Why do airports have luxury stores? Many people who fly a lot are wealthy, and many people who are wealthy fly a lot. They are also often very busy. For them, price matters less than brand and style, so if they need something, they are happy to pay the elevated price for an already expensive item at the airport.
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It turns out people's top priority in an airport, besides making their flight, is staying hydrated. Despite the high price of bottled water at the gate, it's the number one item purchased in Hudson's travel essential stores in the United States.
More than 40 percent of hub airports' revenues involved passenger-related activities, such as terminal concessions, parking, and ground transportation. For large hub airports specifically, another 40 percent, including landing fees and terminal rents, came from passenger airlines (Exhibit 1).
The truth is, for a lot of products, there isn't always much difference between duty-free and the prices you can get at home — especially if you're prepared to hunt online. The key differentials are tobacco and alcohol, which are both usually taxed heavily and therefore can be bought for a lot less at the airport.
In the US, almost all major airports are government-owned – usually by the local federal or city government. In New York, for example, JFK and La Guardia airports are owned by the City of New York. Newark is owned by the cities of Newark and Elizabeth.