SOUTH KOREA. Lotte Duty Free, Shilla Duty Free and Shinsegae Duty Free have submitted bids to operate a duty free store at Jeju International Airport, according to Yonhap News Agency, quoting Korea Airports Corporation (KAC).
Chinese visitors could be set to return to the island in great numbers after Seoul and Beijing authorities recently agreed to end their dispute over South Korea’s deployment of US anti-missile system THAAD.
Incumbent Hanwha Galleria had a contract to operate the existing airport duty free store at Jeju International until April 2019. It has returned its licence after being strongly impacted by the dramatic decrease in Chinese visitors to Korea (including the island of Jeju) as a result of the THAAD crisis. Hanwha is now scheduled to operate the store until the end of 2017.
The new duty free contract at the airport is for a five-year period. The successful bidder will need approval from both the airport and local customs authorities to secure the right to run the duty free business, Yonhap News Agency said.
KAC has revised the terms of the Jeju Airport duty free contract and slashed the rental terms. The minimum acceptable revenue share of total sales has been set at 20.4% in order to calculate rent. Previously this was set at around 30 to 35% of sales – depending on whichever was higher out of the Minimum Annual Guarantee (as per the retailer’s bid) or the sum of revenue share defined for each category. MAG was often set far higher than revenue share through the tender competition.
KAC will now calculate rent based on whichever is higher between the sum of revenue share defined for each category and the revenue share of total sales submitted by the winning bidder. MAG will no longer be applied to define the final concession.