The first serious indication of bidder interest in Incheon International Airport’s duty free tender has emerged after 13 companies – including two international operators – participated in its tender briefing.

TRBusiness can confirm through its sources in South Korea that China Duty Free Group (CDFG) and Dufry Thomas Julie Korea, alongside Korea’s ‘big three’ of Lotte Duty Free, The Shilla Duty Free and Shinsegae Duty Free, were present for the RFP presentation held at Incheon International Airport Corporation’s building on 12 January.

Hyundai Department Store Duty Free, Kyung Bok Kung Duty Free, City Plus, Busan Duty Free, Korean Air C&D, Daon, and Dongwha Duty Free were among a total of 13 companies present.

“A brief introduction on Incheon Airport and major terms of bidding were key topics,” a source close to the matter told TRBusiness. “There were numerous questions on various terms such as the category mix, shop development, smart DF service, shop opening schedule, luxury duplexes etc.”

Operators consider options ahead of bid deadline

As revealed by TRBusiness, Incheon International Airport Corporation (IIAC) has warned against excessive overbidding in this latest high stakes tender for an airport whose passenger volumes bottomed out in the wake of the Covid-19 crisis, while consecutive tender rounds for duty free lots have failed to attract bidders in recent years.

The deadline for this latest set of 10-year contracts, which surfaced in December and cover seven licences (77 stores) over a total commercial footprint of more than 24,000sq m, is 22 February.

Fixed minimum guarantee payments are being replaced with a more flexible monthly rent-per-passenger arrangement (calculated by multiplying the number of passengers by the fee charged per passenger).

However, should percentage rent (the sum of half-yearly sales by merchandise multiplied by the percentage fee per category) exceed the sum of monthly rent paid during the corresponding period, the concessionaire is obliged to pay IIAC the difference.

“The new terms are surely way better than the fixed minimum guarantee payments, but that does not exactly mean that players are now eager to bid,” observed a Korean industry source.

“First, pax traffic is not directly related to duty free sales, meaning that the increase in pax may not result in an increase in sales. Secondly, a 10-year contract does have pros, but also cons due to the burden of skyrocketing rental fees.

“Lastly, the airport duty free business is now not as attractive as before because passengers prefer online duty free shopping. Korean players will not be aggressive in placing bids; the Korean duty free market has not recovered from the pandemic crisis.”

As previously reported, interested parties have until 21 February to register their interest in the RFP. The new operations are set to commence in July following regulatory reviews and approvals.

A Lotte Duty Free spokesperson told TRBusiness it remained ‘too early’ to discuss whether the powerhouse Korean retailer would submit a bid.

TRBusiness is gauging interest in the bidding and aims to bring you further updates in due course…

For more on the original details of the tender and comment from IIAC, click here.