San Francisco International Airport has confirmed to TRBusiness that it is planning to issue a request for proposals for its duty free concession in mid 2016 – well ahead of the formal expiry date of December 31, 2017.

 

 

“While we are planning to issue an RFP for duty free concessions at SFO, this activity will not occur until summer of 2016,” said Doug Yakel, Communications & Marketing officer at San Francisco International Airport.

 

 

DFS is currently the master concessionaire in the International Terminal, managing almost 58,000sq ft of concession space across a broad spectrum of luxury brands and products – including beauty and fragrances, and watches and jewellery.

 

 

Only last September [2014] it unveiled a comprehensive upgrade of its SFO duty free offer, in a record year for tourism and visitor numbers to the city. Total international passengers in fiscal year 2014/15 grew by 5.5% to 10,631,812, comprising 5.2m (+5.3%) international departing and 5.3m (+5.8%) arrivals.

 

 

International ‘departures’ by continent/destination in the last fiscal year 2014/15 were led by Asia/Middle East 2,315,144 (+7.0%); Europe 1,473,694 (+6.0%); Canada 736,844 (+8.6%); Latin America 555,266 (-1.5%); and Australia/Oceania 192,854 ((-9.6%).

 

 

 

 

According to Airport Commission City and County of San Francisco records, fiscal year 2014/15 airport revenues to SFO from duty free sales rose 5% to $1.3m from increased demand on luxury goods, as DFS’ gross sales increased by 13.3% compared to the previous year.

 

 

By comparison, other concession revenues increased by $0.4m (8.8%), mainly due to higher foreign currency exchange levels against the US dollar.

 

 

In fiscal year 2014 ‘concession revenues’ from duty free, F&B, retail and car hire rose by 5.4% from $129.5m to $136.6m, driven by a +3.2% increase in passenger numbers and a higher spend per passenger across the airport.

 

 

[As a gauge of the sheer importance of duty free income to SFO, only the operations of United Airlines ($146.7m); on-airport parking ($92.7m) and Hertz car hire ($29.8m) exceeded the $26.9m revenue contribution from DFS paid to San Francisco International Airport’s $243m total in fiscal year 2012-13 – according to the Airport Commission City and County of San Francisco-Ed].

 

 

Meanwhile, visitor numbers have also been dynamic, with a record-breaking 18.01m visitors to San Francisco in the last calendar year. This represented an increase of 6.5% over 2013, with the 2014 visitor spend reaching an almighty $10.67bn (+13.7%) compared to 2013.

 

 

 

 

Most importantly from the duty free standpoint, total international visitor spending in San Francisco has grown by 71% since 2009, compared to 25% growth for domestic visitors over the same period.

 

 

San Francisco Travel President and CEO Joe D’Alessandro said: “We estimate that San Francisco had 4.1m international visitors in 2014, about 31% of our visitors from outside the Bay Area (or 22.8% visitors). They spent $3.4bn, or 34% of the total spent by all visitors.”

 

 

 

He added that the Chinese visitor market is expected to grow by 20% in the next three years, helped by the city launching websites in both traditional and simplified Chinese earlier this year.

 

 

While it is still quite some way ahead, this new RFP will doubtless attract a lot of interest next year and not least because SFO has long had a forward-thinking and very customer-orientated passenger experience and commercial focus. For example, the relatively new DFS offering at SFO is arguably one of the best duty free departure offers for ‘foreign passengers’ in the US.

 

 

 

 

BACKGROUND: DFS won the 10-year master duty free and duty paid concession in SFO’s new international terminal in early 1999 and commenced operations in May 2000.

 

 

With a retail area doubled in size to almost 58,000sq ft from its previous old facility, DFS introduced several new specialty concepts in addition to its traditional duty free and general merchandise shops.

 

 

In addition, DFS later exercised two one-year options and then a five-year option to take its present concession period through to 2017 after the airport’s post 9/11 ’September Concession Support Program’ was created.

 

This offered DFS and SFO’s other concession tenants options on their leases, which DFS took up. DFS exercised its five-year option at the existing minimum annual guarantee of $26.4m.

 

 

 

 

DFS has operated the duty free concession at San Francisco International Airport since 1983. When completed in 1999-2000, the international terminal at San Francisco International Airport was the largest in the United States and was the centrepiece of the airport’s $2.5bn Master Plan at that time.