Can Starbucks eliminate long lines at airport cafes?

Air travelers face many headaches during their journey. Slow security lines, long waits in luxury lounges, threats of delays and cancellations, and airports. starbucks.

Many travelers, airline crew members, and even airport employees have encountered long wait times for a Starbucks cappuccino, cold beer, or egg.

“We need a better system,” Kolesa Barrino, a regular Starbucks customer, said at New York’s LaGuardia Airport Terminal B earlier this month. She said she waited 10 minutes, counting down her coffee. A nursing assistant on a flight back to Charlotte, North Carolina, said the wait time for coffee at a Starbucks in Charlotte was about two minutes.

The long wait times caught the attention of the coffee chain’s new CEO, Brian Nicol. Brian Nicol has joined Starbucks. chipotle pepper In September, he vowed to win back customers and reverse the company’s sales slump.

Nicol told investors that licensed locations, such as indoors, target Customers in stores and at airports are interested in following the company’s strategy of “returning to Starbucks.”

“If you think about things like airports, there’s a tremendous opportunity to simplify some of the operations there and provide the superior throughput that people want to get to their destination,” said Nicol. It was mentioned in the quarterly magazine. Conference call on October 30th.

Starbucks’ airport location staff and the company’s technology will be put to the test this week on one of the busiest travel days of the year. The Transportation Security Administration predicts a record number of travelers during Thanksgiving week, with Sunday, Dec. 1, likely to be the busiest day of the year, with more than 3 million people at U.S. airports. He said he may be tested.

Airlines and the federal government are working to resolve a surge in air travel, especially during peak periods such as Thanksgiving, which is causing congestion at airport security lines, lounges and gates. For the airline industry, the bottleneck at the airport’s Starbucks is just another sign of surging demand and airport overcrowding.

A record 1.05 billion people will fly to, from, and from U.S. airports in 2023, narrowly surpassing the pre-pandemic 2019 total, according to the U.S. Department of Transportation.

Starbucks has been struggling lately. The company’s sales fell for the third consecutive quarter in the period ending Sept. 30 as consumers resisted price hikes and ignored initiatives such as discounts and energy drinks to lure customers back. Same-store sales in the U.S. fell 6% from a year ago.

In late October, Nikkor announced plans to improve the customer experience and revive the company’s sales, from bringing back its condiment bars to eliminating surcharges for dairy alternatives and cutting menu items.

Reducing wait times is an important goal. He wants to reduce service time to 4 minutes. This will reduce long lines and improve the customer experience.

Starbucks began implementing mobile order-and-pay at its airport stores in 2022, but the change may add to the chaos and confusion at cafe counters instead of eliminating it. Additionally, some travelers may not be regular Starbucks customers who have already downloaded the app.

Improving the coffee chain’s airport hub could boost both sales and brand reputation at a time when it’s needed most. Even the customers Starbucks has lost are likely to visit airport stores during their travels.

As travelers return in droves after the pandemic, Starbucks and other restaurant chains have an opportunity to boost sales.

According to the most recent available Federal Aviation Administration data, concessions contribute about 4% of U.S. airport revenue annually, but with limited time and often limited energy to refuel before flights. For many passengers, concessions are an important feature.

At Dallas-Fort Worth International Airport, revenue from restaurants is growing faster than passenger traffic, said Jennifer Simkins, the airport’s assistant vice president for concessions. According to the Airports Council International, the airport is the third busiest in the world by passenger numbers, up from 10th place in 2019.

Airlines are also increasing the number of seats on their aircraft and, in some cases, operating larger jets.

Ursula Casinerio, assistant vice president for airports at Moody’s Ratings, said more passengers per plane means restaurants may be busier during peak hours, with more customers waiting for service and limited space. He said there is.

He noted that many airports are undergoing major renovations, if not building new terminals. That means “more square footage for retail and restaurants means more revenue opportunities,” she says.

The 25 busiest airports in the U.S. have an average of 80 food and beverage brands as options for travelers, according to data from market research firm Technomic.

The challenge for Starbucks is that airport stores are operated by licensees, not by Starbucks itself.

Starbucks opened its first airport store in 1991 with licensee HMSHost at Seattle-Tacoma International Airport, where Starbucks is based.

For nearly 30 years, HMSHost operated the chain’s airport locations through an exclusive agreement with Starbucks, gradually expanding its airport footprint to approximately 400 locations.

However, in 2020, HMSHost terminated the contract, giving the operator flexibility to offer even more coffee options at the airport.

HMSHost still operates the vast majority of Starbucks airport cafes, but more operators have since jumped on board, including Paradis Lagardère and OTG.

HMSHost, Paradis Lagardère and OTG did not respond to requests for comment for this article.

“Airport locations are difficult because they can be lucrative, but operationally they can also be very challenging,” said Mark Kalinowski, restaurant analyst and CEO of Kalinowski Equity Research. ” he said.

By obtaining a store license, Starbucks will be freed from the hassles of operating at an airport, such as staffing issues, high rent, and security checkpoints. And while the coffee chain is used to dealing with morning surges of caffeinated customers, a surge in demand at airports could be even more volatile.

“When a plane lands, there were zero people and suddenly there are 100 people,” said Kevin Shimp, director of industry research at Technomic.

In return, Starbucks will receive less revenue from licensed restaurants.

As of Sept. 24, the company had more than 16,300 stores in the U.S., but only about 60% of them were cafes operated by the company. The licensee operates the rest. Starbucks said this number includes cafes at 47 of the 50 busiest airports in the United States. The company did not disclose to CNBC the current number of airport stores.

In fiscal 2024, licensed stores accounted for 12% of Starbucks’ revenue, or $4.51 billion. Starbucks only collects license fees from these stores, a portion of monthly sales from royalties and payments for supplying coffee, tea and food to licensees, according to company filings.

Bank of America analyst Sara Senatore estimates that Starbucks generates about 7 cents in profit before interest, taxes and depreciation for every dollar spent at its licensed stores. Mr. Senatore said in a September research note that company-operated stores generate revenue of about 23 cents on the dollar.

If business partners and third-party providers slack off, Starbucks’ brand could be harmed, the company said in the risk factors section of its latest annual report.

“The vast majority of customers don’t know if it’s their own Starbucks or a licensed Starbucks,” Kalinowski said. “They just want their Starbucks. They want it made right. They want it fast. And they’re in a heightened stress situation because they’re trying to get to the gate.”

The airport itself is also introducing technology to its restaurants to keep lines moving smoothly.

Labor issues have led to the installation of kiosks and tablets inside airport restaurants, for example.

“Staffing is becoming more and more difficult for many restaurants, so being able to save money at the store by having consumers order from kiosks, tablets, etc. is really, really helpful,” Schimpf said. spoke.

“Sometimes the airport is set back from the street,” said Laurie Noyes, vice president of concessions and commercial parking at Tampa International Airport. But she said airports are making strides in offering more digital options, and travelers can now order food in advance by: Uber You can eat or pick up your meal at an airport restaurant.

Dallas-Fort Worth offers DFWOrderNow, a website and platform with digital kiosks that allow travelers to order food in advance. Simkins said the airport platform will direct Starbucks customers to Starbucks’ own platform. According to the Starbucks website, you can order more than 170,000 drinks at Starbucks. “We realized there was value in maintaining familiarity for our customers,” Simkins said.

Simkins said the airport is developing robotic technology for deliveries to speed up service. The airline is also experimenting with meal and retail bundles at airport restaurants and shops, so passengers “no longer have to plan a multi-stop route” through the airport, he said.

Ampersand, a local coffee company based in Fort Worth, Texas, plans to open a robot barista in DFW’s Terminal C, Simkins said. We are available 24/7 to accommodate crews arriving outside of business hours.

Simkins said crowds are still drawing at the popular chain.

“There are some brands that have long lines,” she says.

Starbucks is one of those companies for Barrino, who was waiting for coffee at the LaGuardia store.

“I really love this brand,” she said.