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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] Seoul, September 22, 2025 – Hotel Shilla announced that its duty-free subsidiary, Shilla Duty Free, will return the concession for Incheon International Airport’s DF1 zone, citing mounting operating losses and heavy rental burdens. The company will pay a penalty of KRW 190 billion (approx. USD 140 million) to exit the contract.
Shilla Duty Free will continue operating the DF3 zone, but the decision to withdraw from DF1 is particularly notable as the zone includes high-margin liquor and tobacco sales in a prime airport location. Despite these advantages, Shilla’s duty-free business recorded an operating loss of KRW 19.8 billion in the first half of 2025, due to structural changes in consumption and the rise of online shopping.
The vacancy is expected to trigger a re-bidding process within two months. Industry observers predict that new operators will be selected by November, following the typical six-month evaluation process. Lotte Duty Free and Hyundai Department Store Duty Free are likely contenders, while the world’s largest duty-free operator, China Duty Free Group (CDFG), is also expected to participate.
Concerns have been raised over the potential entry of a Chinese state-owned company into Incheon Airport. Industry experts note that while the airport has always conducted international bidding, other countries often prioritize domestic duty-free operators through regulations or licensing systems. In Korea, although no legal restrictions prevent foreign operators from participating, factors such as domestic economic contributions, data security, and national security considerations are included in the evaluation.
The withdrawal also underscores the financial challenges posed by competitive bidding. During the 2023 tender, Shilla Duty Free bid 68% above the minimum rate per passenger to win DF1, significantly increasing rental costs. Even with recent proposals for a 25% rent reduction, profitability remained elusive.
With Chinese tourists making up 28.6% of all foreign arrivals to Korea in the first half of 2025, the outcome of the re-bidding will be closely watched as it could reshape the country’s already China-dependent duty-free market.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
