Thailand's King Power loses retail bid in U-Tapao airport concession

BANGKOK, Nov 19 (Reuters) - Thailand’s Central Group and DFS Venture Singapore snapped up retail and services concession at an upcoming airport in the eastern province of Rayong, a government official said on Monday, beating out duty-free giant King Power.

The announcement underlines the challenges King Power is facing as its dominance of the lucrative Thai duty-free and travel retail industry comes under scrutiny, at a time when it is also trying to recover from the recent death of its chairman, Vichai Srivaddhanaprabha, in a helicopter crash.

“Central Group won the retail and services auction while King Power won the bid for duty-free,” Vice Admiral Luechai Sri-eamgool, director of U-Tapao International Airport, said.

U-Tapao is the first airport in Thailand to hold an auction with multiple concessions, splitting up duty free and retail operations. Up until now, King Power has enjoyed near monopoly, being a sole operator with concessions in all major airports.

King Power’s most lucrative franchise in Thailand’s main international airport is under a single license that is set to expire in 2020. Auctions for concessions at Suvarnabhumi are slated to take place later this year.

Airports of Thailand Pcl, a state-owned firm that grants the concessions at major airports including Suvarnabhumi, may consider multiple concessions at the auction, analysts say, increasing competition among retailers.

Tourism is booming in Thailand, which received nearly 35 million visitors last year, most funnelled through the airports where King Power is ubiquitous. But public debate has increased over the single duty-free operator structure.

Bidders in the U-Tapao concession included Thailand’s Minor International and Korea’s Lotte Duty Free.

Under the 10-year concessions for retail, service and duty free at U-Tapao, operators must share at least 15 percent of their revenue with the government or the minimum guaranteed amount, whichever is higher, Vice Admiral Luechai said.

“The results will be submitted to the defence minister for approval with commercial activity to begin February 2018.”

King Power, which owns Leicester City football club, did not immediately respond to a request for comment from Reuters.

Yuwadee Chirathivat, chairman of Central Department Store, Central Group’s largest unit, said the consortium “was delighted” that the winning bidder would also be responsible for counters where tourists can pick up duty-free items bought outside the airport.

While U-Tapao is smaller than Suvarnabhumi and Don Muang airports, upgrading the Vietnam War-era airport is at the centre of the government’s industrial policy in the east.

It remains a quiet airport with weekly international flights mainly to China, its website shows.

Bidding for a $6.8 billion high-speed rail project to link Suvarnabhumi, Don Muang and U-Tapao is underway. (Reporting by Panarat Thepgumpanat and Chayut Setboonsarng; Editing by Kanupriya Kapoor and Himani Sarkar)