Announcement of Additional Rent Reduction Measures for Commercial Facilities at Incheon Airport Acts as a Positive Factor
The Incheon International Airport Terminal 1 duty-free shop appeared deserted on April 29 due to the novel coronavirus disease (COVID-19) outbreak. (Photo by Asia Economy DB)
[Asia Economy Reporter Kum Bo-ryeong] There is speculation that the breath of relief for duty-free store owners, who were hit hard by the novel coronavirus disease (COVID-19) crisis, will open up. Starting from the 3rd, online sales of duty-free store inventory will take place, and the Ministry of Land, Infrastructure and Transport announced additional rent reduction measures for commercial facilities at Incheon Airport.
According to the Korea Exchange on the 2nd, Hotel Shilla, the leading duty-free store stock, closed at 80,400 won, up 1.52% (1,200 won) from the previous day.
For duty-free stores, which have been hit hardest with sales plummeting since the COVID-19 crisis, domestic customs clearance sales of inventory are good news. Shinsegae will start reservation sales of duty-free luxury brand inventory such as Balenciaga and Saint Laurent from the 3rd, with prices set at 10-50% discount compared to department store regular prices. Shilla Duty Free, Lotte Duty Free, and others also plan to sell inventory duty-free goods within this month.
In addition, the Ministry of Land, Infrastructure and Transport, Incheon International Airport Corporation, and Korea Airports Corporation have decided to further reduce rents to support commercial facilities at Incheon Airport. According to Korea Investment & Securities, the rent reduction effect for six months from March to August is expected to reach 108 billion won for Shinsegae and 84 billion won for Hotel Shilla.
Yoo Jung-hyun, a researcher at Daishin Securities, explained, "Considering the rent reduction, this year's domestic duty-free store operating profit is expected to turn positive from a 70 billion won deficit in the case of Hotel Shilla," and "Shinsegae is expected to increase by about 43%."
The future outlook for duty-free store owners is positive. Joo Young-hoon, a researcher at Eugene Investment & Securities, said, "Since the worst phase has passed, it will have a positive effect on stock prices," adding, "Although it is clearly difficult to be optimistic about the normalization of the duty-free industry while international travel has not normalized, the stock prices have already reflected these concerns, and since the announced airport rent reduction rate is larger than expected, the stock prices of major duty-free store owners will respond positively." As of 9:40 a.m. on the day, Hotel Shilla rose 2.24% (1,800 won) from the previous day. Shinsegae also rose 1.22% (3,000 won).
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