CHINA. China Duty Free Group (CDFG) is poised to be awarded the nine-year arrivals duty free concession at Guangzhou Baiyun International Airport after submitting the highest of five bids, write Martin Moodie and Jason Cao of Duty Free Expert*.
Offers were opened on Friday by the official bidding agency for the concession. CDFG will be awarded the contract if, as expected, there are no challenges to the announcement within one week.
The contract covers both the existing Terminal 1 and the new T2, due to be opened in 2018. CDFG already runs the airport’s departures duty free shops (pictured below).
CDFG tabled the highest of five bids for the contract which covers the new arrivals shopping opportunity at China’s third-busiest international airport. It beat off a very strong rival offer from Shenzhen Duty Free, followed by Zhuhai Duty Free, CNSC and China Travel Service.
CDFG tabled a minimum monthly annual guarantee of 39% of revenue for the T1 business until T2 is open, on minimum monthly sales of CNY32,440,000 (US$4,697,229).
From when T2 opens, the retailer offered a split proposition as follows:
- T1: 42% of revenue, with minimum monthly sales of CNY23,560,000 (US$3,411,427)
- T2: 42% of sales on minimum monthly sales of CNY35,330,000 (US$5,115,693)
Guangzhou Baiyun International Airport is China’s third-busiest and the world’s 16th-busiest airport, with 59.78 million passengers in 2016, up +19.3% year-on-year. Of those, some 13.58 million were arriving and departing international passengers. By 2020 total traffic is projected to reach 80 million and by 2030 100 million.
The new contract covers 300sq m of retail space at T1 before the T2 opening. Once open, T2 will offer 700sq m of space and T1 will be extended to 400sq m.
CDFG GROWING FAST
As reported, the Guangzhou concession is one of 19 arrivals duty free shopping opportunities being tendered across China as the government seeks to maximise domestic consumption.
So far three have been awarded (see table below) with CDFG winning the contract at Kunming Changshui International and (subject to closure) Guangzhou Baiyun International. Shenzhen Duty Free picked up the Xi’an Xianyang International Airport concession and state-owned CNSC the business at Chongqing Jiangbei International Airport.
AIRPORTS APPROVED FOR DUTY FREE ARRIVALS SHOPS – Guangzhou Baiyun International Airport – CDFG named top bidder Source: ©The Moodie Davitt Report |
The news is another boost for a buoyant CDFG. As revealed by The Moodie Davitt Report CDFG is bidding (with Lagardère Travel Retail) on both the liquor & tobacco and perfumes & cosmetics concessions at Hong Kong International Airport (HKIA) as well as (alone) on the Beijing Capital International Airport T2 and T3 duty free contracts currently out to tender.
At last week’s China’s Century conference in Guangzhou, CDFG President Charles Chen made a powerful speech in which he outlined CDFG’s planned domestic, global and online expansion. The programme includes the opening of tax and/or duty free stores in key Chinese tourist destinations abroad. Asia Pacific and Europe will be the two key areas of focus.
*Duty Free Expert is a Chinese language travel retail information service provided on WeChat. The Moodie Davitt Report works closely with its Founder Jason Cao.
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