Last summer a customer on Twitter revealed that airport concessions operator OTG charging $28 plus tax and tip for beer at Newark airport. This clearly violated their lease to abide by ‘street pricing’ rules.
lol at all of this, including the additional 10% “COVID Recovery Fee” that doesn’t go to workers pic.twitter.com/Bq9rHJqek7
— Cooper Lund (@cooperlund) July 7, 2021
OTG, famous for making you order everything via an iPad, quickly claimed the pricing was a mistake, corrected it, but still argued that it really wasn’t such a bad deal after all because it was a big pour ($28 beer was better value than they’re being given credit for). Several members of Congress sprung into action.
The Port Authority of New York New Jersey conducted a nearly year-long investigation and now says it will begin “proactive enforcement” of its street pricing rules to make sure that passengers aren’t charged $28 for beer in its airports.
The Port Authority Office of Inspector General found that 25 people actually paid $23 – $27 for a single “seasonal beer” at New York LaGuardia last summer. While the Port Authority gives lip service to their being proactive on this, they implicitly acknowledge that they won’t really do anything about it proactively because they’re… calling on passengers to tag their airports on social media when concessionaires charge exorbitant prices in the terminal.
According to the Inspector General, airport concessions company OTG claims to have contacted the 25 people who bought overpriced beer and refunded the charge, effectively buying them a beer. It seems more likely that individual charges were reversed than that any actual contact was made.
Going forward concessionaires will have to,
- abide by policies that were already in place
- self-report that they are complying, at least for their 40 most popular items, on a quarterly basis
Airlines and retailers pay airports. There are facilities charges remitted by passengers as part of airline tickets (a ‘head tax’) but those are regulated by the government. As a result passengers aren’t an airport’s customers, they’re the product.
However airports in the U.S. are mostly owned by governments, and managed by politically-appointed boards. So customer outrage matters, too, and that’s why many have rules that require vendors to charge only a little more than ‘street pricing’. It’s common for prices to be capped at 10% more than you’d pay outside the airport. However, in addition to being bad it’s not at all surprising that airport food vendors are expensive,
- Rent is often far more expensive at the airport than anywhere else nearby. Labor costs are too, whether because of the need to find people who can pass background checks or because local laws often mandate higher minimum wages (New York airports are going to $19 in 2023). Bringing supplies and ingredients into the airport is also costly, because it involves using separate vendors and bringing goods through security. That’s the cost side.
- Meanwhile passengers are a largely captive audience. The government forbids them from bringing liquids through the security checkpoint, “no outside beverages” isn’t just a movie theater rule it’s the law. And in many airports there’s limited competition across vendors, since so many of the businesses that have familiar names – be it Wendy’s or TGI Friday’s – are really the same management company like OTG or Delaware North licensing the brand. Customers, facing long lines and little time during connections, often don’t have much time to comparison shop in any case.
Meanwhile this is what street pricing continues to look like at New York airports. Remember that airport renovations have been done with private dollars with the intention of being recouped.
Another reminder that street pricing at @PANYNJ is a lie. Not sure what street charges $17.60 for a tuna roll but pretty sure it is inhabited by someone with a pistol and a mask
FYI: I believe a 6 pc tuna roll at NOBU is $12.50 pic.twitter.com/9LkC7hADIp
— Marty St. George ✈️ (@martysg) May 13, 2022
You have a choice not to buy $28 beer (or $18 tuna rolls). You don’t need it that badly and the beer is even a whole lot cheaper on the plane.
(HT: Harry S)