Due to the recession in the duty-free industry, Hotel Shilla and Shinsegae Duty Free have demanded a reduction in rental fees for their Incheon International Airport locations.
According to the industry on the 21st, Shinsegae filed an application for adjustment of the Incheon Airport rental fees on the 29th of last month, while Shilla filed on the 8th of this month. The request is to reduce the rental fees for cosmetics, perfume, liquor, and tobacco stores at the first and second passenger terminals by 40%. The adjustment hearing is set for the 2nd of next month.
The duty-free zone at Incheon Airport originally required fixed rental payments from each company, but starting in 2023, it has changed to a method calculated based on the number of airport users.
The industry claims that this has increased the rental burden for duty-free companies. Despite the recovery in passenger numbers following COVID-19, the number of duty-free shoppers and sales have declined.
During the bidding for the duty-free license, Shilla and Shinsegae proposed a commission of about 10,000 won per passenger. Considering the monthly number of Incheon Airport users, which is around 3 million, the estimated monthly rental fee per company is roughly 30 billion won. Annually, this amounts to 360 billion won.
Based on last year's figures, this is 11% of Shilla's annual revenue (3.28 trillion won) and 18% of Shinsegae's annual revenue (2.06 trillion won).
According to the duty-free industry, the decrease in group tourists from China, who previously accounted for a large portion of duty-free sales, along with changes in the spending patterns of individual tourists, has significantly reduced the number of purchasers at duty-free shops. The prolonged high exchange rate has also acted as a negative factor.
As a result, the Shilla Duty Free operated by Hotel Shilla recorded an operating loss of 69.7 billion won last year and shifted to a deficit, while Shinsegae Duty Free's operating profit also fell from a surplus of 86.6 billion won in 2023 to a deficit of 359 million won last year. Both duty-free shops reported losses of 5 billion won and 2.3 billion won, respectively, in the first quarter of this year, marking a shift to deficits compared to the same period last year.
The applications for rental fee adjustments by Shilla and Shinsegae are believed to reflect a sense of urgency, as they can no longer bear the losses. The patent period for both companies is 10 years, with 8 years remaining.