and employees often have to pay for parking, which is then reflected in the prices.

Rent is double the standard rate

Rent at airports is a significant factor in the high cost of airport food. The rent that food vendors pay is more than double the standard rate for commercial space in the same area. For example, at Portland International Airport (PDX), the rent per square foot is $80 per year, compared to the average cost of $30.39 per square foot for commercial space in Portland.

Airports charge vendors a monthly rate plus a commission on sales. The Portland International Airport lease agreement, for instance, requires businesses to pay a minimum annual guarantee of $80 per square foot per year or 10-18% commission on sales, whichever is greater. This means that food vendors, who generally have smaller profit margins, must increase their product prices to generate a profit.

The high rent at airports is due to the limited space available and the convenience of operating within the airport. Vendors must submit detailed Requests for Proposals (RFPs) to secure a spot, and the competition for space drives up prices. Airports also use the funds generated from rent to cover maintenance, operating costs, and improvements.

In addition to rent, airport food vendors face other costs, including delivery fees, storage fees, and staff retention challenges. The unique challenges of operating within an airport, such as restricted access and limited storage space, contribute to these additional costs. Ultimately, these costs are passed on to consumers in the form of higher food prices.

High delivery fees

Airports are often outside the usual delivery radius of suppliers, and the hassle and increased fees allow suppliers to charge a premium for delivering goods to an airport. There are increased parking fees for suppliers, and the process of getting food through airport security can be time-consuming and costly.

In addition, airports have limited storage space, so businesses often have to pay a premium for extra storage space. If they cannot afford to do so, they will need multiple deliveries throughout the week, which will increase costs. Some businesses choose to rent storage space outside the airport, but this incurs additional transportation costs.

The high delivery fees are passed on to the consumer, resulting in higher food prices at airports.

Staff retention issues

Staff retention is a significant issue for airport food vendors. Vendors at larger airports tend to operate around the clock, and these early morning and late-night shifts can quickly wear out employees. This is especially true in countries like the United States, where service staff rely on tips to round out their paychecks. As a result, businesses have to pay more for recruiting, hiring, and training, which gets passed on to the customer in the form of higher food prices.

Transportation costs for employees are also generally higher since airports are often located further away from cities. Public transportation can be unreliable and time-consuming, and it may not even be available for employees traveling late at night or early in the morning. If employees have personal transportation, they typically have to pay for parking, which can be expensive. For example, at Seattle International Airport, employees can expect to pay $75 per month for parking, a cost that is ultimately borne by the business and passed on to the customer.

High turnover rates among airport food staff were addressed by Congress in 2022, but employers continue to struggle with retention issues. The challenges of keeping staff can add extra expenses for airport food vendors, which further contributes to the high cost of airport food.

Limited storage space

Airport food is expensive for a variety of reasons, one of which is the limited storage space available to vendors. This has a knock-on effect on several other factors that contribute to the high cost of food at airports.

Firstly, limited storage space means that vendors must bring food in more frequently. This requires more deliveries, which in turn increases transportation costs. Airports are often outside the usual delivery radius of suppliers, and there are increased parking fees for delivery vehicles. This means that suppliers can charge a premium for delivering goods to an airport.

Secondly, the limited storage space means that businesses may have to pay a premium for extra storage space. If they are unable to do so, they will need to receive multiple deliveries throughout the week, further increasing costs. Some businesses may choose to rent storage space outside the airport, but this again incurs additional transportation costs.

The high cost of storage space and deliveries is ultimately passed on to the customer in the form of higher food prices.

In addition, the high cost of storage and transportation is further exacerbated by the high cost of rent at airports. Renting space at an airport is a complex and competitive process. Vendors must submit a detailed Request for Proposal (RFP) outlining their intended use of the space, and they often have to offer higher commissions to secure a spot. The lease agreements that are drawn up typically require a monthly rate plus a commission on sales. For example, the commercial space rent at Portland International Airport (PDX) is double the standard rate in Portland, with no price cap.

The limited storage space at airports, along with the high costs of rent, transportation, and delivery, are significant factors in the high cost of airport food. These costs must be recouped by the vendors, who pass them on to customers in the form of higher food prices.

Airports are a captive market

Airports know they have a captive audience and use it to their advantage to make money. They have to generate revenue, and the time between passengers getting through security and boarding their flights is a prime opportunity for monetization. Airports also have an attractive customer base: people who can afford to travel, some of whom are in "time to spend" vacation mode or are business travellers happy to expense a meal.

Airports restrict how much vendors can charge while operating under their roof, which is called "street pricing". This ensures that vendors don't charge over a certain percentage above what they would for the same products sold outside the airport. However, vendors have some leeway when considering what street pricing is, and they will naturally want the comparables to be on the expensive end.

While it might seem unfair that airports ask for so much, they use these funds for maintenance, operating costs, and improvements.

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