Shilla, Lotte clash at Incheon Int’l Airport

A duty free shop operated by Korea Tourism Organization at Incheon International Airport

The country’s two largest duty free shop operators ― Shilla Duty Free and Lotte Duty Free ― have been engaged in a fierce war over the years to get an upper hand in the booming industry fueled by the surging number of inbound and outbound travelers.

They have competed to win rights to operate shops not only at Incheon International Airport and other local airports, but also at aviation hubs in Asia and North America.

This time, the two are expected to clash over the managerial rights of a duty free shop at Incheon, currently operated by the state-run Korea Tourism Organization (KTO).

The Incheon International Airport Corp. (IIAC) said Monday it had notified the KTO that it was not extending a five-year lease both parties signed in 2008. The state-run tourism promoter won the right to run duty free shops occupying nearly 10 percent of Incheon airport’s duty free zones.

KTO has been seeking to renew the contract, which expires next February. But IIAC wants to select a new duty free shop operator in an open bid in order to generate larger rent.

“We delivered an official letter to KTO that we cannot renew the lease. We will soon select a new duty free shop operator through an open competition,’’ an IIAC spokesman said. “The selection process will be completed in a month or two.’’

Industry watchers say that Lotte and Shilla will do everything they can to secure the management rights for KTO duty free shops, given the soaring number of Chinese and other foreign tourists who go on spending sprees for tax-free cosmetics and other consumer items at Korea’s main gateway to the world.

According to KTO, the number of foreign visitors jumped 23.3 percent to 5.33 million in the first half of this year from the previous year when Korea attracted 1.81 million Japanese and 1.19 million Chinese tourists, up 30.2 and 29.9 percent, respectively.

Lotte vs Samsung

Lotte Duty Free was headed by former Lotte Shopping CEO Shin Young-ja, a daughter of Lotte Group Honorary Chairman Shin Kyuk-ho, from 2008 to 2011. Shin, Chairwoman of the Lotte Foundation, still holds a board seat at Lotte Shopping.

Hotel Shilla CEO Lee Boo-jin, a daughter of Samsung Group Chairman Lee Kun-hee, leads the group’s duty free business.

Lotte accounts for 50 percent of Incheon airport’s duty free zones, followed by Shilla at 40 percent and the KTO with 10 percent.

“We have not yet been notified by IIAC concerning KTO’s duty free shops. When we receive a request for proposal from IIAC, we will then decide what to do,’’ a spokesman for Lotte Duty Free said.

Lotte is widely expected to mobilize all possible measures to defeat its archrival Shilla this time. In November 2010, it suffered a huge setback as IIAC awarded Shilla with a right to open a Louis Vuitton store.

Lotte Duty Free saw its revenues reach about 1.5 trillion won in the first six months of this year, up 30 percent from the previous year.

A spokesman for Shilla Duty Free said it will take a wait-and-see attitude for the time being. “When IIAC officially asks for bids, we will thoroughly consider the matter and make our next move,’’ he said.

Shilla Duty Free earned 905.9 billion won in the first six months of this year, up 39.2 percent from 650.7 billion won in the same period last year, despite the global economic downturn. Its operating profit grew nearly four-fold to 60.1 billion won from 15.2 billion won over the one-year period.

Last month, Shilla won a contract to operate a fashion store at Singapore’s Changi International Airport for three years, beginning Dec. 1. <The Korea Times/Lee Hyo-sik>

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