Incheon airport’s duty-free store license auction falls flat for first time

The bidding for duty-free store licenses at Incheon International Airport failed to attract tenders to fill all of the cosmetics and apparel sections, the airport operator said Friday, the first time .

According to Incheon International Airport Corporation, the operation licenses for two of the eight airside sections in the airport’s Terminal 1, DF2 and DF6, failed to attract bids. DF2 is designated for perfumes and cosmetics, and DF6 for apparel.

IIAC opened the bidding on Wednesday, offering five licenses for large-size businesses and three for small- and medium-sized companies, as the previous contracts are due to end in August.

For the five slots opened for large firms, four duty free operators, Hotel Shilla, Lotte Hotel, Shinsegae and Hyundai Department Store participated in the auction, IIAC said.

IIAC official said it was the first time the airport has failed to attract enough tenders to fill all of its duty free slots.

According to industry officials, the high rents appear to be the main factor putting would-be duty-free operators off. While the rent differs for each of the eight sectors proposed, the minimum yearly rent for DF2 is set at 116.1 billion won ($95.5 million).

The only license where all four firms participated in the bid was DF7, which is set for apparel.

Lotte Hotel and Hotel Shilla will be competing for DF3 and DF4, both of which cover liquor and tobacco.

The eight proposal packages that the IICA has opened the bidding for span a total of 50 shops over a 11,645-square-meter area in the airport’s Terminal 1.

Duty-free operators that win the licenses can run their businesses at the airport for five years, with an option to extend the operations for another five, if they fulfill the evaluation criteria.

By Jo He-rim (herim@heraldcorp.com)