Airport Authority Hong Kong has withdrawn its General Merchandise concession from the list of retail tenders due on February 2 and will bid individual contracts such as watches and clothing on a shop-by-shop basis, while also introducing new cross-merchandising initiatives.

 

Interestingly, some fashion goods will also be made available as part of the Perfume and Cosmetics concession, while accessories and gourmet food will be incorporated into the Liquor and Tobacco business.

 

Under the new contract qualification terms, TRBusiness also understands that Airport Authority will only allow a single bidder to win a single contract and not both.

 

RECORD-BREAKING TRAFFIC

Meanwhile, Airport Authority Hong Kong will be hoping that its record-breaking 70.5m passenger count in 2016 (+2.9%) will translate into some robust financial offers for its imminent duty free tender process. [HKIA handled 68.5m passengers last year-Ed].

 

Several retailers say that they believe the prospects remain good for these contracts at HKIA considering Airport Authority has been actively building its airline client list. They also point to a more positive ‘micro-climate’ at the airport than currently exists in downtown Hong Kong.

 

At the same time, some positively add that many airlines are using [or plan to use] larger aircraft that can deliver more passengers from the same number of landings and take-offs. This is obviously very welcome ahead of the new third runway, which is due to open at HKIA in 2020.

 

POTENTIAL BIDDERS ‘POSITIVE’

Meanwhile, potential bidders have reacted mostly positively to the move to introduce cross merchandising within the traditional L&T and P&C shops.

 

However, some clearly believe that introducing additional merchandise categories could also be a move to try and drive up rentals and guarantees. They say this could be an effort to try and generate more revenues than might otherwise be available if these sectors were bid as standalone businesses.

 

Equally positively, potential bidders also point to the incremental revenues they believe they may generate once the current shops are both redesigned and rebuilt.

 

Rebuilds are a requirement under the concession process and it is hardly a secret that the shops are poorly positioned away from the normal traffic flows. DFS Group did invest heavily in a smart redesign of all the shops the last time around, but still resigned the business early.

 

As reported last year, DFS waived its right to take up its three-year extensions for its separate liquor and tobacco, general merchandise and perfume & cosmetics concessions, which were awarded back in 2012.