Hong Kong’s MTR Corporation has published its duty free prequalification tender invitation(s) for Hung Hom and Lo Wu railway stations and/or Lok Ma Chau – either as separate bids, or as part of a three-strong station package.
The current business comprises Hung Hom Station serving the Guangzhou-Kowloon through train service; Lo Wu, which is the primary connection for rail travellers between the two territories and Lok Ma Chau which ultimately connects with the Longhua Line leading into Shenzhen.
Anway – the sister company to Sky Connection in Hong Kong – currently operates separate Hong Kong-China duty free railway business at both Lo Wu and Lok Ma Chau stations.
The existing MTR contract commenced on January 1, 2013, with the Lo Wu duty free shop historically accounting for more than 90% of combined gross revenues back in 2010, but this share has since changed. [The existing contract covers Lo Wu, Hung Hom and the onboard Hong Kong-Guangzhou train duty free shops-Ed].
Right now, MTR is requesting that qualified bidders should apply for the prequalification process before the end of January 2016, with invitations to tender expected to be issued ‘tentatively’ in April 2016.
The various requirements for each offer can be found at the MTR site here [https://www.mtr.com.hk/en/corporate/tenders/Q043332.html]
Basic requirements include bidders to submit their shareholding and financial information, along with audited financial statements for the past three years, references from landlords and annual gross sales turnover data spanning the last six years.
The Lo Wu duty free railway station shop run by Anway has been substantially improved, with a wider range of merchandise on offer than ever before.©
MTR is also asking for information relating to the number of years in duty free; number of sales outlets in Hong Kong and/or elsewhere; and operational capability and relevant experience of operating duty free businesses involving cross-boundary and international borders.
As reported many times before, Lo Wu and Lok Ma Chau stations feed railway services directly into Mainland China as part of the estimated 100m-plus cross-boundary travellers who use these facilities each year.
Historically, tobacco formed a very big element of the group’s port and railway store business. However, this received a big blow in August 2010 when the Hong Kong SAR Government’s cigarette allowance entitlement for ‘incoming’ travellers to Hong Kong was cut from three packs to 19 cigarettes as part of its public health programme.
Following this, Anway has done a remarkable shop in trading customers up at Lo Wu and Lok Ma Chau shops by mitigating tobacco losses by pushing more spirits and other alcohol beverages – including offerings below 30% alcohol content like wine, where excise duties in Hong Kong were abolished in 2008.
Anway/Sky Connection have upgraded the retail offer impressively and substantially in recent years. Shown here: the quality wine offer at Lok Mau Chau.©
The retailer also made very positive efforts – along with MTR – to try and find ways to increase the retail space at Lo Wu in particular to help the operation. As a result of these efforts, Anway/Sky Connection Ceo Baker Salleh told TRBusiness at the time that the loss of tobacco sales proved surprisingly less damaging than the company had originally envisaged.
Currently, MTR has a ‘total’ average weekday patronage of over 5.4m passengers across its entire network and is one of the busiest railway systems in the world.
Revenue from its Hong Kong station commercial businesses in the half year ended 30 June 2015 up 8.5% to HK$2,579m ($332m) while the cross-boundary service to Lo Wu and Lok Ma Chau grew by 3.2% to 56.2m passengers for the six-month period to the end of June 2015.
According to MTR’s accounts, the increase was driven mainly by higher rental income from station shops, resulting from rent renewals and increased turnover rents.
Anway and Sky Connection CEO Baker Salleh and his team have improved Hong Kong’s railway duty free business impressively in recent years, despite significant challenges, including developing the Lok Mau Chau business from its infancy.©
Station retail revenue for the period increased by 11.2% to HK$1,743m (224.8m). MTR says that the increase reflected rental increases and higher turnover rent, particularly from the Lok Ma Chau Station Duty Free Shops, as well as rent earned from shops in the new stations of the Western extension of the Island Line.
Interested operators are being asked to express interest by submitting the relevant correspondence to the MTR Corporation Limited, 20/F, MTR Headquarters Building, Telford Plaza, Kowloon Bay, Hong Kong.
Correspondence should be addressed to the Purchasing Manager – Property & Marketing, quoting ‘Expression of Interest for the Tender no. Q043332 – Operation of Duty Free Business at Hung Hom Station, Lo Wu Station and Lok Ma Chau Station” – on or before 15 January 2016.
