Guam Airport Authority extends Lotte Duty Free contract for three years

GUAM. Lotte Duty Free has won a three-year extension to its duty free contract at A.B. Won Pat International in Guam, the travel retailer has confirmed to The Moodie Davitt Report.

A Lotte Duty Free spokesperson told The Moodie Davitt Report today (19 July), “We signed a contract with the Guam Airport yesterday. The contract will be effective from July 21, 2023 to July 20, 2026.”

The story was broken by Pacific Daily News.

Lotte Duty Free was awarded a ten-year contract in April 2013, effective 21 July that year. But the agreement has been mired in controversy ever since due to a bitter wrangle involving former incumbent DFS Group, Lotte Duty Free and A.B. Won Pat International Airport Authority.

The Korean duty free retailer then faced a stern challenge of a different kind from early 2020 when the COVID-19 pandemic struck.

Click on the image to read the full article from Pacific Daily News

The contract extension was made possible by a bill being signed into law by Governor Lou Leon Guerrero earlier this month. This allowed the airport authority to negotiate a contract extension, rather than issuing a new Request for Proposals.

Because passenger numbers in fiscal 2023 are projected to be about half of 2019 levels, adjustments were made to the concession agreement, the report said.

The following terms apply, according to Pacific Daily News:

  • Lotte Duty Free will pay a fixed fee annual concession rent fee of US$2.64 million in advance for the respective contract year.
  • In addition, the company will pay a set fee for each passenger based on cumulative passenger counts for the term of the contract. For the first million passengers, the fee is US$4 per passenger. Between 1 million and 1.5 million passengers, the fee is US$4.50 per person. For more than 1.5 million passengers, it is US$5 per passenger.
  • Indemnity defence fees and costs for the protest litigation are capped at US$1.2 million per lease year.
  • There is also a minimum performance guarantee of $8 million per year. Lotte has agreed to a minimum capital investment of US$2.5 million with approximately U$2 million dedicated to a Gucci boutique.
  • Lotte will provide a plan in 90 days for Guam-made products, to be implemented within 120 days after submission.
  • Lotte will continue to maintain the space and provide travelers with an atmosphere embodying the uniqueness of Guam and the Marianas. ✈

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