SAIPAN. The Commonwealth Ports Authority (CPA) has rejected the possibility of calling an open tender for a duty free contract at Francisco C. Ada/Saipan International Airport, but is continuing to evaluate its options for a master concession agreement.
DFS Saipan operates the master concession (embracing duty free, specialist retail and food & beverage), which expires on 13 November 2015.
Earlier this year the CPA published a study by consultant Ricondo & Associates into Saipan International Airport’s concession programme and leasing strategies. That study recommended a choice of three options: a successor master concession agreement; a pure duty free retail concession; and a master concession on an upfront payment basis to help fund specifically identified capital needs.
In a comment reported by the Saipan Tribune, subsequently confirmed by The Moodie Report, CPA Board Member Barry Toves said last week that option two (a pure duty free concession) was “off the table”.
While DFS appears in a strong position to retain its master concession (either option one or three), the CPA has not ruled out dialogue with other parties. In particular, Lotte Duty Free, which ousted DFS from the airport duty free contract in Guam, has repeatedly stated its interest in the Saipan business. Toves told the Saipan Tribune he “is not saying that it [a new master concession] will [necessarily -Ed] be with the incumbent”.
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Lotte has sent a letter of intent to the CPA outlining its interest, and has stated its belief that it can “add value to the airport and local community”.
Today Lotte Duty Free Director – Global Business Planning Team Steve Park told The Moodie Report: “Lotte Duty Free is monitoring the situation in Saipan closely. We believe that “˜Option 3′ [presented by] Ricondo & Associates report makes sense from both airport and concessionaire perspectives, but more importantly a longer-term contract will benefit passengers immensely as it would attract additional investment. Speaking for our company only, Lotte Duty Free is a long-term player and we have the appetite to invest in the airport and tourism infrastructure of the island of Saipan.”
DFS is declining to comment publically at present but is on public record requesting a successive master concession of at least ten years. Any duty free concession, by law, would have been limited to a five-year term, which would have prohibited the necessary investment in the operation, the company argued in a letter to the CPA in June. DFS currently subcontracts some of the commercial activities at the airport, but has said it is willing to undertake all these (including food services and advertising) as well as open stores at the smaller Rota and Tinian airports if necessary to fulfil CPA master concession requirements.
“Everyone is waiting for the CPA to say which option they prefer and then… whether it is with the incumbent,” said a well-placed source.
The CPA Board next meets on 12 December when it is likely to hear the findings of a committee set up to evaluate the options.
As reported, a successive master concession may be granted for up to 20 years. DFS’s existing master concession agreement was a successor to an agreement executed in 1985 which expired in 2005. The next agreement, executed in 1997, extended the term to 2015. Under the master agreement, DFS pays CPA 18% of gross sales.
DFS, especially Co-Founder and still significant minority shareholder Bob Miller, considers Saipan one of its historic heartlands. Importantly, the retailer has played a critical role in developing Saipan’s tourism industry, notably in financial support of the airport’s development in the early days. In 1974 DFS made a US$6 million rental prepayment which funded critical airport infrastructure.
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