SOUTH KOREA. The much-delayed latest tender for the duty free departures contract at Incheon International Airport Terminal 1 has been postponed indefinitely due to the still-moribund nature of the country’s inbound and outbound travel markets and rocketing cases of COVID-19’s Omicron variant, according to reliable sources. The on-again, off-again bid had been planned for early 2022.
A senior figure in the Korean travel retail sector told The Moodie Davitt Report: “The tender has been delayed again and frankly I think that nobody will enter the tender unless the airport brings in a new scheme.” [Look out for an extensive report on the tender and the Korean market later this week].
Commenting on the stricken nature of Korean duty free, where total market sales, though rising +15% year-on-year to US$14.74 billion in 2021, still remain nearly -31% down on pre-pandemic 2019, the source said: “Korean duty free does not have more blood to bleed.”
As reported, the T1 stores formerly run by Lotte Duty Free and The Shilla Duty Free are now being operated by Kyung Bok Kung Duty Free, Hyundai Department Store Duty Free and Shinsegae Duty Free on temporary concessions until permanent contracts are in place.
The Lotte and Shilla T1 extended concessions ended at the end of February 2021. Both retailer’s concessions expired in August 2020 but were extended for six months after new bidders backed out amid the worsening COVID-19 pandemic. Under the Korea Customs Act, contracts can only be extended once.
However, any hopes that the IIAC might have harboured of hosting a successful tender in early 2022 have been scuppered by soaring daily COVID-19 cases. Saturday saw a record 17,542 new infections (including 17,349 local cases) – the fifth consecutive daily record.
As reported, IIAC has tried to tender the T1 contracts three times since 2020 but all efforts have failed due to low retailer participation driven by the pandemic. The existing DF2 perfume & cosmetics operation has been suspended, Korean media agency Yonhap Infomax noted.
The title reported that there is a “high possibility” that International Airport Corporation (IIAC) will hold the T1 and T2 bids simultaneously later in the year as the T2 contracts are due to go to tender in the second half.
An Incheon Airport official told the news agency: “There are no people at the airport yet, and the skyway is not open, so even if they go to bid, there will not be many participants, and it is difficult to bid for duty free shops.”
The five-year contracts at T2, which began in January 2018, expire on 17 January 2023. The report noted that any new retailer must be selected at least five months in advance. Bundling the bids would allow retailers to leverage economies of scale and thss generate higher bids, the Yonhap Infomax report said.
