Key challenges for T2 duty free bidders
– T3 opening in 2020 (exact date to be confirmed) will dilute T2 passenger numbers. Authority will not offer compensation (concession relief) for any traffic decrease.
– The cross-strait relationship with the PRC government is deteriorating
Changing passenger mix
– Increasing number of budget airlines at T2
TAIPEI. With just over six weeks until bids close on the dual Taoyuan Airport Terminal 2 duty free concessions, a packed field of heavyweight contenders is weighing up the challenges of a uniquely constructed tender.
As revealed by The Moodie Davitt Report, bids on the T2 tender (released on 1 June) are due by 23 July. The two contracts will run for 12 years with three-year extensions subject to “outstanding” performance.
The winning bidders will pay between 16% and 22% of revenue each month depending on sales volumes (the higher 22% kicks in when a monthly threshold is exceeded). They must also take responsibility for a wide range of additional airport operations (see below) under the terms of the airport’s unique Private Public Partnership (PPP) model.
The incumbents for the T2 zones C and D concessions are Tasa Meng Corporation (North Gate D) and Everrich Duty Free (South Gate C).
Besides the long-established duo, likely bidders include Dufry, DFS Group, Lotte Duty Free, The Shilla Duty Free and Shinsegae Duty Free.
The Moodie Davitt Report understands that Dufry, DFS, Lotte and Shilla are all poised to work with strong local partners on their respective bids (Dufry in a powerful combination with Taiwanese airline Eva Air; Lotte with the TV shopping arm of banking group Fu Bon; Shilla with local food chain Hsin Tung Yang). Shinsegae will bid alone.
Heavy investment in airport facilities required
Both contracts involve considerable complexity and operational responsibilities beyond duty free shop trading – one of the reasons that most offshore companies are bidding with local partners.
The 27,000sq m Zone C area also embraces management of F&B, as well as public zones including the boarding gate areas, customer service desks, washrooms and transit area.
Within the first three years of contract commencement, the winning bidder must invest a minimum NT$650 million (US$21.8 million) in these public functions. The successful company will be also responsible for related staff costs and maintenance of all facilities.
Zone D embraces 34,000sq m of commercial and public space. Again, the winning bidder will also take charge of F&B and various public facilities.
As with Zone C, the new incumbent is to invest a minimum NT$700 million (US$23.5 million) in such functions within three years and staff and maintain them.
For both Zone C and Zone D, the concessionaires must renovate the public facilities in year nine of their contracts.
The successful bidders have the right to set up a downtown shop with airport pick-up (as Ever Rich already does).
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