The Board of the Metropolitan Washington Airports Authority (MWAA) has approved a staff recommendation to revamp the duty free concessions at Dulles International Airport (IAD) and potentially at Reagan National Airport (DCA) as well. The approval paves the way for an RFP seeking a firm to develop, construct, operate and manage the duty free/duty paid concession at IAD, with an optional concession at DCA.
The duty free contract is expected to carry a 10-year lease term beginning January 1, 2023. The RFP will seek an operator for four duty free locations at IAD, totaling approximately 13,000 square feet and located near international departure gates in Concourses A, B, C and D. The contract would also provide for one optional 200 square foot duty free location at DCA.
According to MWAA’s pre-solicitation document, the winning bidder will be required to invest a minimum of $3 million to remodel all existing duty free locations, or develop new locations no later than 24 months from the contract commencement. A mid-term refurbishment, with required spend of at least $750,000, is required by no later than the conclusion of the fifth contract year.
In addition, the solicitation is expected to require a store-within-a-store concept in the remodel or rebuild of IAD’s largest duty free location. Bidders will be required to propose a minimum annual guarantee with an annual escalation of no less than 3 percent, and the operator will be required to pay the greater of the MAG or 22 percent of gross receipts.
The current duty free concession is operated by Duty Free Americas. The initial contract, which commenced on August 1, 2014 included seven locations in IAD and two locations in DCA, MWAA said. Due to the pandemic, a modification to the contract was executed in July 2020 which reduced the number of locations being operated at IAD to four, closed the two locations at DCA and extended the term of the contract by one year until December 31, 2022.
The MWAA recommendation warned that “current global health and political issues have depressed international travel and represent an additional level of uncertainty around international passenger traffic that may impact how the offerors view the opportunity.” In February 2022, international passenger traffic at IAD was at 62 percent and DCA at 41 percent of pre-pandemic levels, MWAA said. Despite these challenges, duty free stores at both airports generated a higher sales per square foot than the average of stores for any other concessions category.