AGENDA STAFF REPORT

Agenda Item AGENDA STAFF REPORT ASR Control 10-001703
MEETING DATE:	01/11/11
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	2
SUBMITTING Agency/Department:	John Wayne Airport (Approved)
Department contact person(s):	Alan L. Murphy (949) 252-5183

Subject: Award News and Gift Concession Lease Terminals A and C

ceo Concur	County Counsel Review		Clerk of the Board
Concur	Approved Agreement to Form		Discussion
			4/5 Vote

Budgeted: N/A		Current Year Cost: N/A		Annual Cost: N/A

Staffing Impact: No		# of Positions:		Sole Source: N/A
Current Fiscal Year Revenue: N/A
Funding Source: N/A

Prior Board Action: N/A

RECOMMENDED ACTION(S):

Find that: (i) Final EIR 582 and Addendum 582-1, as revised by Final Supplemental EIR 582, previously certified on June 25, 2002, accepted on December 10, 2002, and certified on October 19, 2004, respectively, have been examined in relation to the proposed project; (ii) the proposed project's environmental effects were fully analyzed and disclosed in these CEQA documents and the proposed project would not have any environmental effects beyond those analyzed and disclosed in these environmental documents; (iii) no further CEQA compliance is required for the proposed project.

Select John Wayne NG-AC JV (The Hudson Group) for award of the News and Gift Concession Lease at John Wayne Airport for Terminals A and C.

Authorize the Chair to execute the original and duplicate of the News and Gift Concession Lease with John Wayne NG-AC JV (The Hudson Group) and return a copy to John Wayne Airport.

SUMMARY:

Award news and gift concession lease to John Wayne NG-AC JV (The Hudson Group) for operation of a news and gift concession in Terminals A and C and authorize the Chair to execute the Lease.

BACKGROUND INFORMATION:

Summary

The purpose of this Agenda Staff Report is for the Board to select one proposer from a ranked slate of four proposers to provide news and gift concession services in Terminals A and C at John Wayne Airport (JWA). Based upon the defined criteria, the evaluation committee ranked Paradies-OC, LLC first and John Wayne NG-AC JV (The Hudson Group) second. However, the Request for Proposals noted that the County's Board of Supervisors adopted concession leasing policy requires two separate operators for the news and gift concessions. Therefore, it is recommended that The Hudson Group be selected as the news and gift concession operator for Terminals A and C at JWA provided the Board has awarded the Terminal B and C news and gift concession to Paradies-OC, LLC.

Operating Information for News and Gift Concession - Terminal A

JWA's current news and gift concession operator in Terminal A, Airport Management Services, LLC, dba The Hudson Group, currently operates three of the locations in the subject lease area. The Hudson Group reported news & gift gross sales to be $4,553,901.60 and specialty retail (Sunglass Hut/Life is Good) gross sales to be $1,199,758.56 with total combined gross sales of $5,753,660.16 during the 2009/2010 fiscal year. The passenger total for 2009 was 8,705,259.

Concessionaire

Location

Lease Expiration

MAG

% Rent

The Hudson Group

News & Gift

Terminal A

03/06/11

$903,406

17% - News/Sundries

26% - Gift

Sunglass Hut/

Life is Good

Specialty Retail

Terminal A

10/23/11

$138,203

15%

Proposals Requested

JWA's request for proposals (RFP) for the Terminal A/C package news and gift concession lease was circulated and advertised on March 19, 2010. A pre-proposal meeting and terminal tour were conducted on May 26, 2010. Industry professionals representing four news and gift retail companies attended the meeting. Two RFP addenda were subsequently published and forwarded to all interested parties.

Proposal Overview

The News & Gift RFP overview is detailed below:

Minimum Annual Guarantee (MAG):	$650,000
Minimum Percentage Rents:	15% for News/Sundries 23% for Gifts 12% for Specialty Retail
Lease Term:	Approx. Ten (10) Years
News and Gift Operation Experience:	Minimum Five Years

Airport Concession Disadvantaged Business Enterprise (ACDBE)

JWA established a race neutral goal of 15.7% for news & gift operators and 13.6% for specialty retail firms owned and controlled by socially and economically disadvantaged persons. ACDBE participation was not scored as part of the proposers’ evaluation.

Proposals Received

Four proposals were received and opened by JWA on August 25, 2010, as follows:

1) John Wayne NG-AC JV (The Hudson Group); 2) Host International, Inc.; 3) Pacific Gateway Concessions Orange County JV; 4) Paradies-OC, LLC. Each of the proposals included the required $10,000 proposal deposit. The deposit submitted by the successful proposer will be applied to the first month's rent. The unsuccessful proposers deposits will be returned after the County signs the successful proposer's lease.

Proposer Interviews

Proposer interviews were held with each proposer on September 15, 2010. While the interviews were not scored separately, the information provided in the interviews was considered by the evaluation committee and is reflected in the scoring.

Proposal Evaluation

A proposer evaluation committee, composed of five members, met on October 14, 2010 to review proposals and recommended a ranked slate. The five committee members included one public member with subject matter expertise and senior level JWA managers from Public Affairs, Facilities, Operations and the Airport Executive Office.

Proposals were rated based on the following criteria:

Fees Proposed 25%

Experience and Qualifications 20%

Financial Viability and Background Data 20%

Proposed Merchandising/Pricing and Improvements 35%

Committee member ratings are summarized in Table 1 below:

Table 1: Committee Member Ratings

Committee Member	John Wayne NG-AC JV (The Hudson Group)	Host International, Inc.	Pacific Gateway Concessions Orange County JV	Paradies-OC, LLC
Member #1	465	440	325	420
Member #2	480	420	290	480
Member #3	420	375	300	465
Member #4	445	375	300	480
Member #5	420	340	280	445
Total Score	2,230	1,950	1,495	2,290
Average Weighted Score	446	390	299	458

Proposal Comparison

A comparison of proposal details, including the proposed MAG, percentage rent and construction investment are summarized in Table 2 as follows:

Table 2: Proposal Comparison

John Wayne NG-AC JV (The Hudson Group)

Host International, Inc.

Pacific Gateway Concessions Orange County JV

Paradies-OC, LLC

MAG

Year 1: $673,730

Year 2: $1,325,025

$1,027,000

$1,200,000

$1,415,160

% Rent - News/Sundries

18%

17%

% Rent -

Gifts

28%

26%

% Rent – Specialty

15%

12%

Construction

Investment

$2,091,180

$1,946,434

$2,224,350

$1,923,825

Summary of Proposals for News and Gift Concession - Terminal A/C

John Wayne NG-AC JV (The Hudson Group) currently operates five hundred fifty (550) news and gift concessions in seventy (70) airports in the U.S. The Hudson Group is a wholly owned subsidiary of Dufry AG and is headquartered in East Rutherford, NJ. The Hudson Group's proposal includes a Hudson News for the main store located on the secure side of Terminal A and the newswall located on the secure side of Terminal A. The store will include "Discover Orange County" and "Orange County Market" sections to accentuate the Orange County locale. The Hudson Group has obtained exclusive agreements with Mission San Juan Capistrano, Bowers Museum, Richard M. Nixon Library and The Heritage Museum to promote their merchandise in the "Discover Orange County" section. The Hudson Group has also teamed up with the Anaheim Orange County Visitor & Convention Bureau whose local knowledge will assist in the selection of products which represent local cultural attractions. Hudson News will also feature a "Tech on the Go" portable electronics section. The Hudson Group proposal also proposes CNN Newsstands for the store located in Terminal A pre-security and for the Terminal C location. Both CNN Newsstand locations will feature "Tech on the Go" and a selection of gifts and souvenirs. Travelers will also be able to view live CNN news programs while shopping. The Hudson Group proposes to feature a Rip Curl Surf Shop and Sunglass Hut for the specialty retail location in Terminal A. The Hudson Group's financial reports consistently indicate profitability from operations.

Host International, Inc. (HMSHost) has been in business for more than one hundred and twelve (112) years and currently has operations in one hundred and eleven (111) airports around the world, including LAX, San Diego, San Francisco and Las Vegas. HMSHost is proposing a Fox News Channel theme for the main news and gift store in Terminal A. This store will include flat screen monitors featuring real time Fox News broadcasts with a constantly scrolling ticker tape banner. This store will also feature travel accessories from Brookstone, "Postcards from Orange County" featuring local merchandise and also the Discovery Science Center. HMSHost has proposed The Orange County Register News as the theme for the landside store. Simply Books is proposed for the specialty retail location in Terminal A. This location will feature an exclusive collection from Orange County's Discovery Science Center. The Terminal A news wall, Orange Coast News, will also offer Brookstone travel accessories. The Terminal C news and gift store, located on the secure side will also be an Orange County Register News store.

Pacific Gateway Concessions Orange County JV (PGC) started in 1998 as an ACDBE small business in San Francisco International Airport. PGC graduated from the ACDBE program in 2006 and has grown to over Thirty (30) retail concessions in major geographical areas of the country. PGC currently operates both news and gift concessions and specialty retail shops in San Francisco International Airport (SFO), Houston Intercontinental Airport (IAH) and John F. Kennedy International Airport (JFK). PGC is proposing U.S. News & World Report for the news and gift stores located in Terminal A and Terminal C. PGC has partnered with the Surfrider Foundation to propose two news and gift locations called Surf Rider News. These locations will be the Terminal A news wall and the Terminal A pre-security store. These locations will pay homage to the surf and beach culture in Orange County. Five Piers Marketplace is proposed for the specialty retail location in Terminal A. The stores will feature products from Havaianas, Roxy, Quicksilver, Xan Chocolates and Island Cowgirl jewelry. The store is inspired by the five ocean piers located in Orange County. PGC proposes a selection of newspapers, magazines, and books that will feature a wide variety of top publications and titles.

Paradies-OC, LLC (Paradies) was founded in 1960. Paradies currently provides concession services with more than five hundred (500) stores in seventy-two (72) markets across the United States and Canada. Paradies currently operates news and gift concessions in San Francisco International Airport (SFO), McCarran International Airport (LAS), and John F. Kennedy International Airport (JFK). Paradies has proposed South Coast News for the news and gift store for Terminal A. OC TravelMart is the concept for the Terminal A, pre-security store. The design is inspired by the agricultural past of Orange County. Additionally, plasma displays will offer CNBC news and local news. CNBC Express is the proposed theme for the news wall. The CNBC logo will be featured over a plasma screen offering news. Beachfront News is the store concept for the Terminal C news and gift location. This concept was inspired by the beautiful Orange County beaches. Six surf cams will connect the passengers to local beach culture. Paradies' proposal includes Read & Return, a program that allows travelers to purchase a book, read it and return it to any Paradies store for a 50% refund. "H2O & a Paper To Go" is a self serve kiosk that will allow customers to purchase newspapers and bottled water bypassing the cash register. Paradies' Recharge! Concept will allow customers to charge batteries for their laptops, PDAs, cell phones, etc. in a convenient, secure environment. Paradies has proposed a BlackBerry store and a Lacoste store for the specialty retail location in Terminal A. The BlackBerry Store will offer smartphones from multiple wireless service providers as well as a wide range of accessories. The Lacoste store will offer customers a collection of active and casual sportswear for women, men and children as well as handbags, jewelry, eyewear and footwear.

The evaluation committee carefully considered all information contained in the four proposals. Paradies proposed the highest MAG and had the highest overall score and The Hudson Group had the second highest MAG and overall score. The committee felt that The Hudson Group submitted a concept that embodies what makes Orange County unique by highlighting it's beauty and variety. The Hudson Group will showcase some of the best of Orange County through obtaining exclusive agreements with local attractions such as Mission San Juan Capistrano, Bowers' Museum and The Nixon Library. The open plans provide good access and egress for customers and the interior organization is clear and intuitive. Additionally, The Hudson Group's proposed concepts, substantial experience, and their proven record in customer service at JWA, offer benefits to JWA's passengers and visitors. The Hudson Group is the current news and gift operator in Terminal A and awarding them the Terminal A/C news and gift concession would enable a seamless transition, and offer the least disruption to passengers while providing the most benefit. Paradies has been recommended for award of the Terminal B/C news & gift concession and The Hudson Group is recommended here for award of the Terminal A/C news & gift concession. This recommendation is consistent with the Board’s policy of having two separate news & gift operators within the JWA Terminals.

CEQA COMPLIANCE

Final EIR 582, Addendum 582-1 and Final Supplemental EIR 582 previously certified on June 25, 2002, accepted on December 10, 2002, and certified on October 19, 2004, respectively, have been prepared for the Settlement Agreement Amendment and Settlement Amendment Implementation Plan ("proposed project"). The Board is required to examine the subject project to determine whether its environmental effects were fully analyzed and disclosed in these previous CEQA documents and whether the subject project would have any environmental effects beyond those analyzed and disclosed in the previous environmental documents. If the Board concurs, no further CEQA compliance is required as noted in Recommended Action #1.

LEGAL REQUIREMENTS

A four-fifths vote by the Board is required to approve the Lease in accordance with Government Code 25536.

FINANCIAL IMPACT:

The annual amount paid to County will be the greater of $1,325,025 (after year 1) or 18% of news/sundries gross receipts, 28% of gifts gross receipts and 15% of specialty retail gross receipts.

STAFFING IMPACT:

N/A

EXHIBIT(S):

A. Hudson Merchandising List
B. Host Merchandising List
C. PGC Merchandising List
D. Paradies Merchandising List
E. Evaluation Rating Scoresheets
F. Lease Summary

ATTACHMENT(S):

A. News and Gift Concession Lease Terminals A and C