Incheon airport’s rent policy places heavy burden on duty-free firms

Shinsegae Duty Free store at Incheon International Airport Terminal 1 / Courtesy of Shinsegae DF

By Ko Dong-hwan

• Published Oct 10, 2025 5:29 PM KST

Hotel Shilla’s exit signals market doubt

Duty-free operators are increasingly losing interest in running businesses at Incheon International Airport, as rising rental rates — that do not reflect sales performance — have become a growing burden for tenants.

As shopping trends draw international travelers to hotspots beyond the airport, duty-free zones are losing their appeal among both shoppers and companies.

The duty-free rental structure gained industry attention after Hotel Shilla, which operates Shilla Duty Free, decided to exit the airport’s DF1 duty-free sector last month. DF1 consists of perfume, cigarette and liquor products.

The main reason cited for the exit was the high rent that worsened the company’s operational deficit.

Hotel Shilla won duty-free business rights for the DF1 zone in 2023 despite the area’s rent being about three times higher than that of other zones, taking on a significant financial burden to secure the license.

In the past, duty-free companies paid fixed rents, but in 2023, the airport’s operator shifted to a variable rent system in which fees are calculated based on passenger volume.

Since then, Hotel Shilla paid a rent amount based on the number of international travelers using the airport. With a per-person rate of 8,987 won ($6.33) and the average monthly number of travelers being around 3 million, their rent landed at around 27 billion won.

Before their exit, Hotel Shilla requested that Incheon International Airport Corp. lower the rent by 40 percent to manage its operations there amid unstable sales. Falling sales to “daigous,” or Chinese resellers, shifting trends to e-commerce, and the rising popularity of brand shops among global travelers have threatened the firm’s business at the airport. But the airport refused, even after the Incheon District Court intervened on behalf of Hotel Shilla.

“When we wrote our bidding price for the auction in 2023, we hoped the economy here would improve in one or two years. But it didn’t. The high currency exchange rate persisted, which meant more expensive price tags for duty-free products. That led to a drop in sales,” a Hotel Shilla official said.

He added, “Following the onset of the COVID-19 pandemic, our sales to resellers, which had been consistent, began declining. And there were shifts in shopping trends, with more international travelers here spending money outside the airport via local tourism. Considering all these market changes and the impact to our business, we sought a rent discount from the airport.”

Hotel Shilla on Sept. 18 announced its exit from Incheon airport. It said that the continuation of its duty-free business there would increase its deficit to an “unbearable level” with the rent remaining in place.

Hotel Shilla is not the only company that has suffered from Incheon airport’s duty-free rent policy. Shinsegae DF in September also sought the Incheon court’s intervention to lower the airport’s rent by 40 percent. The airport objected to the court, nullifying the intervention.

Shinsegae DF, which opened its store at the airport in January 2024, said it currently awaits a decision from new CEO Lee Seok-gu as to the company’s future path.

“It has been only two weeks since our new CEO took office, and there was the Chuseok holiday this month that additionally delayed our decision over the issue. We could either exit, or prolong the legal battle with the airport, or stay at the airport,” a Shinsegae DF official said.

The official pointed out the airport’s rent structure, which is calculated using the number of flight passengers instead of sales performance. She said this practice is “unreasonable” and results in rent that is “too high.”

Shilla Duty Free found itself in the red last year, recording a 5.2 billion won deficit, while Shinsegae DF recorded a 35.5 billion won deficit. One of the main causes for both firms was Incheon airport’s rent.

Rising market doubts over the airport have shed light on Lotte Duty Free, which exited the airport in 2023. After operating their business there for 22 years, starting in 2001, the company lost an auction to renew their lease. Its bidding prices for DF1 and DF2 (beauty, fashion, food and electronics) were 6,738 won and 7,224 won, respectively, close to the lowest offers, and industry experts had called the bidding strategy a failure.

But Hotel Lotte, which operates the duty-free firm, improved its profitability afterwards, terminating sales deals with resellers — previously robust buyers — that included surcharges of up to 50 percent. By streamlining its businesses, Hotel Lotte recorded an operating profit of 21.8 billion won in the first half of this year, while Shilla and Shinsegae lost money.

An industry official speculated that Incheon airport has lost its past market advantages, saying, “People used to commit to fewer international trips, and whenever they did, they saw duty-free shopping as a must. Not anymore. Besides, because of the high rent, the duty-free firms cannot offer attractive discounts either.”