Customers wait in a protracted line at a Starbucks cafe in a terminal at Miami International Airport, in Miami, Dec. 12, 2022.
Jeff Greenberg | Universal Images Group | Getty Images
Air travelers face a bunch of headaches on their journeys: slow security lines, long waits for plush lounges, the specter of delays or cancellations — and the airport Starbucks.
Many travelers, flight crews and even airport employees have in some unspecified time in the future encountered long wait times for his or her Starbucks cappuccinos, cold brews and egg bites.
“They should have a greater system,” said Coresa Barrino, a Starbucks patron at Latest York’s LaGuardia Airport Terminal B earlier this month who said she had been waiting 10 minutes and counting for her coffee. The nursing assistant, who was taking a flight back to Charlotte, North Carolina, said the wait when she buys her coffee at a Starbucks in Charlotte is about two minutes.
The long waits have caught the eye of the coffee chain’s recent CEO, Brian Niccol, who joined Starbucks from Chipotle in September, pledging to win back customers and reverse the corporate’s sales slump.
Niccol told investors he thinks that licensed locations, resembling those inside Goal stores or airports, are fascinated by following the corporate’s strategy of “getting back to Starbucks.”
“When I believe concerning the airports and such, there’s such an enormous opportunity for us to simplify a number of the execution there in order that we get people the good throughput that they need so that they can get on their way,” Niccol said on the corporate’s quarterly conference call Oct. 30.
Starbucks’ airport location staff — and company technology — might be put to the test this week during a number of the busiest travel days of the 12 months. The Transportation Security Administration forecast a record variety of travelers during Thanksgiving week and said Sunday, Dec. 1, could possibly be the busiest day of the 12 months, with greater than 3 million people screened at U.S. airports.
The surge in air travel, especially during peak times resembling Thanksgiving, has led to congestion in airport security lines, in lounges and at gates — problems that airlines and the federal government are attempting to repair. For the aviation industry, bottlenecks at airport Starbucks are only one other sign of soaring demand and overcrowded airports.
A record 1.05 billion people boarded airplanes going either to, from or between U.S. airports in 2023, narrowly topping the full in 2019, before the pandemic, based on the U.S. Department of Transportation.
Struggles and fresh approaches
Starbucks has recently struggled. Its sales fell for the third straight quarter within the period ended Sept. 30, as consumers pushed back against higher prices and ignored initiatives resembling discounts and energy drinks aimed toward bringing customers back. Same-store sales within the U.S. declined by 6% from a 12 months earlier.
In late October, Niccol unveiled plans aimed toward improving customers’ experiences and reviving the corporate’s sales, from bringing back condiment bars, to eliminating surcharges for dairy alternatives and cutting down the menu.
Cutting wait time is a key goal: He desires to trim service times all the way down to 4 minutes, which might shrink long lines and improve the shopper experience.
And while Starbucks began rolling out mobile order and pay to its airport locations in 2022, the change can sometimes add to the confusion and chaos on the cafe counter as a substitute of resolving it. Plus, some travelers may not be regular Starbucks customers who have already got the app downloaded.
Improving the coffee chain’s airport outposts could boost each sales and the brand’s popularity during a time when it needs it most. Even the shoppers Starbucks has lost might visit an airport location while they’re traveling.
With travelers returning in droves after the pandemic, it gives Starbucks and other restaurant chains a likelihood to spice up sales.
Concessions contribute about 4% of U.S. airport revenue annually, based on the newest available Federal Aviation Administration data, but they’re a very important feature to many passengers, who’ve limited time — and, often, energy — to fuel up before a flight.
At Dallas Fort Price International Airport, revenue from food and beverage outlets is growing faster than passenger numbers, said Jennifer Simkins, the airport’s assistant vice chairman of concessions. The airport has turn into the world’s third-busiest for passengers, up from tenth place in 2019, based on Airports Council International.
Airlines are also packing more seats on their aircraft and in some cases are flying larger jets.
More passengers per plane means restaurants can turn into crowded during peak times with more customers waiting to be served and space limited, said Ursula Cassinerio, an assistant vice chairman at Moody’s Rankings who covers airports.
She noted that many airports have been undergoing major renovations, if not constructing recent terminals. Meaning “more opportunities for revenue if you could have more square footage for retail and restaurants,” she said.
The 25 busiest airports within the U.S. have a mean of 80 food and beverage brands as options for travelers, based on data from market research firm Technomic.
Licensing model
A challenge for Starbucks is that licensees — not Starbucks itself – operate its airport locations.
Starbucks opened its first airport location with licensee HMSHost in 1991 at Seattle-Tacoma International Airport, which serves Starbucks’ hometown.
For nearly three many years, HMSHost operated the chain’s airport locations through an exclusive take care of Starbucks and steadily grew its airport footprint to roughly 400 outposts.
But in 2020, HMSHost ended the deal, giving the operator flexibility to supply more coffee options to airports.
While HMSHost still operates the overwhelming majority of Starbucks’ airport cafes, more operators, resembling Paradies Lagardere and OTG, have since taken a swing at it.
HMSHost, Paradies Lagardere and OTG didn’t reply to requests for comment for this story.
“Airport locations are tricky because they’ll make good money, but operationally, at times, they may be very difficult,” said Mark Kalinowski, restaurant analyst and CEO of Kalinowski Equity Research.
Customers wait in line at a Starbucks cafe in a terminal at LaGuardia Airport in Latest York City, Nov. 11, 2024.
Leslie Josephs/CNBC
Licensing its stores saves Starbucks the hassles of operating inside an airport, resembling staffing problems, high rents and security checkpoints. And though the coffee chain is used to handling a surge of undercaffeinated customers within the mornings, the swell in demand at an airport may be much more erratic.
“A plane lands, and rapidly there is a hundred people when there have been zero people there before,” said Kevin Schimpf, director of industry research for Technomic.
The trade-off is that Starbucks makes less money from those licensed restaurants.
The corporate has greater than 16,300 locations within the U.S. as of Sept. 24. Nevertheless it only runs about 60% of those cafes itself; licensees operate the remaining. That number includes its cafes in 47 of the 50 busiest airports within the U.S., based on Starbucks. The corporate didn’t disclose its current airport store count to CNBC.
In fiscal 2024, licensed locations accounted for 12% of Starbucks’ revenue, or $4.51 billion. From those stores, Starbucks collects only licensing fees, a percentage of monthly sales through royalties, and payments for supplying its coffee, tea and food to licensees, based on company filings.
For each dollar spent in a licensed store, Starbucks generates about 7 cents of earnings before interest, taxes, depreciation and amortization, based on estimates from Bank of America analyst Sara Senatore. Company-owned stores make about 23 cents per dollar spent, Senatore wrote in a research note in September.
If its business partners and third-party providers slack off, Starbucks’ brand could possibly be damaged, the corporate noted in the danger aspects section of its latest annual filing.
“The overwhelming majority of consumers, they do not know whether that could be a company-owned Starbucks or a licensed Starbucks,” Kalinowski said. “They simply want their Starbucks. They need it made properly. They need it quickly. They usually’re in a situation of heightened stress because they’re attempting to get to their gate.”
Airports themselves have been adopting more technology of their restaurants to assist move lines along.
Labor challenges have led to more kiosks and tablets inside airport restaurants, for instance.
“It’s harder and harder to staff a whole lot of these restaurants, so any front-of-house savings that you may make by having consumers order on kiosks or tablets or whatever, that basically, really helps,” Schimpf said.
Laurie Noyes, vice chairman of concessions and industrial parking at Tampa International Airport, said that “sometimes the airports are somewhat bit behind the road.” But she said the airport has made strides in offering more digital options and now, travelers can order food ahead of time via Uber Eats, and pick it up at airport restaurants.
Dallas Fort Price offers DFWOrderNow, a web site and platform available at digital kiosks so travelers can order food ahead. Simkins said the airport’s platform will reroute Starbucks customers to Starbucks’ own platform. Starbucks offers greater than 170,000 possible drink orders, based on the chain’s website. “We just found the worth in keeping the familiarity for his or her customers,” Simkins said.
Simkins said the airport is developing robotic technology for delivery to hurry up service. It is also experimenting with offering meal and retail bundles from airport restaurants and shops, she said, so passengers “now not must plan their route for multiple stops” in an airport.
A neighborhood coffee company, Fort Price, Texas-based Ampersand, plans to open a robotic barista at DFW’s Terminal C, Simkins said. It can be available 24/7, to accommodate flight crews arriving at off-hours.
Simkins said popular chains still draw a crowd.
“There are some brands that individuals will line up for,” she said.
For Barrino, who was waiting for her coffee at LaGuardia, Starbucks is one in every of those firms.
“I just really love the brand,” she said.
