The Hong Kong Mass Transit Railway (MTR) Corporation is understood to be evaluating its Lo Wu, Hung Hom and Lok Ma Chau station duty free shop tender offers, while Airport Authority Hong Kong (AAHK) is also continuing with preparations to launch its airport duty free tender this November.

 

MTR is currently evaluating its two tenders comprising Lo Wu and Hung Hom as one entity and Lok Ma Chau as a separate contract.

 

However, it remains characteristically tight-lipped on both the identities and number of companies that have expressed interest at this time while the tenders follow all the normal pre-bid stages.

 

These naturally include optional on-site visits for potential tenderers, which TRBusiness understands, were well attended. Interested parties said to have been present included the China Duty Free Group, Dufry, DFS Group and the incumbent Anway/Sky Connection, although this shouldn’t be taken as any indication as to who will bid in the final analysis.

 

 

TENDERS ARE NOW IMMINENT

Regarding timing, the MTR evaluation panel is now expected to brief its board on its recommendation at the end of this month, with a final award announcement expected this October.

 

As exclusively reported last May [http://www.trbusiness.com/regional-news/asia-pacific/multi-million-operator-focus-on-hong-kong/105525] the largest of these station businesses is at Lo Wu and Hung Hom, where the new contract is set to begin on January 1, 2018.

 

The minimum guarantee acceptable for the Lo Wu and Hung Hom business is HK$87m ($11,204,289) per month, or 42% of sales, whichever is higher.

 

SERIOUSLY BIG BORDER BUSINESS…

Lo Wu remains Hong Kong’s most heavily used immigration control point for passengers travelling to and from Mainland China. Duty free sales at Lo Wu last year were HK$2bn ($257m). As a guide to the present bid, the minimum guarantee MTR is looking for is 40.2% based on 2015 sales levels.

 

By contrast, Lok Ma Chau is a separate contract where tenders are due to close on July 28 2016, with the new contract set to begin on August 15, 2017. This tender was released in the first week of May 2016 with the minimum acceptable monthly bid set at HK$77m ($9,916,591) or 42% of sales – whichever is higher.

 

 

L&T WILL BE FIRST BIG TENDER AT HKIA

This process is expected to be followed by the Hong Kong Airport duty free tender process in November of this year – a full year ahead of the expiry of DFS Group’s existing Liquor and Tobacco and General Merchandise contracts. Meanwhile, DFS’ Perfume & Cosmetics contract has an extra month to run, with its expiry date set for December 2017.

 

This follows the decision by DFS Group not to exercise the three-year extension options for its duty free liquor and tobacco, perfume and cosmetics and general merchandise concessions.

 

Airport Authority Hong Kong (AAHK) is naturally is playing its cards close to its chest, but it is ‘rumoured’ in potential bidder circles that the L&T contract could also include some packaged food business potential, although there was no confirmation of this at presstime.

 

As the tender system works in Hong Kong, it will be hard for AAHK not to recommend the highest bidder – whoever it may be – provided they qualify on all counts in terms of meeting all the bid criteria.

 

 

KOWLOON TERMINUS OPPORTUNITY ‘LATER’

The same is also true for MTR with its station shops, although one minor pressure point has been temporarily removed for bidders, now that the entirely separate express Hong Kong-China rail link opening has been delayed until at least 2018.

 

Concerns that any separate duty free offer from the express service and the anticipated new duty free store at the Kowloon Terminus might cannibalise sales at the traditional station outlets appear to have dissipated for the time being.

 

Having said that, construction is still taking place on the station building in Kowloon, with a view to installing a large duty free store and several specialist stores over a space of around 10,000sq m. Several companies have already indicated their interest in this project to TRBusiness.