[UPDATED]. The Changi Airport Group (CAG) is to tender its two core contracts of liquor and tobacco and perfume and cosmetics under two six-year contracts.
DFS Singapore is the current holder of the L&T business, while Nuance-Watson Singapore will be defending its perfume and cosmetics contract. The CAG told The Business on March 7 that 'both our L&T and P&C concession tenders will be open tenders'. [These existing contracts have already been extended-Ed].
The new contracts will cover all of the shops located in all of Changi’s terminals and carry longer tenure than the former three-plus-two year models used in the past. This should please some retailers, since it should enable and encourage higher investment over the course of the new contract periods than the three-year terms ever could.
At the same time, retail companies who are expected to submit or consider bids include DFS and Nuance-Watson, plus the two Korean giants of Lotte and Shilla, Hong Kong’s Sky Connection, Heinemann, LSTR, Aer Rianta International, King Power Group (HK) and possibly others such as Dufry and WDFG.
STRONG COMPETITION IS EXPECTED
Lotte is expected to mount particularly strong challenges for both contracts and especially after losing out on L&T at Changi in the last round of L&T bidding – even though it had the highest monetary bid.
The retailer was also encouraged by the CAG’s decision last year to award it the three-year Terminal 1 ‘Fashionwear’ contract (from October through to September 30 2015) through a direct approach exercise after CAG had already sought proposals from the market. The airports company pointed out to The Business that this was not conducted 'by way of a direct award', as was stated in our earlier report and we are happy to correct this error.
NEW CONTRACT DETAILS
The L&T tender will be a six-year contract running from April 9, 2014 until April 8, 2020 with no renewable option and will cover Terminals 1, 2 and 3 and the upcoming Terminal 4. A compulsory on site tender briefing is being held at Changi Airport Terminal 2 on April 3 at 09.30am and any interested parties should make themselves known to
(telephone: +65 6541 2137/+65 6595 6419).
The actual tender opening date is set for March 28, 2013 and will close on June 27 at 1600 Singapore time. For more details, click here: http://www.changiairportgroup.com/cag/html/business-partners/airport-concessions/upcoming-leasing-opps.html
Meanwhile, the tenancy period for the P&C contract is also six years and will run from October 1, 2014 until September 30, 2020 – again with no renewable option and also covering Terminals 1, 2 and 3 and the upcoming T4.
The site briefing will also take place at exactly the same time as the L&T briefing in the CAG(S) Auditorium, 4th Storey, T2 and again, attendance is compulsory. The tender opening and closure dates are also the same as L&T. Further details of this tender can also be found at exactly the same link above, with the contact names and email contacts also the same.
For those readers who are familiar with the last L&T bid, Lotte management told The Business at the time that it missed out because its logistics were simply not considered to be sufficient at the time to service the L&T contract. But this is unlikely to be an issue this time around-Ed].
Following the last openly tendered core contract tenders at Changi in 2007, Hotel Lotte – as it was then known – bid around S$5.5m a year more for the L&T business than DFS.
In precise terms and using the S$/USD exchange rate of the day, Lotte offered a straight minimum monthly guarantee of S$10,486,000; ($6,821,882) for the three years of the contract, compared with DFS’ minimum monthly guarantee of: (i) S$10,166,667 ($6,612,853 ) for Year 1; (ii) S$10,333,333 ($6,722,344.75) for Year 2; and (iii) S$10,500,000 ($6,830,990) for Year 3.
Put simply and in summary, the bids over three years were as follows:
BIDDING TABLE: THE LAST TIME AROUND:
1. Hotel Lotte: S$.377,496,000 ($245,721,289)
2. DFS Venture: S$.371,999.990 ($242,104,119)
3. Sky Connection: S$.334,836,000 ($217,919,852)
4. Nuance Watson: S$300,000,000 ($195,268,484)
5. Aelia SAS: S$.291,600,000 ($189,795,243)
6. Aldeasa: S$.186,708.990 ($121,542,824)
Based on minimum monthly offer guarantees over 36 months. (Exchange rate at the time was equivalent to: 1 SGD = 0.650818 USD/1 USD = 1.53653 SGD).
Full details of the last round of bids can be found here, although they are only indicative of the interest at that time and will have no bearing on these new entirely reshaped core contracts. [Since that time, SAS has disappeared and Aldeasa is now part of WDFG/Autogrill-Ed].
[Above: Changi Airport passenger numbers from 2012]
HIGH INVESTMENT LEVELS
Of particular interest will be how some retailers and suppliers view these latest Changi Airport mega tenders now that Hong Kong International Airport’s L&T contract has been awarded to DFS Group after it made its umbrella offer to take over the entire core DF&TR retail operation last year.
DFS management told The Business last December that it plans to transform all of its newly won L&T, P&C and GM shops at Hong Kong International Airport. It is said to be making good progress towards its central aim of redesigning the whole shopping area in the entire airport with all - or most - of the work expected to be complete by the end of the first half of 2013.
Needless to say, this will involve big investments by DFS’ supplier partners who will then need to turn their attention to the Singapore Changi operation - while other airports are also making calls on supplier ‘investment’ funds.
Indicative sales numbers relating to the Hong Kong L&T, P&C and GM business between 2004 and 2010 are shown here for reference purposes: