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It may currently be just a US$30-40 million duty free concession but the importance of Lotte Duty Free’s success in being named preferred bidder for Guam International Airport’s duty free and specialty retail concession cannot be overstated.
This tender, like those of Hong Kong International Airport last year, was a drawn-out, suspenseful and controversial contract saga. And it may not be over yet.
The tender was called in July for a concession that was due to begin after the tenancy of long-time incumbent DFS Group expired on 20 January, 2013. After a series of delays and running controversy often expressed in colourful terms in local Blogs, a recommended bidder was not named until 12 April.
In its undoubted euphoria, Lotte won’t now be minding the delay. Its press release confirming and celebrating Guam International Airport Authority’s decision was headlined ‘Hafa Adai Guam’ or ‘Hello Guam’ in Guam’s native Chamorro language. Unless DFS protests the decision – a definite possibility – Lotte will indeed be saying hello to travellers at A.B. Won Pat Guam International Airport in the weeks ahead.
Why’s it all such a big deal? Because for DFS Guam is a real heartland, a location that it pioneered and has always held. This loss will sting. For Lotte, this represents the first real international breakthrough of the type it has been craving for several years. Yes, it has gained concessions in Jakarta and Singapore but this is the first open tender victory of magnitude after a series of near – or sometimes not so near – misses, including Sydney, Changi, Hong Kong and Los Angeles International Airports.
Its failure to secure the Changi liquor & tobacco contract back in 2007 would have been particularly galling for the Korean retailer after it tabled the highest offer only for the then Civil Aviation Authority of Singapore (now Changi Airport Group) to defy its historic practice and award instead to the second-highest bidder – none other than DFS Group.
That loss still burns at Lotte, so it will have taken particular satisfaction at ousting (subject to successful final negotiations and no protest) DFS in Guam.
If it does secure the contract, Lotte will believe that the success will duly spawn others in key locations (DFS Group’s liquor & tobacco contract at Changi airport, currently out to tender, promises to be a real humdinger of a contest now). Whatever the eventual outcome, this week’s announcement may come to be viewed as the moment Lotte truly arrived on the international scene.
And for DFS? Well, it’s certainly a setback but one that must be judged against a golden 18 months, which included the at one time unlikely retention of LAX, the brilliant clean sweep in Hong Kong and a stunningly successful development of its China business. Remember DFS still operates its downtown Galleria in Guam. History tells us that when the company loses an airport fight, the war is only just beginning. Lotte may be saying hello to Guam but DFS is not about to say goodbye.