Port Authority introduces new measures to improve airport concessionaires’ pricing

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The Port Authority of New York and New Jersey has introduced a series of measures to improve the clarity of and compliance with fair market pricing policy for goods sold by airport concessionaires.

The policy caps all concession prices at local, off-airport ‘street prices’ plus a maximum surcharge of 10% and requires concessionaries to offer lower-priced food and beverage options to provide a wider range of value for customers. The new measures, detailed in a revised Concessionaire Street Pricing Standards and Procedures Manual published on the Aviation Department’s website, were informed by the findings of a review undertaken by the independent Office of Inspector General (OIG) prompted by reports of past violations of the policy by some concessionaires. The OIG’s review made two main findings that the new measures directly address.

First, the OIG substantiated claims that violations of the street pricing policy occurred, including the prices of certain beers sold at LaGuardia Airport’s Terminal C, managed by concessionaire operator OTG. The review was initially prompted in July 2021 by a traveler’s complaint on social media about the listed price of a seasonal beer, which exceeded US$27. In reviewing the records and assessing all charges associated with the vendor, the OIG determined that certain beer prices included an erroneously added surcharge on top of an inflated base price. Based on a detailed review of the concessionaire’s records, the OIG determined that a total of 25 customers were charged the ‘indefensible’ amounts of US$23 or US$27 (depending on size) for a beer. The OIG confirmed that, as a corrective action, the concessionaire had contacted all 25 customers and refunded the entire value of their order.

Second, in assessing a range of other products and concessionaires, the OIG determined that certain aspects of the previous iteration of the street pricing policy were too vague and lacked adequate specificity to enable concessionaries to know with precision what they were expected to do to comply with the policy. The OIG concluded that the street pricing policy required revisions with greater clarity and granularity to be fully enforceable.

The new measures announced by the aviation department and memorialized in the revised manual now provide this level of requisite specificity. The new measures detailed in the revised manual fall into two main categories. The first is detailed instructions for calculating product prices based on comparable area averages, including criteria for determining; similar types of retailers (e.g. grab and go, quick service, fast casual, premium casual dining, etc); similar product items (e.g. individual components, portion size, preparation, etc); and product quality (e.g. material differences, performance, brand).

The second category outlines steps to strengthen monitoring and compliance of the street pricing policy, including but not limited to the documentation of uniform standards and procedures for all concessionaries, including clear assignment of accountability for concessionaire managers and terminal operators. It includes robust, streamlined processes and a timeline for submitting product pricing documentation for Port Authority review and approval – and a full inventory of all products on an annual basis. Furthermore, each concessionaire must conduct quarterly on-site spot checks of the top 40 items sold at their location during the previous quarter. Furthermore, random, periodic price checks will be conducted by the Port Authority, including during high-traffic travel periods. Finally, a clear process for corrective action will be put in place for any discrepancies noted during periodic price checks.

The Port Authority’s Aviation Department has conducted an initial round of street pricing standards workshops with terminal operators and concessionaire managers to help them understand the revised manual, various template forms and timelines.

Kevin O’Toole, chairman of the Port Authority, said, “All airport customers should rightly expect that policies that limit the pricing of food and beverages at concessions will be followed and enforced. Nobody should have to fork over such an exorbitant amount for a beer. The aviation department’s new compliance and enforcement measures announced today make it crystal clear that all prices at concessions will be routinely monitored to ensure they are aligned with the regional marketplace. And all airport customers and concessionaires should expect tough proactive enforcement going forward now that these revised standards are in place.”

Rick Cotton, executive director of the Port Authority, said, “The aviation department’s comprehensive and necessary updates to the street pricing standards and procedures are an important step in improving the operations of airport concessionaires and assuring the traveling public. In addition to outlining clear, specific and detailed steps that must be followed to adhere to the street pricing policy, it also redoubles the emphasis on including lower-priced value items at every concessionaire. The agency is grateful for the work of the independent inspector general in pointing out the flaws of the previous policy and recommending some key ways to rectify it.”

Huntley Lawrence, chief operating officer of the Port Authority, said, “This evolution of the street pricing policy represents months of rigorous work by the aviation department with the assistance of the inspector general to put in place the procedures necessary to make it successful. Ultimately, this success ensures two objectives: that airport customers are not overcharged for the goods they purchase and that concessionaires have a reasonable chance to thrive even as they face higher operating costs than off-airport businesses.”

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