The concession business

The Group has food & beverage and travel retail operations mostly in airports, motorways, and railway stations under concession contracts.

In this kind of arrangement the concession grantor allows the operator to provide commercial services in a given space and for a set amount of time, in exchange for a rent, and in many cases for construction or renovation work as well.
The process for awarding a concession varies depending on circumstances. Most are awarded through competitive bidding, but in some cases they are negotiated directly.

The terms of the contract - duration of the concession, the rent and required investments -vary according to the business channel and type of business.

Motorway locations usually require more investment than airports, because the concession covers the entire building rather than single points of sale. Thus, for a motorway concession, the rents are generally lower and the average length of the concession is longer - from 10 to 25 years, with peaks of more than 30 - compared with 5-10 years for an airport contract.

In the same channel, contract duration can also vary by type of business. Food & beverage requires investment in equipment, so concessions are generally longer with lower rents.

The rent may be fixed or variable (indexed to revenue or profitability), or a combination of both.

The criteria for evaluating bids can differ according to the sales channel, type of business and country. The main criteria are usually:

  • the quality of the business proposition
  • the brand portfolio
  • the design and layout of the venues
  • the operator's expertise and track record
  • the financial commitments assumed in terms of investments and rents.

The flight sector has a different business model, based on contracts arranged directly with the airline.