April 26, 2024

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[THE INVESTOR] Hotel Shilla, the brainchild of Samsung heiress Lee Boo-jin, appears likely to enter this year’s race for rights to operate duty-free shops in downtown Seoul, industry sources said on Aug. 22.

They noted the company has recently formed a task force for winning the rights to compete against rivals such as Lotte, SK Networks, Hyundai Department Store and Shinsegae.

“A final decision has to be reached, but we are likely to take part in the bid,” said one Hotel Shilla representative on the condition of anonymity. That was a step forward from before when the firm had said that “nothing has been decided.” 

Hotel Shilla President Lee Boo-jin

In 2015, Hotel Shilla CEO Lee Boo-jin -- the eldest daughter of Samsung Electronics Chairman Lee Kun-hee -- joined hands with Hyundai Development Co. to successfully open HDC Shilla Duty Free.

This year, four additional duty-free shops will open in Seoul, as well as two more in areas outside of Seoul. This would be a second chance for firms that failed to renew their contracts. The Korea Customs Service will be accepting bids for duty-free operation rights by Oct. 4. Three large industrial groups and one small or medium-sized industrial group will be chosen, with the final assessment scheduled for the end of the year.

All duty-free shops must apply for government permits every five years. Last year was when large industrial groups were allowed new permits for the first time in 15 years. Hotel Shilla is an affiliate of Samsung Group. Hanwha Galleria was also given a permit.

Lotte and SK Networks, however, were unable to renew their contracts, while Hyundai Department Store failed to make entry.

Debate is now raging over whether the government should completely open the doors to the duty-free industry, especially as more Chinese tourists are entering and generating profit for the country.

The duty-free business is expected to be worth up to 10 trillion won (US$8.95 billion) this year, up 8.7 percent from 2015, according to the KCS.

As of the second quarter of this year, HDC Shilla posted 967 million won in sales, the highest volume among the six newly opened duty-free shops, according to data from the Financial Supervisory Service. Shinsegae, Hanwha and medium-sized SM Duty Free followed.

Hotel Shilla will be up against stiff competition, market sources say. Lotte, which was denied a renewal in operating rights in 2015, has refused to accept new shops into the space previously occupied by Lotte duty-free shops at its Lotte World Tower branch. This is to keep the space open for when Lotte does potentially manage to renew rights, those close to the firm have said.

Chey Shin-won, chairman of SK Networks, is also bent on winning a bid this year, along with Shinsegae, whose Vice Chairman Chung Yong-jin told reporters in June that not only is the group greatly interested in the duty-free business, but it has “a strong chance of winning a bid.”


By Kim Ji-hyun (jemmie@heraldcorp.com)