SOUTH KOREA. Lotte Duty Free has been awarded the liquor, tobacco and packaged foods concession (DF2) at Incheon International Airport’s new Terminal 2, due to open later this year, while The Shilla Duty Free (DF1) has secured the perfumes & cosmetics contract.
The Shilla offered KW100 billion (US$87.9 million) in first-year guarantees for the five-year contract, which covers six stores and 2,105sq m of space. Lotte’s winning bid for the eight-store liquor & tobacco concession featured a Kw84 billion (US$73.8 million) offer in the first year. It embraces 1,407sq m of space (see below for minimum acceptable guarantee levels).
The five-year contract awards were announced this morning by Korea Customs Service, following the completion of an unprecedented two-stage tendering assessment, involving first Incheon International Airport Corporation and then the government regulator.
However, as previously reported, the fashion & accessories contract (DF3) attracted no bidders and is being retendered. “It’s a big, big problem,” IIAC Deputy Executive Director, Commercial Marketing Group, Bum-Ho Kim told The Moodie Davitt Report.
DF3 covers some 14 stores spread across 4,889sq m of retail space. Kim said the revamped tender will feature a reduced MAG but he was still concerned that any bidders will participate.
One possibility is that Shinsegae Duty Free, active in the existing terminal, may bid. However, the slump in Chinese passengers due to the THAAD anti-missile system will be a big deterrent to prospective bidders, as underlined by the lack of take-up to date.
Construction on the new shops will begin soon as the terminal is due to open late this year.
Separately, SM (DF4), Entas Duty Free (DF5) and CityPlus (6) have been awarded the concessions set aside for small and medium enterprises (SMEs). SM offered KW9 billion (US$7.9 million); Entas KW8 billion (US$7.03 billion) and CityPlus KW2 billion (US$1.76 million).
In total IIAC attracted total first-year guarantees of KW204 billion (US$180 million)
Kim confirmed that IIAC will reduce the fees paid by concessionaires at Terminal 1 in light of the heavy diversion of traffic to T2. “We will adjust the MAG because the total passengers will reduce by about -30% and be diverted to T2,” he said. “So we will adjust the MAG by a -30% discount for T1 concessionaires.
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