No Changi liquor & tobacco decision till May as Singapore introduces gate delivery for Australia-bound travellers – 30/03/07

SINGAPORE. The Civil Aviation Authority of Singapore (CAAS) will not award its all-important liquor & tobacco contract at Singapore Changi Airport until May.

As reported, the tender attracted tremendous interest, culminating in bids from six of the industry’s most powerful players – led by Hotel Lotte of South Korea, followed closely by incumbent DFS Venture Singapore (DFS Group). Next came offers from Sky Connection of Hong Kong, Nuance-Watson (Singapore), Aelia and Aldeasa.

On a straight minimum monthly guarantee (MMG) basis, Lotte headed DFS in years one and two of the contract (and overall by S$2,496,000/US$1.65 million or +1.5% over the full term) – see below for full bids – with DFS coming in marginally higher in year three.

In a highly unusual break from tradition the CAAS has asked the top five companies to individually present their respective offers and concepts. The only bidder not to present was Aldeasa.

The move underlines the critical importance of the contract to the CAAS – and the bidders. It covers not only the existing Terminals 1, 2 and Budget Terminal but also the new T3 due to open in early 2008.

Why the call on not just the two leading bidders – as had been expected – but five players to present? A CAAS spokesperson explained to The Moodie Report: “We wanted to understand better their proposals and concepts, which were an important part of our criteria. We are looking for innovative and exciting concepts for our new Terminal 3.

“We heard from all five and at this stage we are still evaluating.” The spokesperson said a final decision will be made “sometime in May”.

Meanwhile Changi’s other glamour concession – for fragrances & cosmetics across all terminals – will go to bid “sometime in mid-April”. Incumbent Nuance-Watson (Singapore), which runs one of the world’s great fragrances & cosmetics operations, is expected to face equally hot competition as that being encountered by DFS.

“I don’t think it will be any less than for liquor & tobacco,” the spokesperson said.

GATE DELIVERY FOR AUSTRALIAN FLIGHTS

In an important development for the winning liquor & tobacco retailer, Changi Airport is implementing gate delivery of liquor sales made to Australia-bound passengers. The new system has been forced upon the CAAS by the new Australian security regulations which take effect tomorrow, 31 March.

The regulations say that the only duty free liquids of over 100ml that will be allowed into Australia are those sold at the “˜last port of call’ of an airline – and only when gate delivery is in place.

“We will start gate delivery from day 1 [of the new regime],” said the CAAS spokesperson. “If you go, say, to Sydney, you can still buy duty free liquor but it has to be gate delivered.” The official confirmed that liquor sales to passengers bound for Australia constituted a significant element of the overall business.

Any Australia-bound traveller entering Changi and transiting onto Australia will have duty free liquids of over 100ml (purchased earlier in their trip) confiscated in Singapore.

In a related development, the Asia Pacific Travel Retail Association (APTRA) said today that it has received confirmation that Australia’s Department of Transport and Regional Services (DOTARS) will recognise the Singapore gate delivery initiative for arriving duty free LAGs. A DOTARS spokesperson told APTRA: “Singapore is doing the right thing by gate delivery of duty free”.

Now other airports and retailers are having to scramble to adapt to the Australian rules. BAA told customers today: “From 31 March 2007, European Union airports will be unable to sell any liquid purchases to passengers travelling to Australia as all liquids will be screened at the last point of call. Therefore liquids over 100ml will be confiscated.” [Editor’s note: Unfortunately that advice is not correct – liquids, for example fragrances in bottles under 100ml, can still be sold to travellers leaving the EU and bound for Australia.]

SINGAPORE CHANGI LIQUOR & TOBACCO BID LEVELS

Aldeasa: An additional rental of either: (a) (i)40% of the total monthly gross sales for liquor (excluding wines/champagnes); (ii) 20% of the total monthly gross sales for wines/champagnes; and (iii) 25% of the total monthly gross sales for cigarettes/tobacco; OR (b) a minimum monthly guarantee of SGD5,186,361; whichever is the higher of (a) or whichever is the higher of (a) or (b)

Aelia: An additional rental of either: (a) (i) 40% of the total monthly gross sales for liquor(excluding wines/champagnes); (ii) 20% of the total monthly gross sales for wines/champagnes;and (iii) 25% of the total monthly gross sales for cigarettes/tobacco; OR (b) a minimum monthly guarantee of SGD8,100,000; whichever is the higher of (a) or (b).

DFS Venture Singapore: An additional rental of either: (a)(i) 40% of the total monthly gross sales for liquor (excluding wines/champagnes); (ii) 20% of the total monthly gross sales for wines/champagnes; and (iii)25% of the total monthly gross sales for cigarettes/tobacco;OR (b) a minimum monthly guarantee of: (i) SGD10,166,667 for Year 1; (ii) SGD10,333,333 for Year 2; and (iii) SGD10,500,000 for Year 3; whichever is the higher of (a) or (b). PLUS Bonus incentive for increased sales: (i) An additional rental of SGD500,000 if annual sales exceeds SGD320,000,000 for Year 1; (ii) An additional rental of SGD750,000 if annual sales exceeds SGD355,000,000 for Year 2; and (iii) An additional rental of SGD1,000,000 if annual sales exceeds SGD385,000,000 for Year 3.

Hotel Lotte Co: An additional rental of either: (a) (i) 40% of the total monthly gross sales for liquor (excluding wines/champagnes); (ii) 20% of the total monthly gross sales for wines/champagnes; and (iii)25% of the total monthly gross sales for cigarettes/tobacco; OR (b) a minimum monthly guarantee of SGD10,486,000; whichever is the higher of (a) or (b).

Nuance-Watson (Singapore): An additional rental of either: [A] (i) 40% of the total monthly gross sales (TMGS) for liquor (excluding wines/champagnes); (ii) 20% of the TMGS for wines/champagnes; and (iii)25% of the TMGS for cigarettes/tobacco; OR [B] a minimum monthly guarantee (MMG) of: (i) S$8 million(M) for Yr 1; (ii) S$8.5M for Yr 2 and Yr 3; whichever is the higher of [A] or [B]. PLUS An annual incentive rent of: if sum of the MMG for the year (as defined in [B]) exceeds sum of the percentage rents for the year (as defined in [A]) the following incentive rent is payable: 45% of the total annual gross sales (TAGS) exceeding S$312M in Yr 1; 45% of the TAGS exceeding S$366M in Yr 2; 45% of the TAGS exceeding S$391M in Yr 3; If sum of the percentage rents for the year (as defined in [A]) exceeds the sum of the MMG for the year (as defined in [B]) the following incentive rent is payable: 30% of the TAGS exceeding S$312M in Yr 1; 30% of the TAGS exceeding S$366M in Yr 2; 30% of the TAGS exceeding S$391M in Yr 3.

Sky Connection: An additional rental of either: (a) (i) 40% of the total monthly gross sales for liquor (excluding wines/champagnes); (ii) 20% of the total monthly gross sales for wines/champagnes; and (iii)25% of the total monthly gross sales for cigarettes/tobacco; OR (b) a minimum monthly guarantee of SGD9,301,000; whichever is the higher of (a) or (b).