Incheon plans big tender

By Administrator |

There are big changes afoot at Incheon International Airport in South Korea where Incheon International Airport Corporation (IIAC) is now preparing to announce the terms of an airport-wide retail tender later this year.

This will cover the existing Main Terminal Building (MTB) and the vast new 32-gate concourse at Seoul Incheon Airport Concourse A area that is due to open in August 2008.
IIAC General Manager Retail Marketing Bum-Ho Kim told The Business last week: ‘We will announce a retail tender in the late part of this year and we want to make a decision by early next year.’
Up for grabs are 6,000sq m of retail space in Concourse A and just under 9,000sq m in the existing Main Terminal Building. The food and beverage concession will also be tendered at the same time covering 11,258sq m.
According to Kim there are a number of major decisions yet to be taken. Foremost is whether they will opt for a single tender or a multiple tender. ‘The contracts with our current operators in the existing terminal terminate in 2008,’ said Kim.
‘So the termination date for the operators in the existing terminal and the opening of the new terminal is about the same. So we are wondering whether to hold a separate tender for concourse A and the Main Terminal Building, or hold them together. That is a big issue.’
The current Main Terminal Building presently houses four operators: Lotte Duty Free, AK Duty Free, Duty Free Korea (Korea National Tourism Organization) and DFS Group. Combined, they share 46 shops across the airport. They are each on a five-year contract with a two-year option. All will expire in February 2008.
‘We will keep four operators in the existing terminal. That number has worked well. The real question is with Concourse A and whether we will have one or two operators.’
The retail offer in Concourse A will be centralised, which stands in contrast to the sprawling layout in the MTB. Thus, the requirement is for relatively fewer operators in the new Concourse A. Kim anticipates says that there will be 15 shops in Concourse A and he says the duration of the new contracts will be same five-year period with an optional two-year extension period.
The other issue is the retail mix. ‘We have the initial layout for Concourse A and it includes both boutiques and general shops together. In product mix, it will be fairly similar, but there will be more focus on fragrances and cosmetics. Sales of fragrances are so high and growing at such a rate that it makes sense to give them more focus in the new set up.’
He adds: ‘We want more branded boutique shops in the old building, but we are an airport operator. We will select powerful main concessionaires to select the retail brands in our airport. We won't be selecting [retail] brands directly. We will leave that up to the operators.’
While some regional airport authorities, most notably Tokyo Narita, are moving into retail operations themselves, Kim says don't expect the IIAC to follow suit. ‘We will not move into running the retail side ourselves. That is not our business. We prefer to bring in powerful main operators and use their expertise.’
This year IIAC is forecasting a duty free sales increase of 10% at the same time as it is continuing to lobby the government for arrivals shops. The government turned down an initial request for arrivals facilities last December, despite IIAC producing six surveys showing that passengers want them.
But strong lobbying from Korean Air Lines and other carriers (worried about losing duty free sales) plus objections from Korean Customs put paid to this. But the IIAC remains determined to try again and the implications for operators in other countries would obviously be huge if it is successful a second time around.
Duty free sales at Seoul Incheon Airport reached W.880bn ($906m) in 2005, an increase of 13.7% compared with 2004.

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