Control of news, gift shops a rich prize

By Jeff German, Joe Schoenmann

Saturday, Sept. 13, 2008 | 2 a.m.

A high-powered political battle is brewing over lucrative news and gift shops at McCarran International Airport.

The New Jersey-based Hudson Group’s 21-shop concession contract at the airport expires in 2010. Hoping to avoid a bidding war, Hudson is offering to spend $7 million to improve its shops at the airport and give Clark County a larger share of the gross revenue in return for an extension to 2020. The company reported $49.2 million in sales at the airport in 2007.

Big-name lobbyists for other companies that have been gearing up to bid on the contract in 2010 say the airport will be shortchanging taxpayers if it short-circuits the competition.

The high-stakes battle will take center stage Tuesday, when the County Commission considers the contract extension — and there should be plenty of high drama.

On one side, representing the Hudson Group, are former Gov. Bob Miller and politically connected attorney Frank Schreck. The influential Culinary Union also is supporting the Hudson Group because it has agreed to allow the union to organize about 150 workers.

The opposition features three of the valley’s top lobbyists — former U.S. Sen. Richard Bryan and attorneys Jay Brown and Chris Kaempfer — all of whom say failure to allow competition for the airport business would be a disservice to taxpayers.

“It precludes the county from considering bids that may generate far greater revenue than what’s proposed,” said Bryan, who represents the Atlanta-based Paradies Shops. “Competition is good for the airport, and it’s good for the taxpayers.”

Kaempfer, who represents Ayala’s Inc. of Las Vegas, said the county “will leave millions of dollars on the table” if it grants the extension.

Brown said his client, HDS Retail, a large airport retailer based in Toronto, is prepared to top anything the Hudson Group is offering the county.

In a July 21 letter to Airport Director Randall Walker, Hudson Chief Executive Joseph Didomizio proposed increasing the county’s share of gross revenue from 18 percent to 20 percent.

“In light of the current economic downturn and reduction in passenger traffic at the airport, this request to extend the concession agreement will provide an opportunity for the airport to increase its revenues ... with the Hudson Group, a proven operator,” Didomizio wrote.

But Brown said the county stands to earn much more with HDS. He said the company would give the county 25 percent of gross revenue, and by the time the bidding is done, that figure could rise. Last year, a partnership between HDS and Ayala’s agreed to pay the county 30 percent of gross revenue for a new gift concession it won following a bidding process.

The partnership also agreed to pay a minimum rent of $2.4 million a year, which Brown noted was far above the $1.5 minimum currently guaranteed by Hudson for all of its shops. Under its concession contract with the county, Hudson operates 12 shops and subleases nine others to minority-owned businesses.

Brown said HDS is prepared to offer the county a minimum rent of at least $10 million a year for all of the shops over a 10-year period beginning in 2010, which would mean an additional $85 million in guaranteed money for the county.

Miller, however, said the taxpayers will be getting a better deal with the Hudson Group because of its track record, with the highest revenue among airport news and gift shops in the country.

He said that in the five years Hudson has had the airport contract, the company has increased its revenue there by 93 percent, with only a 32 percent increase in airport passengers.

The company, Miller said, also is willing to pay the 20 percent of gross revenue to the county immediately, rather than waiting until 2010, which should give taxpayers an additional $2 million.

Walker, who is recommending the Hudson extension, said he was skeptical of the claims other operators can bring in millions of dollars more in revenue to the county.

“I would like to see their numbers because I don’t think it’s credible,” he said.

The difficulty with making projections, he said, is the uncertainty in air travel.

“You have to ask what kind of passenger increases are you going to project over the years,” he said. “You have to ask what the underlying assumptions are. And I find people get a little fancy and free with some of their assumptions.”

That view was shared by County Commissioner Chris Giunchigliani, who put the Hudson Group extension on Tuesday’s agenda.

“What people claim and what they will do are two different things,” she said. “I think Randy (Walker) made a pretty good case that we should go with Hudson.”

Giunchigliani, however, added that if the competing companies can prove their revenue projections are accurate, she might reconsider her position.

Commissioner Tom Collins questioned giving one company precedence over the others.

“I do not support just rolling over those contracts across the board,” he said.

Collins said he favors a mixed plan that would extend the contracts for some of Hudson’s shops and put others out to bid.