Building for the Future Concession Program

BUILDING FOR THE FUTURE

CONCESSION PROGRAM DEVELOPMENT

SEPTEMBER 1, 2016 AGENDA

. Welcome and Introductions

. Airport Growth and Trends

. Concessions Program Development

. Concessions Leasing Plan

. Minority Business Participation

. Being a Concessionaire

. Questions & Answers

. Networking

2 AIRPORT GROWTH AND TRENDS (WHAT IS GOING ON @ DEN?)

NEIL MAXFIELD SENIOR VICE PRESIDENT - CONCESSIONS DENVER AND COLORADO ARE GROWING 101,000 additional people in Colorado in 2015 Ranked 2nd in the nation for population growth

71.3 million visitors to Colorado in 2014

+1.1 million people in Denver metro in 2040 Crowded Colorado in 2040: +2.3 million people 38% growth in annual tourism since 2009

Sources: Colorado, Department of Local Affairs, State Demography Office; Colorado Tourism Office / Data Prepared By: Ricondo & Associates, Inc. 4 DEN IS GROWING Seat Capacity: CY 2016 vs. CY 2015

+9.7% +7.4% +8.1%

• 4th largest station • Network shift from IAH • DEN accounts for 47% of • 199 average daily to DEN and SFO flights (This was 99% in departures • 50% less 50-seaters by 2009) • DEN has the most 2020 • Cut over 30% of DEN average seats per flight • Rapidly adding Skywest- flights in 2015 but slowly among their top 20 operated 76-seat E-175s adding back cities stations • Purchased and ordered • Transitioning to larger • Filling in some gaps left 737-700’s and -900’s, A321 aircraft on several by Frontier Airlines at 777’s, 787’s and A350’s routes large and mid-sized cities

Overall Airport YTD Through April: Passengers: 6.0% Capacity: 7.5% 5 DEN’S UNIQUE MARKET

175 destinations 8 20 international countries cities

17 small communities depend on our air service

• DEN’s geographic location is favorable for domestic connections and access to unique smaller destinations

Data Prepared By: Ricondo & Associates, Inc. 6 PASSENGER FORECAST

7 RECOGNIZE GENERAL UPWARD TREND… REMAIN FLEXIBLE AND RESPONSIVE 100

90 Continental Dismantles Denver Hub Original Frontier What’s 80 New Frontier Launches Airlines Ceases Next? Operations Early 2000s Recession Sept. 11th Attacks 70 Southwest Colorado Launces Service Recession 60 Great Recession DEN 50 Opens

40 ANNUAL PASSENGERS (MILLIONS) PASSENGERS ANNUAL 30

Data Prepared By: Ricondo & Associates, Inc.

8 MARKET SHARE BY AIRLINE

120 Other U.S. Airlines Other Foreign Flag Airlines Mainline: Aeromexico Alaska Air Canada American British Airways Delta Icelandair 100 jetBlue Lufthansa Spirit Volaris Commuter: Aerodynamics, Inc. 80 Denver Air Connection Great Lakes PenAir

40 AnnualPassengers (millions)

2010 2020 2037 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2038 2039 2040 2015-2040 CAGR United Airlines: 2.47% Southwest Airlines: 2.44% Frontier Airlines: 1.71% Other Airlines: 2.22% 9 TRANSFER VERSUS O&D PASSENGERS

Original Airport Design: 60% Connecting and 40% O&D

10 TYPES OF PASSENGERS

Impact the Following Facilities • Gates • Concessions CONNECTING • Airfield Capacity Impact the Following Facilities 35% of all • Roads passengers • Parking in 2015 • Rental Cars ORIGIN & • Ticketing DESTINATION • Security (O&D) • AGTS Train • Baggage Claim 65% of all • Concessions • Gates passengers • Airfield Capacity in 2015 11 GATE UTILIZATION • 107 contact gates

• 5 new gates added Nov 2014

• All available gates are leased

gates 12 CONCESSIONS PROGRAM DEVELOPMENT

NEIL MAXFIELD SENIOR VICE PRESIDENT - CONCESSIONS DEN HISTORICAL SALES

$350.0 4.2% Annual Growth $300.0

$250.0 6.0% Annual Growth $200.0

Millions $150.0

$100.0

$50.0

$0.0 2011 2012 2013 2014 2015

Food & Beverage Retail (Includes Spa Services)

14 DEN HISTORICAL SALES PER ENPLANEMENT

$12.00 3.7% Annual Growth $10.00

$8.00 5.4% Annual Growth $6.00

$4.00

$2.00

$0.00 2011 2012 2013 2014 2015

Food & Beverage Retail (Includes Spa Services)

15 DEN HISTORICAL SALES PER ENPLANEMENT

Food & Beverage Sales per Enplanement Retail Sales per Enplanement $8.00 $8.00

$7.00 $7.00

$6.00 $6.00

$5.00 $5.00

$4.00 $4.00

$3.00 $3.00

$2.00 $2.00

$1.00 $1.00

$0.00 $0.00 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

DEN Comparative Airports DEN Comparative Airports

16 COMPARATIVE CONCESSIONS AREA

2014 Retail Concessions Relative Area 6.0

5.0

4.0

3.0

2.0 Area per 1,000 Enplanements (sq.ft.)

1.0

0.0 ORD CLT MDW LAX ATL DEN SLC DFW PHX SEA EWR IAD SFO DTW MSP IAH LAS BWI JFK PHL MCO MIA

17 COMPARATIVE CONCESSIONS AREA

2014 Food & Beverage Concessions Relative Area 8.0

7.0

6.0

5.0

4.0

3.0

2.0 Area per 1,000 Enplanements (sq.ft.)

1.0

0.0 MDW ORD CLT ATL LAX SFO SEA IAH IAD DEN DFW SLC BWI LAS PHL MIA JFK PHX MCO DTW EWR MSP

18 COMPARATIVE CONCESSIONS AREA

2014 Relative Area 12.0

10.0

8.0

6.0

4.0 Area per 1,000 Enplanements (sq.ft.) 2.0

0.0 MDW ORD CLT ATL LAX DEN SEA SFO SLC DFW IAH IAD PHX BWI LAS EWR DTW JFK PHL MSP MCO MIA

Food & Beverage Retail

19 DEN SPACE REQUIREMENTS

Current Program 2030 Program Requirements 176,000 SF 380,000 SF

20 Concessions Hierarchy

21 MEETING THE NEED: GATE EXPANSION

22 MEETING THE NEED: GREAT HALL

– Provides ±75,000 sf airside space

– Primary market is O&D passengers

– Focus on high-profile, destination shopping and dining concepts

23 MEETING THE NEED: EXPAND & REPURPOSE

24 MEETING THE NEED: EXPAND & REPURPOSE

25 EXAMPLE DEVELOPMENT: CONCOURSE A

A Core Concourse Level A Core Mezzanine Level Create Retail District Develop Mezzanine: Duty Free + Higher End Create Retail District: Chef-Inspired Restaurant Popular-Priced and Services and Marché

Develop Frontier Office to 2-Level Restaurant

Add Vertical Circulation

In-Fill and Create New Food Court

Create Retail Mezzanine Access to Market 2-Level Restaurant

26 CONCESSIONS SPACE DEVELOPMENT BENEFITS

. Enhance Customer Experiences

. Create Sustainable Business Opportunities

. Improve Concessionaire Economics

. Increase Airport Revenues

. Lead – not follow – market forces & trends

. Curate Sense of Place

27 MAXIMIZING SALES POTENTIAL

Sources of Projected Sales Growth 2015 Actual to 2030 Projection (2015 Dollars)

$600.0

$58.3 $551.5

Millions $500.0 $135.6 $493.2 $400.0

$47.4 $300.0 $310.1

$200.0

$100.0

$0.0 2015 Actual Enplanement Growth Program Expansion 2025 Projection Enplanement Growth 2030 Projection 2015-2025 2025-2030

28 CONCESSIONS LEASING PLAN

NEIL MAXFIELD SENIOR VICE PRESIDENT - CONCESSIONS RE-LEASING REQUIRED AHEAD OF EXPANSION

Cumulative Lease Expirations

40 No. Units of

0 Near Term 2017 2018 2019 2020 2021 2022 Expiration Year

30 RE-LEASING REQUIRED AHEAD OF EXPANSION

31 2016 Q4 RFPs: CONCOURSE C

RFP Package 3: RFP Package 1: News/Convenience Branded Coffee (new space)

RFP Package 2: Branded Coffee

32 2016 Q4 RFPs: CONCOURSE B

RFP Package 3: Expanded News/Convenience

RFP Package 1: Branded Coffee (new space)

RFP Package 2: RFP Package 5: Branded Coffee Casual Dining (new space)

33 2016 Q4 RFPs: CONCOURSE A

RFP Package 1: Branded Coffee (new space)

RFP Package 4: Expanded Casual Dining RFP Package 2: Branded Coffee (new space)

34 2016 Q4 RFPs

RFP PACKAGE No. OF SQUARE FEET LOCATIONS (approx.)

Package #1 – Branded Coffee 3 900

Package #2 – Branded Coffee 3 1,346

Package #3 – News & Convenience 2 1,907

Package #4 – Casual Dining 1 3,895

Package #5 – Casual Dining 1 3,572

35 RFP SCHEDULE

Outreach Events – Phase 1 2016 Q3

Issue Phase 1 RFPs October 2016

Anticipated Phase 1 RFP Due Date December 2016

Anticipated Phase 1 RFP Awards 2017 Q1

Outreach Events – Phase 2 2017 Q1/Q2

Issue Phase 2 RFPs 2017 Q2

36 MINORITY BUSINESS PARTICIPATION

VICKI PADILLA ACDBE PROGRAM ADMINISTRATOR What is ACDBE?

. Airport Concessions Disadvantaged Business Enterprise

. Final rule for Airport Concessions (49 CFR, Part 23)

. Became effective in 2005

. Its purpose is to help firms compete and participate in concession opportunities, but does not necessarily guarantee award of a contract.

38 ACDBE – Program Objectives

. To ensure non-discrimination in the award and administration of opportunities for concessions by airports receiving DOT financial assistance;

. To help remove barriers to the participation of ACDBE’s in opportunities for concessions at DIA;

. To create a level playing field on which ACDBEs can compete fairly for opportunities for concessions.

39 ACDBE - Who Should Apply?

. Concessions operators (food & beverage, retail, services to travelling public)

. Firms that provide goods or services to concessionaires in the course of operating the concession . Food & beverage distributors . Retail goods . Paper products . Janitorial . Legal . HR/employees . Auto related (car rental and ground transportation)

40 Why should I apply for ACDBE certification?

41 ACDBE – Why?

. Visibility

. Increased opportunities

. Supply to non-ACDBEs

. ACDBE operator

. Growth

42 ACDBE Requirements

. Ownership . At least 51% of the firm’s ownership must be managed and controlled by members of socially and economically disadvantaged groups. (Woman, Hispanic, Asian, Black, Native American)

. Business Size . $56.42M - F&B, retail, services and suppliers (3-year average gross receipts) . $75.23M – Car rental companies (3-year average gross receipts) . $1B in assets – Banks & financial institutions . 1,500 employees – Pay telephones . 350 employees – Automobile dealers

. Personal Net Worth . $1,320,000 cap . Excludes primary residence . Excludes ownership interest in applicant business

. Time in Business . No specific time requirements, though must be actively in business

43 ACDBE – Certification Mistakes and Pitfalls

. Incomplete information

. You must answer all questions and upload documentation, even if n/a

. Insufficient documentation of ownership acquisition

. By-Laws/Operating Agreement issues

. Insufficient management, control, and/or voting rights

. Lack of independence

44 ACDBE Goals

. Airport Goal

. Individual Concessions Goals

. Availability of certified firms

. Goals on similar concessions

. Overall airport goal

45 ACDBE Goals Compliance

Goals can be met by:

. Concession owner/operator ACDBE certified

. Non-certified owner obtaining goods and/or services from ACDBE certified firms

. Agreements entered into by two or more firms

(joint ventures, management agreements, etc.)

***ACDBEs are encouraged to work together to operate concessions***

46 ACDBE Certification for Counting

. Must be ACDBE certified in the state of the opportunity by one of the authorized certifying entities of the state (out of state firms must be certified in home state prior to applying for certification in new state)

. Must be ACDBE certified in the state of the opportunity at the time the proposal is submitted

. Certification must be updated annually and renewed every three years

. Participation counts through end of the original contract term even if the ACDBE firm graduates from program during the original term

. Participation ceases to count if revoked or de-certified for any other reason during the term of the contract

47 Apply for certification NOW!!

Look for partners and suppliers NOW!!

48 Please refer to

49 C.F.R. Part 23

49 Suggestions

. Register to be notified of opportunities

. Attend pre-proposal conferences

. Download planholders and attendee lists

. Attend trainings and networking events

. Contact current concessionaires

. Read “Resource Materials”

. Check “Future Opportunities” frequently

. http://business.flydenver.com/bizops/concessions.asp

50 Tenant Finish / MWBE Goals

MWBE Requirements

. An MWBE goal will be assigned, a portion of which must be obtained through professional design

. MWBE Commitment Form must be submitted with proposal

. Successful proposer must contact DSBO within 15 days of notification to discuss MWBE requirements

51 References and Contact Information http://business.flydenver.com/bizops/smallBus.asp

ACDBE Program Administrator ACDBE Program/Tenant Finish ACDBE Certification Vicki Padilla LaQuisha Shaw Alicia Sewell (303) 342-4358 (303) 342-2204 (303) 342-2185 [email protected] [email protected] [email protected]

49 C.F.R. Part 23:

http://ecfr.gpoaccess.gov/cgi/t/text/text- idx?c=ecfr&sid=b880432dedbe5f0d12a2409fe5535503&tpl=/ecfrbrowse/Title49/49cfr23_main_02.tpl

JV Guidance:

http://www.osdbu.dot.gov/documents/pdf/dbe/JointVentureGuidance-final.pdf

52 BEING A CONCESSIONAIRE

NEIL MAXFIELD SENIOR VICE PRESIDENT - CONCESSIONS HOW TO PARTICIPATE

. Direct Lease

. Sublease to a Prime Concessionaire

. Joint Venture

. Licensing

. Vendor

54 AIRPORT BUSINESS CHALLENGES

. Scaling Up

. Large Investment

. Small Spaces

. Operating Hours

. Operating Costs

. Delivery/Storage

55 AIRPORT BUSINESS CHALLENGES

. Security

. Employee Badging

. Employee Parking

. Customer Dwell Time

56 WHAT TO DO NEXT?

. Find Resources . Start certification process / . Register on Website update certifications

. Division of Small Business . Start business planning Opportunity office (DSBO) . Your unique concept . DEN Commerce Hub . Your unique approach . Learn about opportunities . Arrange financing . Attend outreach sessions . Start designing . Begin networking / keep networking

57 WHAT TO DO NEXT?

. Start thinking about your proposal

. Describe your experience

. Describe your concept

. Why is your concept best for DEN

. How you will manage your concession

. Meeting the ACDBE participation goal

58 QUESTIONS? THANK YOU FOR YOUR INTEREST FOR MORE INFORMATION

– Denver Community Contact Outreach Neil Maxfield Senior Vice President – Concessions – 9/1; Renaissance Hotel on (303) 342-2574 [email protected] Quebec Avenue