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Why Airport Food Is So Expensive — Transcript

by Business Insider · 2,345 words · 401 segments · language en · Watch on YouTube

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0:00Take a look at these chocolate bars.
0:02They're identical except one costs 120%
0:06more because this was bought at the
0:10airport. You probably know you're paying
0:12a premium, but have you ever realized
0:15just how much more? This burger from
0:18Chili's is marked up 46% from its street
0:21price. There are so many airports across
0:25the US where the management isn't
0:28answerable to the broader public.
0:30>> But the problem isn't just that
0:32passengers are a captive audience. It's
0:35a lack of competition. Like look at this
0:37food court. All six of these businesses
0:40are operated by the same multi-billion
0:43dollar company. So how did airport
0:46prices get so high? And why are some
0:49airports raising them even more?
0:56To understand how we got five Starbucks
0:58in a single terminal, we need to go back
1:00to the early 20th century
1:03when airports looked more like train
1:05stations.
1:06People complained about airports being
1:09overcrowded,
1:11dirty, dingy kind of places. The glamour
1:14came once you got on the airplane.
1:16>> See how neatly everything is arranged on
1:19the tray. But for the air travel
1:21industry to grow, airports needed to
1:23improve. They also needed to make money
1:26from passengers.
1:28They were making money any way they
1:30could. Observation decks, oil wells,
1:33swimming pools, tennis courts. Some of
1:36them began to charge for parking, which
1:39became a big money maker eventually.
1:41There might be a new stand there.
1:43Airports tried things like pay toilets
1:47and every nickel count, I guess.
1:50By the midentth century, airports opened
1:52restaurants to attract not only
1:54passengers, but also those wanting a
1:57night out. These were very nice
1:59restaurants. In my hometown, you would
2:01go for an anniversary. People would go
2:03there for prom. This postcard described
2:06Janet's hometown airport as the
2:08Midwest's most distinctive dining and
2:10cocktail lounge. And in the 1960s, some
2:14new terminals were architectural
2:16marvels.
2:17These types of amenities were designed
2:20to bring people to the airport, maybe
2:23inspire them to fly, but also to
2:26generate revenue. Of course, airports
2:28are always looking for ways to make more
2:30money. This was the golden age of
2:33flying.
2:34>> Here in the cabin, it's like a gentle
2:37June morning.
2:38>> But compared to today, not that many
2:40people traveled by plane because tickets
2:44were expensive. It was mostly the
2:46wealthy and businessmen that flew.
2:49And those who did fly weren't spending
2:51much time in airports anyways.
2:54But that changed in 1978.
2:57Congress deregulated the industry,
3:00allowing airlines to decide their own
3:02rates and routes. Soon after, ticket
3:05prices fell. Deregulation led to
3:08literally a frenzy of fair wars. Well,
3:13you get what you pay for. You went from
3:15getting gourmet meals to getting the bag
3:18of pretzels, peanuts, and a soda pop. No
3:21more free cigarettes.
3:23For those who had grown up in aviation
3:26during the golden age, their world was
3:28gone because as they lowered fairs, the
3:31service on the airplanes also, as they
3:34would put it, deteriorated.
3:36The number of people flying in the US
3:38each year nearly doubled over the next
3:40decade thanks to cheaper tickets and
3:42bigger planes. I could afford to fly.
3:46And if you know about graduate students,
3:48they they can't afford much of anything.
3:51>> In the 1980s, an increase in connecting
3:54flights meant passengers waited longer
3:56in the terminal.
3:57>> This big rush in there overwhelmed
4:00airports.
4:01>> They could shop at a news stand or eat
4:03at a few quick service restaurants, but
4:05it wasn't a great experience.
4:08Even back then, passengers complained
4:10about 50 to 100% markups. the airports
4:14and the airlines began thinking, well,
4:16we need to do something to keep
4:18passengers happy while they're sitting
4:20here waiting for their connection.
4:24The solution,
4:26malls.
4:27>> The Pittsburgh airport opens in the
4:29early 1990s and it catches on
4:32immediately. With more than a 100 shops
4:35and restaurants, Pittsburgh's airport
4:37was the first in the US to transform the
4:39terminal into a mall. It not only makes
4:43passengers a lot happier, but it's a
4:46great revenue source because every one
4:48of those shops are going to pay a rental
4:51fee to the airport. In fact, the
4:54airport's revenue soared 75% within 6
4:57years, according to one report. And the
5:00airport achieved that without price
5:02hikes. It used a model called street
5:05pricing. Basically, what you buy inside
5:08the airport should cost the same as
5:10outside. The county commissioner even
5:12said, "We're the first airport not to
5:15gouge people."
5:16>> The air mall concept was a great one to
5:20make a lot more money. Other airports
5:23poured tens of millions of dollars into
5:25renovations, hoping to emulate
5:27Pittsburgh's success. And in response to
5:30passenger complaints, other airports
5:32also followed the street pricing model.
5:35But if airports had this policy back in
5:38the '9s and early 2000s, why does this
5:41chocolate bar cost more than double what
5:43you'd pay outside?
5:47Nowadays, most US airports use something
5:49they call street pricing plus. That is a
5:53product's street price plus an
5:55additional 10 to 15%.
5:58The authority that controls the airport
6:00sets this price cap. 15% a fair and
6:04reasonable adjustment for our concession
6:06errors.
6:07>> Businesses aren't supposed to go over
6:10this additional percentage. And in most
6:13cases, the airport audits prices a few
6:15times a year. Under this model, prices
6:19should only be a little bit higher. But
6:22how an airport determines street price
6:24can be a bit
6:27confusing.
6:29That $14 chocolate bar is from LaGuardia
6:32in New York City, which is run by the
6:34>> Port Authority of New York and New
6:35Jersey.
6:36>> It requires businesses to set prices
6:38based on the average of comparable items
6:40sold outside the airport, plus an
6:43additional 15%.
6:45This is what the Port Authority said
6:47District Market was citing for the
6:49chocolate bar. But when we checked in
6:51person, we found a different story.
6:55One location didn't sell this bar at
6:57all. The other two sold it for less than
7:01district market said.
7:03In response, the Port Authority didn't
7:05say it would be adjusting any prices.
7:10Because enforcement and repercussions
7:11are lax, examples abound of companies
7:14charging more than 10 to 15% above
7:17street price.
7:19Let's say Janet flew out of MSP and
7:22wanted to buy her favorite airport
7:23snack.
7:24>> Oh, M&M's. You know, they melt in your
7:27mouth, not in your hand.
7:29>> In August 2025, the Minneapolis St. Paul
7:32airport told Business Insider it uses
7:34street pricing plus 10%.
7:37But at this Hudson News store, Janet
7:40would pay 69% more than she would at a
7:42Walgreens outside the airport.
7:46A Chick-fil-A chicken biscuit meal costs
7:48over 16% more.
7:51And one of the worst offenders we found
7:53was a yogurt marked up 84%.
7:57A spokesperson from the Metropolitan
7:59Airports Commission told Business
8:01Insider that locations are audited two
8:03times annually or on an asneeded basis,
8:07but it did not comment on the price
8:09disparities.
8:12Even though most airports have a pricing
8:14policy, a lack of enforcement means
8:16passengers often get a bad deal.
8:19But some in the industry say that
8:21charging street prices isn't sustainable
8:24because it's more expensive to run a
8:26business inside an airport.
8:29All employees, products, and equipment
8:32need to go through security, which
8:33increases construction and labor costs.
8:36The exact numbers vary, but development
8:39reportedly costs 30 to 40% more than it
8:42does outside. On top of that, some
8:44cities set a higher minimum wage for
8:46airport workers. And we're also asking
8:49you to generally run your business from
8:514:00 a.m. to midnight. If you're a pasta
8:54place, we're saying, "Okay, what's for
8:56breakfast?"
8:58>> And businesses pay a percentage of their
9:00sales to the airport. That's part of
9:02their rent.
9:03>> The businesses here at the airport pay
9:05anywhere between 6 and 20%. But the vast
9:07majority are paying between 10 and 16%.
9:12>> But there's one thing that usually
9:14doesn't get brought up by these
9:15companies.
9:17competition
9:19or the lack of it. In the US, the vast
9:22majority of airport food and retail is
9:24managed by six large corporations.
9:28You might not have heard their names
9:30before, but these companies have their
9:31footprints everywhere.
9:34Worldwide, they operate more than 13,000
9:37locations.
9:39Remember this food court? It's in the
9:41Minneapolis St. Paul airport. It might
9:44seem like you have six options, but
9:46inside the airport, these restaurants
9:48are all operated by one company, HMS
9:52Host. And it goes even further. Volulta,
9:55the company that owns HMS Host, also
9:58owns the Duty-Free and Hudson News
10:00stores at this airport.
10:02But even that's not the full picture. A
10:05store like this Prairie Market seems
10:07like a different business, but it's
10:09operated by Hudson under the Avolta
10:12umbrella. You can see it advertising a
10:14Volulta's rewards program.
10:18But it's not just this airport. In parts
10:20of LaGuardia in New York City, you can't
10:22escape AUTA's signs.
10:27Another big player, OTG, operates 350
10:31locations in North America, including
10:33this Chebo Express gourmet market that
10:35sells yogurt for 84% above street price.
10:40After we reached out, OTG said it
10:42lowered the yogurt's price down to about
10:44what you'd pay outside the airport.
10:48Many airport businesses have multiple
10:50owners, but the large concessionaire is
10:53usually the majority stakeholder,
10:56and because a few big companies have a
10:58hand in most of the airports in the
11:00country, there's hardly any competition
11:02within a terminal.
11:05mergers and acquisitions are
11:07consolidating the industry even more.
11:10And these companies often advocate for
11:12airports to raise their street pricing
11:15cap. The Phoenix, Arizona airport
11:17abandoned street pricing entirely in
11:202019 after two large concessions
11:22companies, HMS Host and SSP, asked for
11:26the cap to be increased.
11:28That means there's theoretically no
11:30limit to what businesses charge.
11:33But if everyone charges high prices,
11:36passengers don't have anywhere else to
11:38go.
11:39This became more of a problem after
11:419/11.
11:44New security measures greatly increased
11:46what's called dwell time. Basically, the
11:49time spent waiting in the terminal. And
11:52studies have shown that for airports,
11:54more waiting means more food and retail
11:56revenue. About 63%
12:00of passengers on the airplane side will
12:03make some form of purchase. Some of it
12:06is based on boredom because the average
12:08time spent at an airport is roughly 2
12:10hours. It is only the very experienced
12:14travel that will often go through
12:16security with an empty bottle and then
12:19take it to a water fountain and fill it
12:21up. But that is a tiny percentage of
12:25passengers.
12:26The whole goal of moving them through
12:28quickly is one to reduce the stress time
12:30that they have, but two provide them
12:32with the opportunity to spend more time
12:34postsecurity, hopefully supporting the
12:37concessions program.
12:41For more than two decades, airports have
12:43capitalized on dwell time, and the
12:46concessionires have made heaps of money.
12:49It's usually impossible to get to your
12:51gate without walking past food or
12:53retail.
12:55If you get someone's saliva glands
12:57working, they tend to buy more.
12:59>> That's essential to the business model.
13:02US airports earn almost half their
13:04revenue from non-eronautical sources
13:06like passengers parking their cars or
13:08buying food.
13:10>> Diversifying non-eronautical revenue and
13:12getting more of it is really one of our
13:15highest priorities to kind of protect
13:16ourselves from these unknowns. In 2024,
13:20US airports made over twice as much food
13:23and beverage revenue as they did in
13:252010.
13:27So, are there any airports in the US
13:30where you don't pay a premium?
13:33One of the few that doesn't use street
13:35pricing plus is in Portland, Oregon.
13:38It's clean street pricing. Whatever they
13:41charge downtown in their stores or on
13:43their street locations is what they have
13:45to charge here at the airport. There are
13:46no fees, no additional charges.
13:49>> At PDX, the percentage the airport takes
13:52is relative to a business's sales
13:54volume.
13:55>> If you're working with them to make them
13:58successful and have a financial
13:59structure that allows them to flourish,
14:02then I don't think they're so against
14:04the street pricing cap.
14:06>> And it's been a success.
14:08>> The passenger spend per what we call
14:10perplane passenger at PDX is about
14:13$15.3.
14:14That's about 20% higher than the average
14:16through the nation, which is around
14:18$12.50.
14:20>> PDX has used street pricing for decades,
14:23but Dan doesn't expect the industry to
14:25follow suit.
14:27>> I think that airports that don't have
14:29the model today, it's hard to turn the
14:32dial back.
14:35>> In fact, some airports are moving in the
14:37other direction.
14:39Since 2010, LAX used street pricing plus
14:4218%.
14:45But it removed that cap on most items in
14:472025 in response to complaints over
14:50rising airport minimum wage.
14:54And the airport restaurant and retail
14:56association wants flexible pricing or in
14:59other words no limit.
15:02It says that overall passenger
15:04satisfaction is more important than
15:06price.
15:08But the six big airport food and retail
15:10operators are very focused on increasing
15:13profitability.
15:15Part of Aulta's long-term strategy is to
15:18continuously drive spend per passenger
15:20and optimize the profitability of our
15:23commercial spaces.
15:26And so far, it's been quite successful.
15:29[Music]
15:33At a time when everything feels more
15:35expensive, some passengers might be
15:37reaching a breaking point. JD Powers
15:412024 survey of North American airports
15:44found that passengers spent less in the
15:46terminal than they did a year earlier.
15:48It also found that food and beverage
15:50prices have been the lowest scoring
15:52attribute on its survey for years.
15:55In May 2025, members of Congress wrote a
15:58letter asking the Federal Trade
16:00Commission to investigate concession
16:02prices at airports and stadiums. They
16:04said that with few options, travelers
16:06face extreme markups for drinks and food
16:09before their flights.
16:11>> I experience the same frustration at
16:14some airports when I have a beer on the
16:16way home from a business trip and pay
16:18$16 for it.
16:21Having worked on airport retail now for
16:24almost 40 years, it could definitely be
16:27better. No question. I believe fervently
16:31that amenability and profitability are
16:34linked. That the friendlier the space
16:36is, the more money you tend to make.
16:41And buying your favorite snack before
16:43you reach the airport might save you
16:45more than you realize.
16:49[Music]

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