Airports are the places which are flocked by foreigners and business man. Where there are many retail shops inside the airport. The passengers wish to buy high branded shops at the airport. The restaurants in the airport charge more on food. Many people think they are paying more on food just because they are having food in airport. Everyone have different opinion on this topic but the truth is nuanced. It’s assumed that nearly 300 percent mark-up for items inside the airport. Here are some major reasons on increase in price inside the airport
Demand and supply
The restaurants bring all the ingredients and other things which are needed through high security inside the airport. There are so many restrictions on bringing the supplies inside, during peak travel times the supplies cannot be bought inside the airport easily.[i] They have to spend lot of money in bringing necessity goods neatly packed and properly checked, before they are bought inside the airport. To meet the demand for so many people at a particular time, the restaurants should have sufficient supplies. When there are no enough supplies, demand arises. Due to increase in demand the price of the products sold at the airport rapidly increases.
Retail charges
Airport is one of the most promising sectors for the retail development. There are more premium shops in the airport. Airport retail offers various brands of luggage, accessories and clothing which have high sensitivity and appeal. The rental charges are high for retail spaces. In order to make more profit in the business to pay high rent, they hike the prices in the restaurants. High charges on rent also become the reason for increase in price on the airport.
Captive audience
It means a group of persons unable to leave a place and forced to listen what is been said. Once the people are checked in the airport they will not be left to go out. As they cannot go out they have to have food on airport. The passengers do not wish to starve so they have no other option they ought to have food in airport. When all are in need for food there creates a high demand in the airport. The retailers use the opportunity to increase the price on the food in the airport.[ii] Not only on food even in other products like electronics, clothes etc.
Competition
There are lesser shops in the airport. When there are few retail shops in the airport, the shops fix the price of the products. In absence of competition the shops are flexible to charge more on high price. For instance when the customer is in need for charger, where he is been charged more on retail shop than original price. The customer do not have any other option, as there are only one branded shop and he cannot buy the charger anywhere in the airport, he have to buy the charger at any cost. When there are only fewer markets, the retailer increases the price of the goods.
Storage
The storage becomes another problem where only small quantity can be kept inside the airport. The retail shops should have high stock to meet the demand of the passengers in the airport. As seen earlier the airports have certain limitation for letting the supplies inside the airport. The company cannot store more on goods as there only lesser storage is allowed. Due to some security reason the knife used by the chief to be tethered to a wall. Inside the airport, gas oven are not permitted all the needs are met with electricity in the restaurant.
MNCs
MNCs will operate at very big level their sale rate is very high, where the small shops cannot afford to do it. Not all retail shops will be able to manage the same price for the products in airport, whereas the KFC, Mc Donald’s can subside the price of the products inside the airport based on the profits they make from the retail outside. Some MNCs will have their target audience in airport; the KFC, Mc Donald’s will have so much capital to operate it. MNCs like KFC, Mc Donald’s have many pricing strategies to cover the audience. Sometimes the KFC, Mc Donald’s have the tie up with the airport authority, and even with banks. Where the customer get discount of 5%, 10% when they pay through particular bank prescribed by KFC, Mc Donald’s. These strategies will help the MNC to gain more profit.
Conclusion
We have seen some of the major reasons behind the increase of price in the airport. It’s been clear that the retailers will have high operating cost; this leads them to have high price on the goods to make more profit in the business. The airports earn revenue, 50% from commercial charges and 50% from aeronautical charges or user charges. It is also to be noted that when there is no commercial activities then the charges on aeronautical services will be high.[iii]
Edited by Pragash Boopal
Approved & Published – Sakshi Raje
Reference
[i] https://viewfromthewing.com/2014/12/31/restaurants-airports-bad-stop-eating-shake-shake/
[ii] https://thepointsguy.com/2015/08/the-airport-restaurant-pricing-scam/
[iii] https://www.quora.com/Why-are-prices-so-high-in-airports
