Airport Concession Agreements and Revenue

A. Introduction

Non-airline revenue comprises 40–46% of total airport revenues at 18 of 31 large-hub airports (ACI-NA benchmarking data, 2024).

Airport concessions span categories—from food and beverage to retail, rental car, parking, and advertising. Each category carries operating characteristics, revenue structures, and regulatory considerations. Understanding these concession programs can inform decisions by airport executives, airline representatives, financial advisors, and policymakers seeking to balance airport financial needs with competitive service offerings.

Concession revenues are linked to airline rate-setting. 18 of 31 large-hub airports use compensatory or hybrid compensatory methodology (DWU classification, 2025). Where revenue-sharing provisions exist, concession revenues are credited against costs, effectively reducing airline rates. At airports using pure compensatory methodology without revenue sharing, the airport retains all non-airline revenues and airline rates are set independently of concession performance.

B. Concession Categories

B.1 Food & Beverage

Food and beverage operations generated 30–50% of total concession revenues at 12 of 31 large-hub airports (DWU analysis of ACFRs, 2024).

The F&B mix includes:

• Quick-service restaurants (QSRs): national chains and emerging local brands

• Full-service dining: limited-service eateries (e.g., $15–25 entrees) and dwell-time appeal

• Coffee/beverage shops: drive-through or grab-and-go concepts for quick service and convenience

• Specialty and ethnic cuisine: niche operators capturing traveler preferences

12 of 31 large-hub airports use street pricing policies (DWU survey, 2025) requiring F&B pricing to remain at or below street-level equivalents, that balances airport revenue optimization with passenger satisfaction. Enforcement at 15 of 31 large-hubs involves periodic market basket studies and passenger surveys (DWU review of agreements, 2025).

Commissary operations—central food production and distribution facilities—are operated separately or managed by a master concessionaire, reducing individual operator costs and standardizing food safety protocols.

Brand versus local operator tension reflects an airport strategy question: national brands offer revenue and service standards, while local operators enhance airport uniqueness and community identity. 15 of 31 large-hub airports blend national brands and local operators (DWU classification, 2025).

B.2 Retail/News & Gift

Retail and news/gift operations represent a concession category, encompassing terminal retail shops, duty-free boutiques, and specialized retail (books, electronics, travel goods).

Terminal retail at large-hub airports has shifted toward consolidated models since 2018, driven by:

• Rise of operators including Hudson Group, Paradies Lagardère (now Lagardère Travel Retail), Marshall Retail, and others have consolidated airport retail through master concessionaire or subletting models

• E-commerce competition reduces impulse shopping, driving consolidation and experience-based retail

• Duty-free expansion: International terminals increasingly feature duty-free zones, generating per-square-foot revenue

• Specialty retail niches: premium fashion, electronics, beauty, and travel convenience brands command space rent at $30–80 per square foot (ACRP reports)

Retail concessionaires occupy leased space under percentage-rent or MAG-based agreements, with initial capital investment requirements for tenant improvements.

B.3 Rental Car

Rental car, structured differently from F&B/retail per DWU classification of 31 large-hubs, with distinct on-airport and off-airport operations and revenue implications.

In-terminal rental car operations generate revenue exceeding $10 million annually, with fees of 10–12% of gross revenue (based on DWU analysis of 20 major airport agreements, 2025), while off-airport operations (remote lots accessible by shuttle) compete on price and convenience.

Rental car concession fees in 20 major airport agreements (DWU, 2025) are structured as:

• Percentage of gross revenue: 10–12% range, applied to all rental transactions at the airport

• Per-contract fees: some agreements specify a fixed fee per vehicle rental contract

• Tiered or blended structures: higher percentages on volume rentals; lower percentages on segments

The Minimum Annual Guarantee (MAG) provides predictable revenue, calculated as 85% of prior-year actual rental car revenue. This structure incentivizes volume while protecting airport revenue if a concessionaire underperforms.

ConRAC (Consolidated Rental Car Facility) developments have changed rental car revenue structures at 10 of 31 large-hub airports since 2020 (DWU survey, 2025). ConRAC facilities are designed to improve the passenger experience and reduce traffic congestion.

Rental car revenue is also closely linked to Customer Facility Charges (CFC), which reimburse airports for the cost of constructing and operating shared rental car facilities. Clear separation of concession revenue and CFC ensures accurate rate base treatment, as analyzed in DWU review of airline agreements.

B.4 Parking

Parking represents a non-aeronautical revenue source, with 12 of 31 large-hub airports using dynamic pricing (DWU survey, 2025).

Parking categories include:

• Short-term/garage parking: pricing for quick transactions, often in covered facilities near terminals

• Valet parking: service targeting passengers

• Economy or remote parking: product in surface lots or remote facilities

• Cell phone lots: free or low-cost spaces for waiting passengers, reducing cruising and congestion

• Pre-booking and discount programs: dynamic pricing mechanisms that fill vehicles during off-peak periods

Dynamic pricing—adjusting rates based on demand, occupancy, and time-of-day—used at 12 of 31 large-hub airports (DWU survey, 2025), similar to airline yield management. Mobile apps and real-time availability displays enhance the passenger experience and increase parking revenues.

Transportation Network Company (TNC) services (Uber, Lyft) have impacted parking revenue at 15 of 31 large-hubs (DWU survey, 2025), as passengers substitute paid parking for ride-share pickup in designated areas. Some airports have implemented TNC-specific fees or separate pickup zones to mitigate revenue loss.

B.5 Advertising & Other

Advertising and miscellaneous concessions represent 2–5% of total concession revenue at large-hub airports (DWU analysis, 2024).

Advertising categories include:

• Digital displays: departure hall monitors, gate displays, and baggage claim screens command rates per impressions or per month

• Static signage: terminal and curb-side advertising space

• Naming rights: premium spaces (gates, terminals, lounges, facilities) can generate annual revenue

• Lounge programs: airport-operated or operated by third-party lounges often generate concession revenue through operator fees or profit-sharing

• Ground transportation permits: ride-share, shuttle, and charter operators may pay fees for terminal access or operational privileges

Other miscellaneous concessions may include vending machines, wireless charging stations, spa services, children's play areas, and pet relief areas. These collectively contribute to overall concession revenue.

C. Revenue Structures

C.1 Percentage Rent

Percentage rent is a revenue structure in airport concession agreements, with airport revenue participation and operator profitability incentives.

In 20 reviewed concession agreements, percentage rent structures operate as a floor-ceiling mechanism:

Revenue = Higher of (a) Minimum Annual Guarantee (MAG), or (b) Percentage of Gross Revenue

In 20 reviewed concession agreements, percentage ranges were:

• Food & Beverage: 8–12% of gross revenue (review of 20 agreements)

• Retail (including duty-free): 12–18% of gross revenue (review of 20 agreements), with duty-free often at the higher end

• Rental Car: 10–12% of gross revenue (review of 20 agreements)

• Parking: 5–10% of gross revenue (review of 20 agreements), varying by facility type

• Advertising: 100% of revenue (minimal costs), or percentage of incremental revenue above baseline

Percentage rent agreements may also employ breakpoints or tiered percentages, where higher revenue levels trigger different percentage rates. For example, an F&B concessionaire might pay 8% on the first $5 million of gross revenue and 10% on amounts exceeding $5 million, incentivizing volume growth.

Gross revenue typically includes all sales proceeds, less only authorized deductions (e.g., credit card processing fees, third-party commissions on specific products), and concession agreements include audit rights to verify accuracy.

C.2 Minimum Annual Guarantee (MAG)

The Minimum Annual Guarantee (MAG) is a fixed or escalating annual payment ensuring predictable airport revenue independent of operator performance. MAGs are negotiated during the RFP process and often adjusted during the concession term.

MAG calculation and escalation methods:

• 85% of prior-year method (used in 10 of 31 large-hub airports per DWU classification, 2025): MAG is reset annually at 85% of the prior year's actual gross revenue, incentivizing operator investment and volume growth while protecting airport revenue from volatile years

• Fixed MAG with escalation: a negotiated base-year MAG escalates annually by a fixed percentage (2–3%) or tied to an index (e.g., CPI)

• Tiered MAG: higher MAG for established operations, lower for new concessionaires entering the airport

MAG vs. Percentage Rent Dynamics: When actual revenue exceeds the percentage-rent threshold, the operator pays the higher amount. The max(MAG, % rent) structure aligns incentives for operator investment and volume growth. In low-revenue periods, the MAG provides airport revenue stability.

Post-COVID MAG Restructuring: The 2020–2021 pandemic impacted passenger traffic and concession revenues. Airports at 14 of 31 large-hubs implemented temporary MAG relief through:

• Abatement: temporary waiver or reduction of MAG obligations

• Deferral: postponing MAG payments to later periods, potentially extending concession terms or collecting during recovery

• Reset to actual: reducing MAG to actual revenue levels until recovery, then re-escalating toward normalized levels

Multi-tenant operators at 8 of 31 large-hubs continue to negotiate individualized MAG reset provisions based on traffic recovery.

C.3 Privilege/Concession Fees and Other Charges

Beyond percentage rent and MAG, airports at 20 of 31 large-hubs assess additional fees to cover specific operational costs or to monetize specific privileges:

• Per-transaction fees: rental car agreements often include per-contract fees in addition to percentage rent

• Per-square-foot fees: some retail leases specify annual rent per square foot of space occupied

• Common area maintenance (CAM) charges: assessed to concessionaires to fund terminal area cleaning, maintenance, utilities, and security

• Utility charges: direct metering or allocation of terminal utilities (water, electricity, HVAC) to specific concessionaires

• Insurance and liability: requirements for concessionaire-maintained insurance, with airports often named as additional insureds

These supplementary charges are typically not included in gross revenue calculations for percentage-rent purposes, ensuring clean separation between base rent and cost-sharing mechanisms.

D. ACDBE Requirements

D.1 49 CFR Part 23 – Airport Concession Disadvantaged Business Enterprise Program

The Airport Concession Disadvantaged Business Enterprise (ACDBE) program is a federal requirement under 49 CFR Part 23 for airports receiving federal aid. The program aims to ensure that socially and economically disadvantaged individuals have opportunities to participate in airport concession operations.

Key program characteristics:

• Mandatory for federally-aided airports: applies to all concession agreements at airports receiving FAA or other federal funding

• Goal-setting methodology: airports must establish annual ACDBE participation goals as a percentage of total concession revenue averaging 12% across 31 large-hubs (FAA reports, 2024)

• Participation methods: ACDBE goals may be met through direct participation (ACDBE operates concession independently), joint ventures (ACDBE partners with non-ACDBE firm), or management contracts (non-ACDBE operator manages concession with ACDBE ownership/revenue sharing)