Sydney Airport (SYD) has shortlisted three operators for one of its most important contracts – the duty free concession – which accounts for nearly 13% of its total revenue and 23% of commercial revenue.

 

Retail revenue in the first half (ending June) grew by +7.4% at the Australian hub to A$125m ($116.7m).

 

The current duty free contract held by Nuance Australia expires in February 2015 and SYD says that a decision on the winning partner – or partners – will be made before the end of the calendar year.

 

According to the airport, the busiest in the country with 37.86m passengers in 2013, the expression of interest request in February resulted in “unprecedented interest” from DF&TR operators. A number of them progressed to the request for proposal process which commenced in May 2014.

 

The request for proposal contained a variety of options including:

• Increased floor space

• The potential for more than one operator

• The possibility to bid for a specified area within the luxury products and brand space.

 

SYD says: “The quality of operators and their submissions has been extremely high.”

 

Nuance Australia currently operates six duty free outlets at the Terminal 1 International facility occupying around 7,600sq m of retail space – plus one domestic duty paid outlet located in the Domestic Terminal 2.

 

RISING PASSENGER PENETRATION

The shortlist announcement was made today as SYD revealed its half-year results which showed a strong retail performance, with revenue up +7.4% to A$125m ($116.7m) and better than any other division (see table below and click to enlarge).

 

 

This rise reflects increased passenger penetration and the complete cycling of tobacco law changes. “We are delighted that duty free initiatives implemented in late 2013 have translated into a +13% increase in passenger spend rates [compared to the same period in 2013], and in advance of the duty free retender,” SYD,

 

The airport has seen a number of retail projects progressed over the period with some retailers developing new brands and products. Terminal 2 concessions introduced in 2013 such as MoVida, Coopers Alehouse, Marcs, Oxford and Studio T2 are said to be trading well

 

Meanwhile in Terminal 1, new stores such as National Geographic, Cerrone, A Little Something and La Perla have benefitted from continued Asian and specifically Chinese nationality growth, claims the airport.

 

INTERNATIONAL BOOST

In the first half, overall traffic rose by +2.3% but international passenger growth was double that at +4.7%, benefiting from the Chinese New Year and Easter periods, plus a number of business, sporting and cultural events in Sydney.

 

During the period, growth in Asian nationality markets was buoyant. Malaysia (+22.5%), Hong Kong (+17.0%), China (+15.8%), India (+15.4%) and Singapore (+9.3%) were the strongest contributors (see table right and click to enlarge).

 

NEW RETAIL OPPORTUNITIES

SYD notes that there will be new contracts available soon. As well as three new tenancies set to open in Terminal 1 in the last quarter of 2014, the airport is tendering its advertising business – another significant contract for the airport – and is reviewing and repositioning its food courts across both Terminals 1 and 2.