Shilla exit sparks concerns over Chinese firm’s entry to Incheon airport

Liquor and tobacco are displayed at a Shilla Duty Free store inside Incheon International Airport Terminal 1 in this undated photo. Courtesy of Hotel Shilla

China Duty Free Group (CDFG), the country’s largest state-owned duty free store operator, has emerged as the strongest contender to fill vacancies at Incheon International Airport, following Hotel Shilla’s decision to relinquish its license to sell cosmetics, perfume, liquor and tobacco at Korea’s main gateway.

The prospect has raised concerns about China increasing its influence at the airport and Korean duty free store operators losing ground in the global market.

According to Hotel Shilla’s regulatory filing, the company will stop operating The Shilla Duty Free shops in the DF1 zone as of March 17, 2026. Hotel Shilla said it viewed the surrender of its license as the most effective way to stem declining profits, despite the obligation to pay a penalty of 190 billion won ($136 million) to Incheon International Airport Corp. (IIAC).

“The market has changed significantly due to shifts in core customer consumption patterns and decreased purchasing power,” Hotel Shilla said in a statement. “Accordingly, we asked IIAC to reduce the rent, but our request was denied.”

Since winning the previous bid in 2023, Hotel Shilla has run duty free shops for cosmetics, perfume, liquor and tobacco in the DF1 zone in both of the airport’s terminals, as well as fashion and accessories stores in the DF3 zone.

Securities analysts expect the withdrawal to help Hotel Shilla recover profitability and strengthen Shinsegae DF’s bargaining power in its negotiations with IIAC over rent.

Citing mounting losses, Shinsegae DF has also asked for reduced rent for the DF2 zone, where it sells cosmetics, perfume, liquor and tobacco. The company, which also offers fashion items and accessories in the DF4 zone, is now considering giving up its license as well.

Travelers walk past duty free stores at Incheon International Airport, May 26. Newsis

However, IIAC has already rejected a court recommendation to lower rents for the DF1 and DF2 zones, citing the risk of breaching contract obligations. Even after Hotel Shilla’s announcement, the state-run airport operator said it would promptly select a new duty free store operator.

“Amid the prolonged downturn in the duty free sector, we regret that differences between our company and the duty free store operator led to a withdrawal, rather than to a mutual agreement,” IIAC said in a statement.

Given CDFG’s participation in the 2023 bid, the world’s leading duty free store operator is widely expected to join the upcoming bid. In 2023, the Chinese firm offered to pay a higher rent than Hotel Lotte, although both lost at the time.

“If CDFG opens a store at Incheon airport, China will be able to recapture spending by its citizens — the airport’s top duty free consumers,” a retail industry official said. “Korean companies may face difficulty securing licenses to run airport duty free stores overseas.”

Hotel Lotte said it will not make an unreasonably high offer in the upcoming bid. After surrendering its licenses for Lotte Duty Free in the DF1, DF5 and DF8 zones in 2018 due to declining profits, the company closed its remaining liquor and tobacco shop in DF3 in 2023 and completely left the airport upon contract expiration.

Hyundai Duty Free, which currently holds the license for the luxury boutique zone DF5, still remains a potential contender to fill The Shilla Duty Free’s vacancy in DF1.