COMMENT Bids must expect the unexpected
Now and Then... C
an bidding ever be mastered? Have we seen
an end to the days of laying down excessive guarantees in highly competitive tenders
within an uncertain climate? The answer to that question is a resounding no. Strong financial guarantees and rental terms remain the currency of today’s concession environment and any shrewd retailer or landlord would not argue the contrary. However, that’s not of course to say that concepts such as the much-vaunted ‘sense of place’ and other idioms we use so freely in our retail-immersed everyday worlds are any less important, but lessons from Asia in particular show us that a tactical approache can be a virtue in the concession race. Fittingly, Asia hub Hong Kong
International Airport again takes up a prominent position in May 1998’s edition of The Duty Free Business. At that time, incumbents Sky Connection and Nuance- Watson’s (HK) hope for a ‘timely’ rent cut on their respective liquor and tobacco and perfumes & cosmetics concessions in the face of Asia’s crippling financial crisis were roundly rebuffed by Hong Kong Airport Authority. Sky Connection had reportedly set down ‘much more’ than the $81m minimum annual guarantee, while Nuance-Watson was committed to paying out more than $58m per year for its perfumes & cosmetics lot. Both were five- year contracts. Alpha Airports Group also indicated
that it would walk away from the contract it won in a joint venture with King Power Group (HK) should no rent renegotiation take place. The current situation at Incheon
International Airport in South Korea is not too dissimiliar. The airport authority is locked in discussions with tenants at T1, who have faced passenger spending drop- offs as traffic shifts towards the new T2. This is not to mention the impact caused by the US-supplied ‘Terminal High Altitude Area Defense’ missile system. Lotte Duty Free and The Shilla Duty Free secured the lion’s share of the T1 contracts
154 TRBUSINESS
Hong Kong International Airport’s rental fees were a major topic of discussion in the May 1998 edition of the The Duty Free Business.
in 2012 and having weathered the effect of the MERS crisis in 2015, are now facing up to falling spending at T1. Lotte has since pulled three of its concessions at T1 and Shilla has accepted a 27.9% rent reduction offered by the airport authority. Much like HKIA, the airport authority
will be at pains to point out to tenants the original MAG terms under which it awarded the concessions in 2012. The Asia financial crisis was not planned for, and neither was THAAD. Likewise, this applies to economic or political crises out of the blue. However, bidding must be adapted carefully and strategically to allow tenants to cope with any eventuality that might swing their way. Easier said than done mind... Elsewhere on the cover that month, The
Duty Free Business highlighted misleading international news reports that centred on a meeting of the European Council of Finance Ministers, in which the Irish Ministry called on the European Commission to produce an economic impact study into the effects of intra-EU duty free abolition. Meanwhile, BAA’s retail revenues exceeded 50% of its total sales for the first time in history. «
TRBusiness is independently and equally owned by Nigel Hardy and Janice Hook. It is available on a subscription package basis only and is published by TRBusiness Limited and distributed by air mail each month.
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