Wednesday, January 31, 2001
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Posted on: Wednesday, January 31, 2001

DFS retains airport's retail concessions

By Glenn Scott
Advertiser Staff Writer

DFS Group LP yesterday capped off an eventful month by bidding $47.25 million to win a 5-year state contract allowing the company to continue running most of the retail concessions at Honolulu International Airport.

The contract is the second the company has won in Hawaii this month, both times as the sole bidder. Two weeks ago, the international company doing business as DFS Hawaii won a larger contract to serve as the state’s exclusive retailer of duty-free products with an offer to pay a minimum of $60 million a year over five years.

Yesterday also was opening day for an expanded and animated DFS Galleria, a $65 million retail store built around a boat days theme that observers say could become the centerpiece of Waikiki’s commercial scene.

"It’s been a great day," said Bob Coe, DFS Hawaii president, as he led a company entourage through the airport concourses after the bid-opening. The group paused at each of the company’s 37 shops, carts and kiosks to assure employees their jobs were safe.

Said Coe: "Our DFS family can rest easy now."

To be sure, Coe and others had sat tensely an hour earlier during the bid-opening in a quiet conference room of the airport’s seventh-floor administrative offices. The atmosphere changed once Dave Shimokawa, the airport’s property management supervisor, confirmed that just one Manila envelope thick with a bidder’s paperwork — the DFS bid — had been submitted.

Then Coe slapped the long conference table and yelled, "Yes!"

The concession covers retail operators accessible to all shoppers in outlets for gifts, clothing, jewelry and packaged food. Annual sales in those categories reached about $40 million last year, according to state records. The duty-free shops, in contrast, are available only to foreign tourists buying items free of customs duties, but sales are higher because duty-free items tend to be more expensive, luxury products.

In its bid yesterday, DFS offered slightly more than the state’s minimum annual requirement of $8.75 million, by bidding $9.2 million for the first two years, $9.45 million in the following two years, and $9.95 million in the fifth year.

According to the deal, DFS will pay the higher of that annual minimum or 20 percent of its annual gross receipts. Annual sales in the coming year would need to exceed $45 million before a calculated percentage would surpass the minimum bid.

The DFS offer, if approved in a legal review, will go into effect March 14 through March 2006. The concession does not include the news stands run by the Blind Vendors or food services operated by Marriott/Host. Nor does it involve the new Bestsellers book shop — the only actual bookstore in the airport — that moved into space in the main terminal last month under a one-year experimental permit.

Coe and Sharon Weiner, DFS Hawaii vice president for administration, said the new concession contract will allow DFS to move forward with airport officials to create a retail scene at the airport in the same tone as at the new Waikiki Galleria.

"Our plans," Weiner said, "are to really improve the central concourse. It’s going to be fabulous."

State Department of Transportation officials did not comment yesterday, but documents related to the concession acknowledge that the retailer will be expected to shift some of its shop locations as airport expansion work begins in 2002.

Coe said he is all for a remodeling that turns a cold concrete structure into a warmer place to present travelers with a poignant first and last image of Hawaii. All of his company’s market research, he said, suggests that visitors want more of that.

"They want a richer, more cultural, more romantic experience," he said. "And that’s what we’re doing."

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