Incheon Airport Terminal 2 duty free tender pushed back to early 2017

incheon-bum-ho
Bum-ho Kim: “We are still in talks with the Customs office”

SOUTH KOREA. Incheon International Airport Corporation (IAAC) has delayed the release of its much-anticipated duty free tender for the new Terminal Two until early next year.

As reported, IIAC had hoped to launch the tender by early December but it is still in talks with Korea Customs Service over the details, Deputy Executive Director, Commercial Marketing Group, Bum-Ho Kim told The Moodie Davitt Report.

Bidding for the five-year contracts was originally due to close by mid-February 2017 with awards expected to be announced by the end of the same month.

That tight timeline recognises that the first phase of the ambitious T2 development will open next October, with ultimate project completion in 2023.

The key categories (perfumes & cosmetics, around 40% of current sales), liquor & tobacco (almost 35%) and fashion & other products (circa 25%) will each be tendered on a still unpublished formula. It is unlikely that a single retailer will win multiple categories due to monopoly sensitivities. Having three or four main retailers is likely, with at least one small & medium enterprise (SME) retailer in place too.

The tender (as reported previously) will be open to international and local players, though it is uncertain whether any offshore players will contend. Local/international joint ventures are not permitted by law as only individual entities are allowed to bid.

concourse-lotte-768x576
(Top to bottom) The key protagonists in the tender are likely to include Lotte, The Shilla and Shinsegae

shilla-768x576 shinsegae-df-768x576

Duty free income is crucial to the funding of the US$5 billion T2 project. The sector accounts for almost 40% of total Incheon International Airport revenues.

As reported, IIAC is conscious of the heavy financial burden that the T1 retailers (principally Lotte Duty Free, The Shilla Duty Free and Shinsegae Duty Free) are facing in the Main Terminal Building and has tweaked the financial model for T2 accordingly.

Additionally, the terms of the T1 concessions will be adjusted by the same percentage (roughly 30%) of traffic that is moving to T2 (Korean Air flights plus SkyTeam alliance members, including Delta Air Lines, KLM and Air France).

T2’s passenger mix will vary considerably from T1 with Chinese nationals accounting for around 14% of the mix, compared to about 25% at T1 (where Koreans represent 65% and Japanese 5%).

Unlike T1, the approximate 10,000sq m of retail space will be concentrated in a single central area.

*Note: Look out for a major South Korean travel retail market report written on location by Martin Moodie in our next Print Edition, out in early 2017.

sm-duty-free-768x576
One spot is likely to be reserved for a small & medium enterprise retailer. Pictured is SM Duty Free, which has carved out a successful business in Terminal 1.

NOTE TO AIRPORT OPERATORS: The Moodie Davitt Report is the industry’s most popular channel for launching commercial proposals and for publishing the results. If you wish to promote an Expression of Interest, Request for Proposals or full tender process for any sector of airport revenues, simply e-mail Martin Moodie at Martin@MoodieDavittReport.com.

We have a variety of options that will ensure you reach the widest, most high-quality concessionaire/retailer/operator base in the industry – globally and immediately.

Similarly The Moodie Davitt Report is the only international business intelligence service and industry media to cover all airport consumer services, revenue generating and otherwise. We embrace all airport non-aeronautical revenues, including property, passenger lounges, car parking, hotels, hospital and other medical facilities, the Internet, advertising and related revenue streams.

Please send relevant material, including images, to Martin Moodie at Martin@MoodieDavittReport.com for instant, quality global coverage.

All such stories are consolidated in our popular Tender News section (see home page dropdown menu) that has been running since 2003.

Food & Beverage The Magazine eZine