TOP 10 AIRPORTS: INCHEON
Shortly before this issue went to press, IIAC agreed to a flexible rent arrangement with Lotte Duty Free tied to monthly sales for the latter’s liquor, tobacco & food concession at Terminal 1.
TRBusiness
Lotte and Shilla were subsequently selected as preferred bidders for two liquor, tobacco and food concessions (DF4 and DF3, respectively), while Hyundai Duty Free was named for the fashion/misc package (DF7). Hyundai was the sole bidder for
11,645sq m after August 2023, with each tender package running for a period of five years with an option to extend to no more than 10 years [for more information on the rent/MAG proposals, see
TRBusiness.com]. The bids exclude previously
awarded packages operated by Shinsegae (DF1, DF1-2, DF5) and Grand Duty Free (DF11). New leases begin on 1 September in line with current expirations at the end of August. As it stands, Incheon Airport’s
retail landscape has seven operators running 12 concessions. Heady anticipation greeted the
tender, with Lotte expected to try to claw back some of its non-tobacco & liquor business relinquished in 2018. In turn, Shilla’s 1,887sq m fashion/
misc (DF6) and 1,257sq m-plus flagship perfumes & cosmetics (DF2) concessions were expected to be fiercely contested, particularly the latter.
the fashion/misc concession (DF6), much to the surprise of sources in South Korea, but Shilla’s highly billed beauty business (DF2) failed to tempt any interest. In the small & medium-sized
enterprises category, Grand Duty Free was nominated for the all items (DF8) package, while City Plus Duty Free and Entas Duty Free retained a foothold by securing positions for all items (DF9) and liquor, tobacco and packaged food (DF10) concessions, respectively.
‘Unsustainable’ conditions Amid the announcements, IIAC was scrutinising rent cuts for tenants after South Korea’s Ministry of Economy and Finance revealed a monetary support package in February worth more than KRW20tn to boost the economy. This was supplemented by a further KRW11.7tn. Negotiations between Lotte,
Shilla and Shinsegae and airport management were deadlocked after rent relief of 25% was permitted to small businesses – City Duty Free
and Grand Duty Free specifically – while larger companies were offered payment holidays. After some smaller concessions,
the government upped the level of cuts for smaller companies and large and medium-sized operators to -75% and -50%, respectively, as part of a KRW490bn package. The discounts, which apply
retrospectively, cover the period March – August. But Lotte and Shilla withdrew
their preferred bidder statuses in April due to unsustainable operating conditions tied to Covid-19. Shortly before this issue went to
press, IIAC agreed to a flexible rent arrangement with Lotte Duty Free tied to monthly sales for the latter’s liquor, tobacco & food concession (DF3) at T1. Shilla is also thought to have
accepted a similiar agreement for its liquor & tobacco lot following talks with IIAC. The development paves the way for Shilla and Lotte to temporarily extend their current concession agreements with IIAC at T1. IIAC declined to comment when
approached for this report, with a spokesperson stating: “In the present situation, it is very difficult to talk about current performance, the latest trends and future plans.” «
ICN – Seoul, SK
24 TRBUSINESS
AUGUST 2020
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