Hartsfield banking on high-end buyers

By Rachel Tobin Ramos

The Atlanta Journal-Constitution

If you don’t know the Ermenegildo Zegna brand, then you probably aren’t the target market for the luxury retailer. And you may be surprised when the sales clerk says the black travel jacket in the window costs “twenty-six fifty.”

Don’t reach for your quarters. The clerk really means $2,650.

Travelers who can afford the Italian brand’s $4,195 leather jackets and $195 ties, however, can now purchase them between flights at Hartsfield-Jackson International Airport.

This store plus a Salvatore Ferragamo and Bulgari have opened on Concourse A, creating a mini “luxury row” at the world’s busiest airport.

Among the offerings: a $7,900 Ferragamo watch.

It’s part of Hartsfield’s rolling retail makeover.

It’s a twist of unlucky fate, however, that these shops have opened during the worst recession since the 1930s. These stores and others signed on more than a year ago, before the downturn in consumer spending.

In all, about 90 retail spaces will change, producing about $8 million more in revenue, for a $22 million haul in retail rents, the airport says. The airport relies on concessions revenue for its operations.

These global brands are a departure for Hartsfield, which for years was known for its utilitarian newsstands and fast food. The retail plan sought to increase its revenues by offering a better mix of national brands and locally flavored shops.

Other new stores include a slick Sean Jean outpost on Concourse B, and a sexy gallery on Concourse C by Spanish-accessory maker Tous selling whimsical purses and jewelry. There are also new Reebok, Lacoste, BlackBerry and Brooks Brothers stores, and an Atlanta Magazine Home Store.

Passenger traffic — especially the lucrative business traveler — has been declining, however, meaning fewer travelers to spend the Benjamins between flights. Hartsfield projects passengers to decline to 85 million in 2009, down from 90 million in 2008.

“Across the board, retailers are having a very tough time in airports, more than restaurants,” said Pauline Armbrust, president and CEO of Armbrust Aviation Group, which publishes Airport Revenue News. “Passenger traffic is down, which correlates directly to retail sales.”

According to Airport Revenue News’ list of top 50 airports by revenue, Hartsfield made about $7.55 per passenger getting on a flight in 2008 — putting it in 44th place. Pittsburgh, which recently upgraded its retail mix, was first, with $13.68 spent per boarding passenger.

John Cugasi, the airport’s concessions manager, said that retail sales at the airport have remained flat, which he sees as a good sign given there are fewer passengers.

Most U.S. travelers may see luxury as something for duty free shops or foreign airfields.

But Terminal 4 at John F. Kennedy International Airport in New York has succeeded with Zegna, Hermes and Ferragamo, Armbrust said. JFK ranked second on the Airport Revenue News list, with $11.84 per boarding passenger.

One thing that will help with Hartsfield’s luxury experiment, even with its declining passenger base, is the high ratio of business travelers, Armbrust explained.

“The income level of a business traveler in airports is well above the average you would find in a shopping mall,” she said.

Bulgari sales clerk D. Bullard said she has sold a $3,700 bracelet and two $1,400 bracelets since the store opened in July.

Valentina Daughtry, HMSHost’s manager for luxury row, said NFL players and Delta execs recently made purchases there.

But unlike the luxury frenzy of a few years ago — fueled by the hoi polloi using home equity and stock accounts to buy luxury goods — buyers will be from a different class, said Pam Danziger, president of Unity Marketing, a luxury consumer research firm. Danziger says luxury sales likely will never be the same, and that sales initially will sag at the airport.

Still, the brands will have a window to a world of passengers that may not see them at malls like Phipps Plaza and Lenox Square.

“These brands are looking for new channels of distribution,” Danziger said. “People who travel often have money and are looking for something to do when they are inevitably stuck at the airport.”

HMSHost is watching their success closely to evaluate whether to roll out similar shops at other North American airports.

Joan Ryzner, senior vice president for retail at Bethesda, Md.-based HMSHost, said, “We thought Atlanta was the best place to try it. Twenty million passengers are flowing through the apex of A concourse [annually], which is right where the stores are located.”

Hartsfield’s Cugasi said the new shops are holding their own. And he believes new services — from the BlackBerry store to the salons — are going to rival Phipps and Lenox in terms of sales and appeal to time-strapped shoppers.

“Our motto,” he said, “is that whether you are a business or leisure traveler, we give you your weekend back.”