Travelers boost spending, slot play at McCarran

Friday, Feb. 8, 2002 | 11:09 a.m.

McCarran International Airport says many passengers, faced with spending more time in the concourse waiting for flights since the Sept. 11 terrorist attacks, are using that time to play slot machines and are spending more on concessions.

While the amount of passenger traffic has been down by double-digit percentages since new security measures were ordered following the attacks, airport revenues are just under the previous year's levels and some businesses have done even better since the new restrictions took place.

Airport officials estimate they receive $3.21 per enplaned passenger compared with $2.71 per passenger prior to the attacks.

The increase is most evident in the airport's slot machine revenue. In October, slot machines generated $4.5 million in gross revenue, which was shared by concessionaire Michael J. Gaughn, chairman and chief executive officer of Coast Resorts Inc., and the airport. The airport received $3.1 million that month -- the best month in the last three years -- under its contract agreement.

In December, airport slots grossed $4 million, with McCarran getting just under $3 million. The November numbers bucked the trend, but officials attributed that to the public adjusting to some of the security precautions implemented by the Federal Aviation Administration and not spending as much extra time at the airport.

In December, passengers were again told to arrive at the airport early because of anticipated holiday crowds and inexperienced passengers clogging security lines with wrapped packages and too many carry-on bags.

While revenue has not increased for every McCarran vendor, Scott Kichline, manager of commercial and business development at the airport, said overall, airport revenues are holding their own and airport officials have not had to offer rent relief to concessionaires as some airports have.

He said over the months of October, November and December, revenues from concessionaires have only been off 0.8 percent, from $25.3 million for those months in 2001 compared with $25.5 million in 2000. At the same time, traffic at the airport has been off 16.2 percent, 7.9 million passengers for those three months in 2001 compared with 9.4 million passengers for the same period in 2000.

"What we've found is that people were asked to come to the airport earlier because of the new security precautions that were implemented," Kichline said. "As a result, there were a lot more people who were spending more on meals at the airport and, in general, just milling around. And, if you're milling around at a place where there are slot machines, there's a tendency to play them."

The resulting revenues from people with more time to kill at the airport have even offset the fewer customers at some businesses. There are fewer "meet-and-greet" visitors at the airport -- those who in the past have gone to the gate to meet an incoming friend or relative -- because the new security regulations restrict the concourses to ticketed passengers.

That means businesses on the secured side of the security checkpoints have had to survive on fewer passengers using the airport as well as there being no meet-and-greet customers.

Kichline said at McCarran, some businesses have fared well in the post-Sept. 11 era while others have struggled. Some have adjusted their marketing and sales strategies to compensate.

In addition to slot revenues being up, restaurants have fared well. Gross revenues for all restaurants were $4.7 million in October compared with $4 million in October 2000, generating $329,000 for the airport compared with $277,000 the same month a year earlier. Similar trends continued in subsequent months.

Kichline said in addition to passengers having more time to eat, restaurant business has increased at the airport because some airlines have discontinued meal service on their flights.

"Some of them actually make announcements prior to boarding the plane saying they won't be serving food on the flight," Kichline said. "People adjust by getting something before they get on, or by buying something to take with them."

One retailer that has seen an increase in business since the attacks is InMotion Pictures, a company that has been at McCarran since May. The company rents digital video disc players and movies and has capitalized on people spending more time in the airport.

"The company has grown month over month since in started (in February 1999)," said Robert Mork, manager of the local outlet at the D gates. "Passengers have been told to be here two to three hours in advance and at times, the lines aren't that long. That definitely helps us out. Some people are renting movies on a flight to the West Coast. They watch part of the movie while they wait here and the rest on their flight."

InFlight has outlets in other airports where customers can drop off their DVD players and discs or the company offers a prepaid United Parcel Service bag to return equipment. Inbound customers can drop items at a 24-hour drop box in the baggage claim area at McCarran.

While some other retailers have reported increased sales, others have slumped since Sept. 11.

Clothing stores like J&D Inc. and Marshall Rousso have been flat and sales at gift stores like W.H. Smith are off by 13 percent from a year ago. Gross revenue fell for Nuance Global Traders' duty-free store, $332,000 in October compared with $425,000 a year ago. The reason for the dramatic drop -- the store primarily serves the Asian tourist market, which fell when Japan Airlines discontinued nonstop air service between Tokyo and Las Vegas.

Kichline said while his office does not monitor the sales of individual items, he has heard about some products that have moved well in some stores. When the FAA mandated passengers take only one bag aboard planes, sales of small carry-on pieces increased at El Portal, softening the blow of the loss of Asian tourists who wouldn't flinch at buying $800 luggage sets that cost twice that much in Japan.

Tobacco product sales also have been up in some stores, as nervous travelers stocked up on cigarettes for their long wait at the airport. Kichline said some stores have increased sales by promising shoppers they'd mail purchases to their homes.

The taxi and bus transportation sectors also have dropped dramatically as has the airport parking concession. When the FAA established a 400-foot no-parking perimeter around the terminal following the September attacks, it temporarily stopped valet parking by the Five Star Parking concession.

Kichline said the airport waived its fees for the month when the parking lot closure shut down the business.

Public parking receipts also have been off at the airport with monthly receipts normally around the $1.1 million level dropping to or below $1 million. There is no comparison with the previous year, since rates were increased in April.

McCarran hasn't offered rent relief to its concessionaires, primarily because most contracts are written on a percentage basis. That means if gross revenues are down, what is paid to the airport falls as well.

Kichline said only one company, Star Trans, a shuttle bus transportation company, has closed down at the airport in late 2001, but he attributed that to other economic pressures and not the effects of the terrorist attacks.

"They failed to pay (rent) in July, August and September, so I don't think it had anything to do with the attacks," Kichline said.

Concessions at other airports nationwide haven't fared as well as most of the McCarran businesses. A report in Airport Business magazine said the shutdown of airports in the four days after Sept. 11 resulted in an estimated loss of $56.6 million in concession revenues from non-aeronautical sources, according to a survey of 50 large, medium and small U.S. airports.

The report, issued at an Airports Council International North America conference last month, estimated the disruption of non-aeronautical business at those airports to be $70.8 million in the first week after the initial four-day disruption and $1.5 billion for the 12 months after the attacks.

Airport managers at Orlando International Airport in Florida said they could not afford to grant rent concessions to airport businesses.

David Swierenga, chief economist for the Air Transport Association, Washington, said he doesn't expect "normal" traffic levels to return for airports and concessionaires until next summer and that the next two years will be challenging for most of the nation's airports.

Kichline said McCarran appears to be an exception because its passenger traffic has rebounded faster than at most airports.03

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