State-owned Airports of Thailand (AoT) has yesterday (20 February) approved a THB42bn ($1.3bn) plan to build a second terminal at Bangkok Suvarnabhumi International Airport following a meeting of the Board of Directors.
According to statement seen by TRBusiness, AoT will now press forward with the construction of a second terminal, which could increase duty free and commercial space by up to 70%.
This is after the project was initially shelved due to criticism of the terminal’s planned location from several organisations including the Council of Engineers and Architects Council of Thailand.
Multiple local media reports indicate the project was not in accordance with the original Suvarnabhumi master plan devised in 1990 and approved in 2003.
Work on the new terminal was originally planned to start next year with the facility scheduled to open in 2021, but construction was delayed due to the criticism. At present, there is no concrete timeframe relating to the construction and eventual opening of the new terminal.
In a further twist, AoT, is to adopt a new design for the terminal, with the original one not deemed suitable to accommodate the needs of those eventually using the new facility.
The DBALP consortium, headed by local architect Duangrit Bunnang was declared the winner of a design competition on 22 August 2018. But the blueprint for the terminal’s design has now been scrapped.
AoT said in the aforementioned statement: “It is necessary to change the design to be in line with the needs of the users.”
The design work for more than 80 shops at Bangkok Suvarnabhumi was undertaken by UK-based company The Design Solution, which also worked on the revamp of King Power International’s Rangnam Road flagship downtown duty free store in Bangkok. This opened in January 2018.
Meanwhile, AoT, has revealed important guidelines ahead of a tender for commercial operations at Bangkok Suvarnabhumi, Chiang Mai, Phuket International and Hat Yai International Airporst. The full tender terms are expected to be revealed in the coming months.
King Power International, which declined to comment when approached by TRBusiness is the incumbent duty free operator at all Thailand’s major airports, including Bangkok Suvarnabhumi and Don Mueang, which are overseen by AoT as a master concession. Its contract is set to expire in September 2020.
In 2017, the company reported increased retail revenue of +17.7% versus the previous year across the airport and downtown business, driven by a +10.64% in passenger volumes and other key renovations and expansions.
According to the AoT statement (pictured above), three contracts will be offered. One will be for duty free, another for retail, food and beverage and foreign exchange and the final one for duty free pick-up counters.
The company said: “AoT will examine various requirements and details according to the provisions of the law, before proceeding to the next announcement.”
COMMENT: ANDREW PENTOL, SENIOR EDITOR
Last month, retail groups in Thailand petitioned Prime Minister Prayuth Chan-ocha to ensure multiple concessions are available when the upcoming duty free tender is issued.
Retail Groups such as The Thai Duty Free Shop Trade Association and Thai Retailers Association have long believed AoT should split the duty free concession at Bangkok Suvarnabhumi Airport and offer multiple duty free concessions by category to maximise benefits.
The above organisations believe tender terms combining duty free stores at Suvarnabhumi, Chiang Mai, Hat Yai and Phuket, would not be the best solution as they all have different layouts.
Could the solution be to combine the three regional airports under a single master concession and divide the duty free concession at Suvarnabhumi into smaller contracts? On the surface, this should not be too difficult to manage.
AoT, previously said it was considering four types of duty free concessions, including master and multiple opportunities. But the crucial element of yesterday’s announcement is its decision to retain the single duty free operator model —a positive development as far as King Power International is concerned — and to award two other separate contracts.
King Power, however, will know it is in for a tough battle to retain its contract and faces strong competition from the likes of Lotte Duty Free, which opened its first downtown retail store in Bangkok in 2017 and bitter rival The Shilla Duty Free. The latter, operates a 25,000sq m downtown store in Phuket, which soft-opened in 2016.
Other major DF&TR superpowers such as Dufry and DFS Group will no doubt be circling, while more local entities such as Central Group and the Mall Group are believed to be interested in bidding, according to analysts.
As far as the AoT commercial tender guidelines are concerned, there is a strong emphasis on ‘free competition’, especially through the duty free pick-up counter contract, which will allow downtown duty free businesses to deliver goods to passengers and the other retail contract up for grabs.
It is understood that the duty free contract award originally had to be finalised two years before the expiry of the current concession in 2020. With the AoT tender process seemingly behind schedule, the next few months should be nothing short of eventful.
One thing is certain though. Those bidding for the duty free, retail and duty free pick up contracts, will be aware of the extra available commercial space due to the new terminal and tailoring their bids accordingly.
They will also be mindful of Thailand’s burgeoning tourism industry. At present, Chinese consumers are the dominant force comprising 57.64% of total inbound tourists this year up to 31 January 2019 (Source: Association of Thai Travel Agents). This is due in no small part to the wavering of the visa-on-arrival-fee which is clearly having the desired impact on Chinese tourism numbers.