THAILAND. Airports of Thailand (AOT) announced today that it is studying various concession models for a forthcoming tender covering its multi-airport duty free operations.
Incumbent King Power International’s duty free contract across Bangkok Suvarnabhumi International, Bangkok Don Mueang International, Chiang Mai International, Phuket International and Hat Yai International airports comes to an end in September 2020.
With a new terminal building set to open at Bangkok Suvarnabhumi International at that time, the new contract must be confirmed two years prior for the new retailer to prepare supply agreements, contracts and staff training, according to an AOT statement. The expansion will see duty free space at the key Thai hub increase by +70%.
AOT said it is considering four different concession models: a master concessionaire; multiple concessions by location; concessions by category; and concessions by category and by location. The airport authority is currently analysing the current duty free stores and the pros and cons of each type of concession.
Heavy competition likely as rival retailers ramp up calls for change
Whatever shape the final contract model takes, competition is certain to be intense, both from local companies and international players such as Lotte Duty Free and The Shilla Duty Free of South Korea. According to The Bangkok Post on 29 March, three retail associations submitted an open letter on Wednesday to Prime Minister Prayut Chan-o-cha calling on the government to revise the concession’s terms of reference. They are the Thai Retailers Association (TRA), the Thai Duty Free Shop Trade Association and the Thai Shopping Centers Association. TRA Executive Director Chatrchai Tuongratanaphan proposed a multiple-retailer model. “The concession may be divided into smaller contracts based on product categories such as food and clothing,” Chatrchai said. “That’s the same model that many large airports in the world use, like in South Korea and Singapore. This model will enhance pricing competition and boost product offerings and quality.” |
The selection process will focus on transparency, fairness and verification, said AOT. The authority stipulated the concession model must be one that is used in airports around the world, but appropriate for AOT’s airports.
AOT said its current concession model is similar to that of Heathrow Airport and Shanghai Pudong International Airport.
AOT generated THB6,365.38 million (US$ 203 million) in non-aeronautical revenues for the quarter ended 31 December 2017, up +15.17% and representing 44% of group income.
Concession revenues (mainly from King Power International’s duty free and related businesses) made up 62% of non-aeronautical income, surging +19.2% to THB3,930.83 million (US$125.3 million).
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