Staff advertised for the opportunity for qualified concessionaires to submit proposals to operate the five-year Gift Shop Concession and a Request for Proposal (RFP) packet was sent to all interested parties. The RFP was advertised in the Billings Times on November 18 and 24, 2010 and posted on the City's Website on November 18 – December 14. This concession oversees the operation of the Airport's gift shop located on the concourse level in the center of the Airport Terminal Building. The proposals were evaluated according to a list of items that included Revenues to the City, participation as a Disadvantaged Business Enterprise (DBE), Experience and Qualifications, Store Concept and Transition Plan, and Customer Service.  Two proposals were received by the deadline on Tuesday, December 14, 2010 from the following businesses:

• Airport Gifts – A local company and current gift shop Concessionaire at the Airport.
• Air Host – The Airport's restaurant Concessionaire who also operates gift shops in other airports. Air Host is based in Memphis, Tennessee.

After evaluating the proposals the selection committee, consisting of Airport staff and an Aviation and Transit Commissioner, selected the proposal from Air Host over the current concessionaire, Airport Gifts.  One of the items that led to this decision was the percentage of gross revenues and the level of Minimum Annual Guarantee (MAG) offered by Air Host.  The Air Host proposal offered to pay the City 19.75% of the gross revenues with a MAG of $120,000 for each year of the contract versus the Airport Gifts' proposal to pay 18.5% of gross revenues and a MAG of $60,000.  Additionally, Air Host proposed to remodel and expand the entrance of the Gift Shop facility to give it a fresh new look, while Airport Gifts' proposal failed to provide much detail regarding the store's future look and concept.  The Airport Gift Shop Concession expired on December 31, 2010, with January 2011 as a transition month for the two concessionaires, and the new Agreement officially beginning February 1, 2011.

The City Council may:

• Approve the five-year Gift Shop Concession Agreement; or
• Not approve the Gift Shop Concession Agreement and direct staff on how to proceed with securing a Gift Shop Concessionaire.

The Gift Shop Concession normally generates $650,000 to $710,000 in gross revenues from which the Concessionaire remits the percentage that was proposed to the City. This will generally result in revenues for the Airport operation of between $120,000 - $132,000 annually, depending on the total annual gross revenues generated.  With a MAG of $120,000, the Airport will be guaranteed at least this level of revenue for each of the next five years.  This last contract year generated only $102,258 for the Airport, which is $17,742 less than what would be received with a $120,000 MAG.

Staff recommends that Council award the five-year Airport Gift Shop Concession to Air Host, for the period beginning February 1, 2011, and expiring January 31, 2016.