On December 12, 2022, customers waited in a long line at the Starbucks cafe in the Miami International Airport terminal.
Jeff Greenberg | Universal Image Group | Getty Images
Air travelers face a host of headaches during their travels: slow security lines, long wait times in luxury lounges, the threat of flight delays or cancellations, and airport Starbucks.
Many travelers, flight crews, and even airport staff have experienced, at some point, a long wait for a Starbucks cappuccino, cold brew, and eggs.
“They need a better system,” said Coresa Barrino, a Starbucks customer at New York’s LaGuardia Airport Terminal B earlier this month, who had been waiting for 10 minutes, counting the seconds for her coffee. The nursing assistant, who was on a flight back to Charlotte, North Carolina, said when she bought a coffee at a Starbucks in Charlotte, she had to wait about two minutes.
The long wait caught the attention of the coffee chain’s new chief executive, Brian Niccol, who joined Starbucks in 2017. Chipotle In September, it pledged to win back customers and reverse the company’s declining sales.
Nicol told investors he believes licensed locations, such as those within Target stores or airports that are interested in following the company’s “Return to Starbucks” strategy.
“When I think about airports and so on, there’s a huge opportunity for us to streamline some of the execution there so that we can give people the tremendous throughput that they want so they can move forward,” Nicol said in the company’s quarterly report. October 30 conference call.
Starbucks’ airport staff and company technology will be put to the test this week on one of the busiest travel days of the year. The Transportation Security Administration expects a record number of travelers during the Thanksgiving holiday and said Sunday, December 1, could be the busiest day of the year, with more than 3 million people screened at U.S. airports.
A surge in air travel, especially during peak times like Thanksgiving, has led to congestion in airport security lines, lounges and gates, an issue airlines and the federal government are working to address. For the airline industry, the bottleneck at airport Starbucks is just another sign of soaring demand and overcrowded airports.
According to the U.S. Department of Transportation, a record 1.05 billion people flew to, from or to U.S. airports in 2023, slightly higher than the total in 2019 before the pandemic.
Struggle and new methods
Starbucks has been in trouble lately. it is Sales fell for the third consecutive quarter in the period ended Sept. 30 as consumers resisted higher prices and ignored initiatives such as discounts and energy drinks aimed at attracting customers. U.S. same-store sales fell 6% from the same period last year.
In late October, Niccol announced plans to improve customer experience and revive the company’s sales, from bringing back condiment bars to eliminating surcharges on dairy alternatives and cutting menus.
Reducing wait times is a key goal: He hopes to reduce service times to four minutes, which will reduce queues and improve the customer experience.
Although Starbucks began rolling out mobile ordering and payment services at its airport stores in 2022, the change sometimes added to confusion at cafe counters rather than solving them. Additionally, some travelers may not be regular Starbucks customers who have already downloaded the app.
Improving the coffee chain’s airport outposts could boost sales and brand reputation when it’s needed most. Even Starbucks’ lost customers may have visited the airport while traveling.
As tourists return home in droves after the pandemic ends, Starbucks and other restaurant chains have an opportunity to boost sales.
Concessions account for about 4% of U.S. airport revenue annually, according to the latest Federal Aviation Administration data, but they are an important feature for many passengers who have limited time (and often energy) to refuel before takeoff.
Jennifer Simkins, assistant vice president for concessions at Dallas-Fort Worth International Airport, said revenue from food and beverage outlets is growing faster than the number of passengers. The airport has become the third busiest airport in the world for passengers, up from 10th in 2019, according to Airports Council International.
Airlines are also adding seats on planes and in some cases flying larger planes.
Ursula Cassinerio, assistant vice president for airport operations at Moody’s Ratings, said more passengers on each plane means restaurants can become crowded during peak hours, with more customers waiting to be served. , and space is limited.
She noted that many airports are undergoing major renovations, if not new terminals. That means “if you have more retail and restaurant space, there are more revenue opportunities,” she said.
According to data from market research firm Technomic, the 25 busiest airports in the United States have an average of 80 food and beverage brands for passengers to choose from.
Authorization mode
The challenge for Starbucks is that its airport stores are operated by licensees rather than Starbucks itself.
In 1991, Starbucks and licensee HMSHost opened its first airport store at Seattle-Tacoma International Airport, which serves Starbucks’ hometown.
For nearly three decades, HMSHost has operated the chain’s airport stores through an exclusive agreement with Starbucks and has gradually expanded its airport footprint to approximately 400 outposts.
But in 2020, HMSHost terminated the deal, giving the operator the flexibility to offer more coffee options to airports.
While HMSHost still operates the vast majority of Starbucks airport cafes, more operators, such as Paradies Lagardere and OTG, have begun to take action against them.
HMSHost, Paradies Lagardere and OTG did not respond to requests for comment for this report.
“Airport locations are tricky because they can make a lot of money, but operationally they can sometimes be very challenging,” said Mark Kalinowski, restaurant analyst and CEO of Kalinowski Equity Research. express.
Customers wait in line at a Starbucks cafe in the terminal of New York’s LaGuardia Airport on November 11, 2024.
Leslie Josephs/CNBC
Obtaining a store license would allow Starbucks to avoid the hassles of operating in an airport, such as staffing issues, high rents and security checkpoints. While coffee chains are used to seeing large numbers of under-caffeinated customers in the morning, a surge in airport demand could be more volatile.
“A plane lands and all of a sudden there are 100 people here where there were zero,” said Kevin Schimpf, director of industry research at Technomic.
The trade-off is that Starbucks makes less money from those licensed restaurants.
As of September 24, the company had more than 16,300 cafes in the United States. The rest are operated by licensees. According to Starbucks, this number includes cafes in 47 of the 50 busiest airports in the United States. The company did not disclose its current number of airport stores to CNBC.
In fiscal 2024, authorized store revenue accounted for 12% of Starbucks revenue, or $4.51 billion. According to company filings, Starbucks collects only licensing fees from these stores, royalties on a percentage of monthly sales, and fees for supplying coffee, tea and food to the licensees.
Bank of America analyst Sara Senatore estimates that for every dollar spent at franchised stores, Starbucks generates about 7 cents of advance interest, tax, depreciation and amortization. Company-operated stores earn about 23 cents for every dollar spent, Senatore wrote in a September research note.
The company noted in the risk factors section of its latest annual report that Starbucks’ brand could be harmed if its business partners and third-party suppliers slack off.
“The vast majority of customers don’t know if it’s a company-owned Starbucks or a licensed Starbucks,” Kalinowski said. “They just want their Starbucks. They want it made right. They want it fast. And they want it fast.” They’re in a stressful situation because they’re trying to get to the door.”
The airport itself is also using more technology in its restaurants to help move lines.
For example, labor challenges have led to more kiosks and tablets inside airport restaurants.
“It’s getting harder and harder to staff a lot of these restaurants, so being able to save on front-of-house costs by having consumers order at kiosks or on tablets or other devices is really helpful,” Schimpf said.
“Sometimes the airport is a little bit behind the street,” said Laurie Noyes, vice president of concessions and commercial parking at Tampa International Airport. But she said the airport has made strides in offering more digital options, Now, travelers can order food in advance through the following methods Uber Eat and then pick up your meal at the airport restaurant.
Dallas-Fort Worth offers DFWOrderNow, a website and platform available on digital kiosks so travelers can order food in advance. Simkins said the airport’s platform will redirect Starbucks customers to Starbucks’ own platform. Starbucks offers more than 170,000 possible drink orders, according to the chain’s website. “We just discovered the value of maintaining familiarity with our customers,” Simkins said.
Simkins said the airport is developing delivery robotics technology to speed up service. She said the company was also experimenting with offering dining and retail packages from airport restaurants and shops so passengers “no longer have to plan routes to multiple stops at the airport.”
Simkins said a local coffee company, Fort Worth, Texas-based Ampersand, plans to open a robot barista at DFW’s Terminal C. It will be available 24/7 to accommodate crew members arriving outside of business hours.
Popular chains still draw crowds, Simkins said.
“There are some brands that people will queue up to buy,” she said.
For Barrino, who was waiting for his coffee at LaGuardia Airport, Starbucks was one of them.
“I really like this brand,” she said.
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