PVC Benefit Determination

Premium Value Concession Program

Robb Brown / Rob McDanielMetrix Advisors, LLC

[email protected]

PVC Benefit Determination

April 18, 2013

Agenda

1. Phase 1 Review2. Phase 2 Timeline3. Services PVC (Rule 46)4. External Customer Service Scoring (peer airports)5. Reporting6. Other Initiatives7. Feedback

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8. PVC Program Overview9. Q&A

2DIA Premium Value Concessions Program

Phase 1 Review

• 29 Participants

• PVC Program Benefit recipients (44.8%)

• PVC Program Appeal eligible participants (6.8%)

• All participants eligible to bid on resulting RFPs

• Benefit recipients included:– Mix of local, national and ACDBE concessionaires

– Concessionaires located in inner, outer and RJF Merchant Zones


Phase 2 Timeline


Contract Expiration August 1, 2013 – July 31, 2014

Operational Defaults *Tier 1: None allowed during OEPTier 2: No more than one / year on average during OEP

Financial Scoring August 1, 2010 – July 31, 2013

Internal Customer Service Scoring August 1, 2012 – July 31, 2013

External Customer Service Scoring n/a

Training Program Scoring n/a

Benefit Determinations Early Q4’2013 (estimated)

* Operations Evaluation Period (OEP) is defined for each PVC phase and continues thru the evaluation date

Services PVC Program (Rule 46)

Program kick‐off in January 2013

Pilot customer service surveys completed

Final surveys, peer airports, & scoring metrics under review

Q2’13 roll‐out targeted


External Customer Service Scoring

DIA to select five (5) of eight (8) peer airports proposed by TPA

Peer airports selected utilizing the following criteria:1. Best‐in‐class customer service

2. DIA management perspective

3. Operational metrics

Recommendations currently under review by DIA Presentation to concessionaires in Q2’2013 Peer airport shopping tentatively scheduled for Q4’13


Reporting

Financial Reports:• Format same as online reports

• Scores thru Feb 2013 will be available online by April 30, 2013

Customer Service Reports:• Formats are finalized

• Scores thru Mar 2013 will be available online by April 30, 2013

http://business.flydenver.com/bizops/premiumValue.asp


Other Initiatives

Internal customer service surveys under review: 8 months of actual data now available

Some changes anticipated

No changes expected before August 2013

Open communication with concessionaires on any/all proposed changes

Recommendations for continuous improvement: Evaluation of new counting technologies for possible pilot program to

enhance Merchant Zone allocation methodology

Review all Phase 1 data for trends and insights towards program enhancements

Participation in industry events (e.g., ARN, AMAC) to stay connected with industry trends and best practices.


Program Overview


Phase Review


* Defaults allowed during Operations Evaluation Period (OEP):

Tier 1: None

Tier 2: No more than one (1) per year on average

Phase * Dates ContractExpires

FinancialScoring

CustomerService Scoring

1 6/1/09 ‐ 7/31/13 8/09 – 7/12 Customer ServiceReport only

2 8/1/13 ‐ 7/31/14 8/10 – 7/13 8/12 – 7/13

3 8/1/14 ‐ 7/31/15 8/11 – 7/14 8/12 – 7/14

Full Later of PSD or contract start date

36 months prior to lease expiration + ≤ 18 mos. 8/12 – 7/15

Data Inputs


Description Source Status

Major Merchandise Category PVC Contract Amendment One‐time Review

Minor Merchandise Category PVC Contract Amendment One‐time Review

PVC Square Footage PVC Contract Amendment One‐time Review

Concourse Assignment Concession Location Map Review Quarterly

Enplaned Passenger Report DIA Commercial Monthly Update

DIA Gross Revenue Report DIA Finance (A/R) Monthly Update

Inflation Data Bureau of Labor Statistics(West Urban Region / Broad Basket)

Monthly Update

Seating Capacity Exhibit • Enplanement Allocation Map• Enplaned Passenger Report• OAG Seat Configuration Report• DIA Replacement Report (SH&E)• Gate Assignment Report

Semi‐annually

PVC Models & Databases


Source Data StatusA Seating Capacity Exhibit • Monthly Flight Activity Report (gate

capacity)• Monthly Enplaned Passengers Report (passenger volume by concourse)

• 2009‐12 Final Draft complete• Pending approval of Rule 45 changes

B Financial Database • Monthly Concession Gross Revenue Sales Report

• PVC Amendments (square footage)• Seating Capacity Exhibit

• 2nd draft complete• Quality assurance underway• Pending approval of Rule 45 changes

C Customer Service Database • Monthly mystery shopping results Sales Report

• Peer airport mystery shopping data• DIA Customer Service Training Program data

• Preliminary planning scheduled for Q1

D Scoring Model • Rule 45• Financial Database• Customer Service Database• Contract expiration report• Remodel/closure report

• Preliminary draft scheduled for completion in early November

• Pending approval of Rule 45 changes• Synchronize with Customer Service Database in 2013

• Enhance automation throughout 2013

Key Measures


Operations Criteria• No Tier 1 defaults during Operations Evaluation Period (OEP)• Average 1 (or less) per year during OEP

Customer Service Performance• Internal mystery shopping surveys (DIA)• External mystery shopping surveys (five peer airports)• Training (currently not used)

Financial Performance• Five categories

Scoring Overview


Scoring Metric Frequency Scoring Methodology

Operational Defaults Once / contract term(Evaluation Date)

Pass/Fail

Internal Customer Service Monthly 1 point awarded for top 1/3rd by minor merchandise category

External Customer Service Monthly 1 point awarded if monthly Internal Customer Service score > that aggregate peer customer service score

Customer Service Training Yearly

15% increase to monthly service scores for year, if at least:• 50% of total concession employees, or;• 80% of customer facing employees;attend DIA customer service training program.

Financial Criteria (A‐E) Monthly• 1 point awarded for top 1/3rd by minor merchandise category by

concourse (top ½ for Food Court)• Maximum of 2 points for financial metrics per month

Benefit Determination Once / contract term (Evaluation Date)

• Assign Minor Merchandise Category scoring pool (all concourses)• Sum all monthly points earned for Operating Period• Calculate Monthly Average Point (MAP) score• Those concessions with a MAP in the top 1/3rd of their scoring

pool earn the Program Benefit (top ½ for Food Court)• Those within 17% of lowest recipient score eligible for Appeal

Operations Criteria


Cured and uncured defaults are scored

First default notices within cure period are not counted

Defaults allowed during Operations Evaluation Period (OEP):Tier 1: NoneTier 2: No more than one (1) per year on average

OEP GUIDELINESPhase 1 8/1/10 ‐ 7/31/13

Phase 2 8/1/10 ‐ 7/31/14

Phase 3 8/1/10 – 7/31/15

Full PVC Later of PSD or contract start date, thru Evaluation Date (18 months prior to expiration)

Internal Customer Service


Key Points

• CSE conducts monthly mystery shopping surveys for each concession

• Surveys are customized by minor merchandise category

• Survey results are distributed to PVC participants only

• Internal customer service scoring reports (including gross scores and monthly points) distributed periodically

Monthly Survey Process


1. Mystery shopping surveys completed by shopper

2. CSE performs quality control on individual surveys

3. Automated e‐mail sent to one primary e‐mail for each concession *

4. E‐mail can be distributed or printed by primary contact as needed

5. URL link to survey remains open for viewing

* Exact timing of e‐mail depends on monthly shop cycle

External Customer Service


Procedure

• Five, (5), peer airports are selected

• An external survey completed every eighteen, (18), months

• Uniformity: utilize same mystery shopping forms/minor merchandise categories

• Average score of all peer airports is calculated

• DIA concessions scoring higher than the average peer airport score shall receive one, (1), point for the month

Training


• DIA must establish a training program

• Require: 50% participation among all employees, or 80% of customer facing employees

• Goal: Gain a 15% increase to customer service score for calendar year

• Concessions will be required to submit employee roster reports for validation by TPA

• There shall be no partial year scoring

Customer Service Scoring Phases


Phase I: Required: Customer Service Evaluation Report only

Phase II: 12 months of mystery shopping data

Phase III: 24 months of mystery shopping data

Full PVC: 36 months of mystery shopping data

Financial Performance Metrics


Financial Performance Scoring Metric Source Data

A Top Third Sales per PVC Square Footage by Minor Merchandise Category (MinMC) by Concourse

1. Monthly Sales Report2. PVC Square Footage3. MinMC Assignment4. Concourse Assignment

BTop Third Sales per PVC Square Footage per 1000 Allocated EnplaningPassengers by month, by Minor Merchandise Category (MinMC) by

Concourse

1. Monthly Sales Report2. PVC Square Footage3. MinMC Assignment4. Seating Capacity Exhibit5. Monthly Enplaned Passenger Report

C Top Third Monthly Revenue per 1000 Allocated Enplaning Passengers by Minor Merchandise Category (MinMC) by Concourse

1. Monthly Sales Report2. MinMC Assignment3. Concourse Assignment4. Seating Capacity Exhibit5. Monthly Enplaned Passenger Report

D Above Average Monthly Sales Trend versus Major Merchandise Category (MajMC) Trend by Concourse

1. Monthly Sales Report2. Major Merchandise Category

Assignment

E Above Average Monthly Sales Trend versus Inflation and Enplanements Trend by Concourse

1. Monthly Sales Report2. Monthly Inflation Data3. Concourse Assignment4. Monthly Enplaned Passenger Report

Seating Capacity Exhibit – Allocated Enplanements


“… Since it is not possible to determine the exact number of enplaning passengers that may be customers at any given retail or food location at DIA, an allocation basis must be used to establish

this number.” *

Step 1: Allocate gates to Enplanement Allocation Map by concourse

Step 2: Calculate seating capacity by gateƒ (departures by gate assignment, aircraft capacity by departure)

Step 3: Calculate seating capacity by concourse ‘Merchant Zone’ (i.e., east/west center core, sub‐cores, etc.)

Step 4: Calculate Merchant Zone seating capacity as % of total concourse

Step 5: Apply % from Step 4 to monthly enplanements by concourse

= Allocated Monthly Enplanements* Rule No. 45, Section 4.04.B

Top 1/3rd Sales per PVCSF by Minor Merchandise Category by Concourse (A)


“… Shall be determined by dividing monthly sales by the PVC square footage of the concession. Those concessions scoring in the top third of the Minor Merchandise

Category by Concourse shall score one (1) point for the month.”

Step 1: Monthly Sales (per monthly sales report)PVC Square Feet (per PVC amendment)

Step 2: Rank Step 1 amount by MinMC and Concourse

Step 3: Assign one (1) PVC Point to top 1/3rd for that month

Food Court concessions are awarded on a top 1/3rd“+1” basis.

Top 1/3rd Sales per PVCSF per 1,000 Allocated Enplaning Passengers by Month by MMC (B)


“… Shall be determined using the formula monthly sales per PVC square footage divided by the allocated enplaning passengers divided by 1,000. If a concession scores in the top third of its Minor Merchandise Category in its Concourse, that

concession shall receive one (1) point for the month.”

Step 1: Sales / PVC Square FootageAllocated Monthly Enplanements / 1,000



Step 4: Food Court concessions are awarded on a top 1/3rd“+1” basis.

Top 1/3rd Monthly Sales per 1,000 Allocated Enplaning Passengers by MMC by Concourse (C)


“… the Concession’s monthly sales are divided by the quotient of allocated enplaning passengers divided by 1,000. One point shall be scored by those in the top third for the

month in their Minor Merchandise Category, by Concourse.”

Step 1: Monthly SalesAllocated Enplanements / 1,000



Step 4: Food Court concessions are awarded on a top 1/3rd“+1” basis.

Above Average Monthly Sales trend versus Major Merchandise Category Trend (D)


“… Compares the monthly percentage sales increase or decrease compared to the same month prior year for a concessionaire against the Major Merchandise Category increase or decrease in its residing Concourse for the same period. Concessions whose percentage change in sales for the month is better than the percentage change in sales for the Major

Merchandise Category for that Concourse shall score one point for the month.”

Step 1: Calculate change (%) in Sales by Major Merchandise Category over same month, prior year by concourse

Step 2: Calculate change (%) in Sales by Concessionaire over same month, prior year

Step 3: Compare Step 2 (%) to Step (1%)

Step 4: Assign one (1) PVC Point if Concessionaire outperforms Major Merchandise Category for residing concourse

Above Average Monthly Sales Trend versus Inflation and Enplanements Trend by Concourse (E)


“… Shall be determined by dividing monthly sales by the PVC square footage of the concession. Those concessions scoring in the top third of the Minor Merchandise Category

by Concourse shall score one (1) point for the month.”

Step 1: Calculate change (%) in sales by Concessionaire over same month, prior year

Step 2: Calculate change (%) in enplanements by concourse over same month, prior year

Step 3: Calculate change (%) in regional inflation over same month, prior year

Step 4: Step 2 + Step 3 = change in overall demand and pricing

Step 5: Assign one (1) PVC Point if, Concessionaire outperforms total from Step 4

Scoring Process


Rule 45 Description

1 Evaluate1. Document all Operations Defaults during candidates Evaluation Period.2. Remove from consideration any PVC candidates who have exceeded

predetermined limits.

2 Score the PVC Candidate

1. Determine candidate’s Operating Period (OP)2. The Operating Period subsequently becomes the Operating Period

Denominator (OPD) for calculation of the Monthly Average Point score.3. Calculate total points earned during the OP (financial + customer service).

3 Assign Scoring Pool

1. Determine all concessions in the candidate’s minor merchandise category (across all concourses)

2. Only assign those open for at least of 12 months during the candidate’s OP.3. Calculate OPD’s for each concession in candidate’s scoring pool4. Calculate total points earned for each concession in candidate’s scoring pool.

4 Calculate Monthly Average Point (MAP) 1. For each concession: total points earned / OPD = MAP

5 Rank PVC Candidate 1. Rank all concessions in the scoring pool based on the MAP

6Determine whether PVC Candidate earned the

Program Benefit

1. Food Court candidates in the top half of rankings receive the Program Benefit2. All others receive the Program Benefit if they are in the top third

Scoring Example


Term Contract Start

Contract Expiration

Scoring Pool

Remodel Dates

Operating Period (36 months)

Location

Suzie’s Slippers 5 yrs 7/1/07 3/31/10 No None None (< 12 mos) B‐CENTER‐W

Larry’s Loafers 7 yrs 1/1/08 12/31/14 Yes None 36 B‐INNER‐E

Kidz Cleats 7 yrs 1/1/11 12/31/17 24 B‐OUTER‐W

Runner’s Depot 5 yrs 1/1/10 12/31/14 Yes 1/1/12 –3/31/12 33 C‐INNER‐E

Hiker Haven 5 yrs 8/1/08 7/30/13 Yes 36 B‐CENTER‐E

Calculate scoring: Larry’s LoafersMinor Merchandise Category: FootwearEvaluation Period: 7/1/09 – 6/30/12

Scoring Example – Benefit Determination


Gross Monthly Points ‐ Financial Onl Jan‐10 Jan‐12 Feb‐12 Mar‐12 Apr‐12 May‐12 Jun‐12 Jul‐12Suzie’s Slippers n/a n/a n/a n/a n/a n/a n/a n/aLarry’s Loafers ‐ 3.00 2.00 ‐ 3.00 ‐ 2.00 2.00 Kidz Cleats ‐ 4.00 1.00 3.00 2.00 3.00 4.00 5.00 Runner’s Depot 2.00 2.00 2.00 2.00 2.00 Hiker Haven 5.00 ‐ ‐ ‐ ‐ ‐ 2.00 2.00

Net Monthly Points ‐ Financial only Jan‐10 Jan‐12 Feb‐12 Mar‐12 Apr‐12 May‐12 Jun‐12 Jul‐12Suzie’s Slippers n/a n/a n/a n/a n/a n/a n/a n/aLarry’s Loafers ‐ 2.00 2.00 ‐ 2.00 ‐ 2.00 2.00 Kidz Cleats ‐ 2.00 1.00 2.00 2.00 2.00 2.00 2.00 Runner’s Depot 2.00 2.00 2.00 2.00 2.00 Hiker Haven 2.00 ‐ ‐ ‐ ‐ ‐ 2.00 2.00

Net Monthly Points(Financial + Customer Service) Jan‐10 Jan‐12 Feb‐12 Mar‐12 Apr‐12 May‐12 Jun‐12 Jul‐12

MonthlyPoint Total

OPD MAP

Suzie’s Slippers n/a n/a n/a n/a n/a n/a n/a n/aLarry’s Loafers 1.00 2.00 3.00 1.00 3.00 1.00 2.00 3.00 61.00 36 1.69 Kidz Cleats ‐ 3.00 1.00 2.00 2.00 2.00 2.00 2.00 43.00 24 1.79 Runner’s Depot 2.00 2.00 2.00 2.00 2.00 66.00 33 2.00 Hiker Haven 3.00 ‐ 1.00 ‐ 1.00 1.00 3.00 3.00 43.00 36 1.19

Total Scoring Pool: 4.0Top 1/3rd: 1.0

Appeal Threshold: 1.66Runner’s Depot = Program BenefitLarry’s & Kidz = appealHiker Haven = RFP

Scoring & Model Considerations


Standard Rounding utilized throughout model and scoring. For example: Scoring pool of 5: 5 x 1/3 = 1.67 2 benefit recipient

Scoring Pool of 4: 4 x 1/3 = 1.33 1 benefit recipient

Scoring Pool of <2 = automatic appeal (funded)

PVC candidates must notify TPA of any change in control considerations

Metrix open to meet with PVC candidates upon request to discuss scoring model after Phase 1 benefit determinations issued

Q&A


Documents

PVC Benefit Determination