Food Fight at LAX
Pity the traveler who arrives too early at LAX, getting to the gate with 90 minutes to spare but nowhere to eat lunch except Burger King and Cinnabon.
Or worse, consider the international passenger on layover whose first food in dining-rich L.A. is akin to being trapped in an aging indoor mall.
The food options at Los Angeles International Airport have become a running industry joke. A recent survey by J.D. Power put LAX 18th out of 19 airports in passenger satisfaction, with only Newark saving it from the bottom spot.
Airport officials are quite aware of this, and are trying to bring in some big names in L.A. dining to revitalize the concourses, including Nancy Silverton, Joachim Splichal, and Susan Feniger and Mary Sue Milliken.
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Those chefs would open at LAX if airport officials get their way. They opened the airport's lucrative food and beverage concessions to bid and judged a proposal that included the L.A. chefs to be the best.
But that wasn't good enough.
Because the opportunity is worth more than $600 million in revenues over the next decade, the contract has become hotly contested. The biggest fight is coming from a company that scored lowest among the four bidders, HMS Host, which has run most food concessions at LAX since 1965.
Host is trying to claw ahead of the three higher-scoring bidders by filing an appeal and aggressively lobbying the City Council to throw out the bids and start over.
"It's a full-employment act for lobbyists," Councilman Bill Rosendahl says. "They're all over the place."
Airport officials had sought to break up Host's near-monopoly on LAX food concessions by splitting the contract into five packages. Host bid on all five, along with three retail packages.
Airport officials ranked Host at or near the bottom on all eight packages.
"HMS Host not only lost, but they bid on all of it and came in last on every race," says Pat Murray, senior vice president at SSP America, the company whose bid involves the L.A. chefs. "It was really a difficult period for them, and they have dug in their heels at an extreme level."
Host has appealed to a City Council committee known as the Board of Referred Powers, which will hear the case and make recommendations to the full council. Host also has hired four lobbying firms, along with a PR agency, and has relied on campaign contributions to make sure its message is heard.
The city of Los Angeles has fairly strict campaign-finance regulations. Lobbyists are banned from contributing to city campaigns, and contributions to council members are capped at $500.
But when Councilwoman Janice Hahn announced her candidacy for lieutenant governor last fall, a gaping loophole was created that Host and other bidders wasted little time walking through. Nothing barred the companies from contributing to her statewide campaign, even though she still sits on the City Council.
Hahn is well positioned to influence the case. She serves on the Board of Referred Powers, which is to hear Host's protests this month. She also chairs the Trade, Commerce and Tourism Committee, also expected to review the contract before it goes to the full council.
Last fall, Hahn's campaign for lieutenant governor received $6,500 — the legal maximum — from Host, along with $1,000 from Host's minority-owned partner, Concessions Management Services.
Because there is no ban on lobbyist contributions to state campaigns, she could also take money from Host's lobbyists. John and Esther Ek, of the San Pedro lobbying firm Ek & Ek, each contributed the maximum amount. The law firm Sheppard Mullin, which also represents Host, gave another $1,000.
Hahn also received money from other bidders and their lobbyists. In total, at least $40,000 of her contributions for lieutenant governor can be tied to LAX concessions businesses or their lobbyists. (Hahn lost the Democratic nomination on June 8 to San Francisco Mayor Gavin Newsom.)
Rosendahl, who also serves on Referred Powers and on the tourism committee, says he has refused to meet with lobbyists on the issue.
"They can meet with me in the light of the committee meeting," he says. "I don't want to hear lobbyist jargon. I just said, 'Forget it.' Noboby's going to lobby me."
Teams from other bidders also have met with other council members or their staffs.
Host argues in written protests that LAX officials were biased against the company from the beginning and should be forced to start over. Given that it took the airport five years to get this far, restarting the bidding process would likely extend Host's current contract by months, even years. It expires at the end of the year.
Host's bid largely stuck to the array of food choices already at the airport but did offer to add a Johnny Rockets, a Camacho's Cantina and a "Whopper Bar" — a sort of quicker version of Burger King.
"Freshening up some of the concepts and bringing in some local branding is a good thing for Los Angeles," says Jerry Neuman, a Host lobbyist. "The question becomes one of what is tried and true in certain instances."
The LAX evaluation committee was not impressed, ranking Host's proposal last among four bidders, with a score of 447 points out of 500.
SSP's proposal to include the L.A. chefs scored 495 points.
Silverton is the celebrity chef behind Osteria Mozza, which hosted Michelle Obama and her daughters during a recent L.A. trip.
For LAX, Silverton proposes creating Spuntino, a sort of focaccia bar that would offer grab-and-go versions of her Mozza recipes. (Interestingly, Host is also claiming its share of the Silverton magic by offering the airport version of La Brea Bakery. Silverton founded La Brea Bakery but sold it a few years ago.)
SSP America is also offering airport versions of Splichal's Nick & Stef's; Feniger and Milliken's Border Grill; Bertha's Soul Food, owned by the husband-and-wife team of Rod White and Rebecca Cox; La Serenata de Garibaldi, run by the Rodriguez family; and Craig Min's LAMILL Coffee.
One of the other losing bidders, Delaware North, argued in its protest that SSP's lineup would be too pricey for most travelers.
Vendors were told to assume an 18 percent markup above comparable fare outside the airport. A 16-ounce cup of coffee at LAMILL would cost $3.75. A panini from Spuntino would cost about $13. A sushi roll at Geisha House would cost $18, and Nick & Stef's would sell a $40 steak.
"Not everyone travels on expense accounts," wrote Lisa Specht, of the law firm of Manatt, Phelps & Phillips. "For the average family traveling through LAX, the price points are unsustainable."
SSP's Murray argues that his proposal would offer a range of options for all budgets.
Delaware North's proposal included Coffee Bean & Tea Leaf, Wolfgang Puck's Express, which is already at the airport under a contract separate from Host's, and Fatburger.
To which Murray says, "I can't believe someone would have a conversation and say they really want to have Fatburger instead of Sue Feniger or Nancy Silverton."
SSP's rivals also took aim at the company's financial stability, arguing that it defaulted on its rent payments to Ontario International Airport and is in danger of being unable to service its debt.
After hearing those allegations, airport officials sat down with the top executives at SSP and came away satisfied that SSP could meet its obligations under the contract. SSP runs concessions at 140 airports worldwide.
But the final say belongs to the City Council.
Normally the Board of Airport Commissioners would hear the appeal, but the entire board was recused from the decision because board President Alan Rothenberg is a director at California Pizza Kitchen, which is part of Host's bid. (Rothenberg also contributed $1,000 to Hahn.)
If SSP is ultimately awarded the contract, travelers should start seeing some changes on the concourses toward the end of 2011.
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