Airports Find Creative Ways to Purchase Luggage Carts

Author: 
Mike Schwanz
Published in: 
May-June
2018

Acquiring and managing luggage carts can be an expensive proposition, but Lexington Blue Grass Airport (LEX) and Harrisburg International (MDT) lighten the load by rolling equipment costs into their parking contracts. 

In each case, Republic Parking System purchased luggage carts for the airport, and includes the equipment costs in its monthly charges for managing the cart concession. Because the costs are operating expenses for the airport, it avoids the bidding and bonding requirements associated with capital expenditures. After a preestablished concession period, Republic transfers ownership of the carts to the airport. 

Timothy Edwards, executive director at MDT, reports that the new arrangement is working well at his facility. When the airport’s previous parking contract expired last year, MDT issued a request for proposals and selected Republic. Under the new contract, the parking operator agreed to supply 40 new luggage carts and two new dispensing systems within six months. That process was completed this March.  

facts&figures

Project: Alternative Financing for Luggage Carts 

Sample Locations: Harrisburg (PA) Int’l Airport; Lexington (KY) Blue Grass Airport

Strategy: Luggage carts are purchased by parking operator as part of parking contract; equipment costs are rolled into monthly operating expenses in multi-year contract

Vendor: Republic Parking System

Key Benefits: Bidding & bonding required for capital expenditures are avoided; airports provide customers with new carts & multiple payment options

The airport placed one of the new cart stations in its parking garage and the other in Baggage Claim. Both dispensing systems accept cash and credit cards.

“We signed a five-year deal, with five one-year options, up to 10 years,” Edwards says.  “If it goes that long, we would do a new RFP, and then get new luggage carts at that point. So far, everything has gone very smoothly.”

While contracts vary from airport to airport, Republic keeps all revenue from luggage cart operations at MDT. “This was a good deal for us, because we provide brand new luggage carts for our passengers, and they now have the option of using credit cards to pay for them, which they did not have before,” Edwards explains. “In addition, Republic personnel are in charge of returning all the carts to the dispensers, freeing up our own employees for other tasks.”

A Different Model at LEX 

Officials at Lexington Blue Grass Airport established a cart agreement with Republic in June 2010. The parking vendor purchased 30 new luggage carts and two dispensing machines for the airport, and in return, LEX paid Republic a monthly fee to offset their cost, and for managing the luggage cart operation. “By 2013, we decided to purchase the carts outright from Republic,” says Don Sever, director of administration and finance at LEX. “We only had $7,000 remaining to pay off our amortization on their initial purchase price of $36,000.”

Now that the new luggage carts have been paid in full, the airport is beginning to earn revenue on the cart operation. “While the luggage carts are not a huge revenue source for the airport, it is very important for us to offer this amenity for our customers,” Sever continues. “We typically average $600 or $700 a month from these rentals, and those dollars remain with the airport.”      

Sever and his staff are considering the option of reconfiguring the dispensers to accept Apple Pay, as well as cash and credit cards. “Younger travelers are using their cellphones for purchases, so we will probably add it as an additional customer service,” he explains.

The Vendor Perspective

Don Barrett, a senior vice president for Republic, says that luggage cart concessions make sense for the company. Barrett oversees 34 of the 76 parking garages that the firm operates at U.S. airports, and feels that every airport deal is a bit different. 

“At MDT, they wanted new carts and dispensing systems that accepted credit cards,” he explains. “Our contract with the airport is that they pay us a management fee each year to manage their parking garage and shuttle operation. We also manage the luggage cart operation; all luggage cart revenue goes to Republic to pay for the original investment of the luggage cart system.”

At LEX, Republic paid $36,000 for the current system, and the airport agreed to pay a monthly fee to eventually cover that cost. That system had limitations, and during the most recent request for proposals process the airport wanted to update the luggage carts. With the new system the revenue for the luggage carts is part of the overall parking revenue from which Republic receives a percentage.  

Barrett considers luggage cart operations an auxiliary service for Republic’s airport customers. “This is a value-added service that we provide to our customers,” he says. “It is not a huge revenue source. Some 25 years ago, before wheeled suitcases became popular, luggage cart rentals brought in more income than today. We would not go to a new airport just to manage luggage carts; it would not make financial sense. But with current customers, we are open to providing this service.” 

While LEX and MDT are mid-sized airports with about 1 million annual passengers each, larger airports—especially those with international service—could especially benefit from asking current vendors to foot the bill for luggage cart operations, suggests Justin Thompson, sales manager for Thompson Contract. (Thompson distributes Wanzl carts in North America.) 

“This method can save upfront money, and eventually lead to a long-term profit,” Thompson says, noting that one large international U.S. airport pays $4 million for its luggage cart operations. “Finding an alternative to that huge expense is just good business.”

Many Choices for Partners 

Thompson says that an effective cart agreement covers these key points:

The contractor purchases the carts, vending units, software and other needed infrastructure. The airport leases the equipment over a five-year period, covering both the initial outlay for carts and a monthly service fee.  

• At the end of the initial contract, the carts become the property of the airport.

• All revenue generated from domestic cart rental accrues to the airport. 

• Credit card sales are immediately deposited to the airport’s account. 

• The airport pays a specified fee (per arriving international passenger or per re-staged cart, etc.) for the operator to shuttle carts to/from the Federal Inspection Station. (Since most new carts are equipped with radio frequency identification tags, counting their delivery is a simple electronic process.)

According to Thompson, most airports that follow this model should be able to recover their investment in about 36 months—and own the equipment after five years. Since high-quality luggage carts typically last 20 years with normal use and maintenance, such airports can use them for many more years at minimal cost.

While every airport has unique financial challenges, partnering with trusted vendors for luggage cart operation could save quite a bit of money over time, he emphasizes. “Based on this model, your costs are fixed, but revenue is not, and could continue to grow.”

Moreover, Thompson notes that similar equipment arrangements could be struck with other proven providers, such as janitorial services, security companies, aircraft cabin cleaners, shuttle bus operators, aircraft caterers, contract baggage handlers and rental car companies.  

Subcategory: 
Concessions/Retail

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