Duty-free shutdown drama: Thai airports set to lose big bucks

Airports of Thailand (AOT) is bracing for a colossal monthly loss of 143 million baht after announcing the closure of all duty-free shops in the arrivals areas of five major airports. This shocking move, aimed at boosting domestic spending, was approved by the Cabinet on July 2 and will come into effect on August 1.

The closure affects duty-free shops at Suvarnabhumi, Don Mueang, Chiang Mai, Phuket, and Hat Yai airports. During a board meeting yesterday, AOT officials acknowledged the financial hit, revealing that the monthly revenue loss includes 1.7 million baht from rent and a staggering 142 million baht in minimum profit compensation.

King Power Duty-Free Ltd (KPD), a key player in the duty-free market, has already reached out to AOT to return 2,250 square metres of duty-free retail space across the affected airports. The handover will also begin tomorrow, August 1.

Despite the financial blow, AOT is exploring new projects to recover some of the lost income. The closure is part of a broader government strategy to funnel spending into local shops, with hopes of generating up to 350 billion baht annually.

The decision has sparked mixed reactions, with some praising the focus on domestic retail while others express concern over the economic fallout for the airport operator and duty-free vendors, reported The Nation.

ORIGINAL STORY: Thai Cabinet to scrap duty-free stores on arrival after 3 billion baht loss

The Thai Cabinet plans to scrap duty-free stores on arrival at eight airports in Thailand after losing an estimated 3 billion baht in customs revenue. This cancellation is also aimed at making Thailand a hub of tourism and shopping.

The Prime Minister’s Office deputy spokesperson, Ratchada Thanadirek, reported in a press conference after today’s Cabinet meeting. The Cabinet agreed to implement measures to promote Thailand as a hub of tourism and spending during the meeting on November 28 of last year.

Cancelling duty-free stores on arrival at each airport was one of the measures discussed. The Cabinet assigned the Ministry of Finance to research the benefits and effects of the cancellation.

The ministry reported the results of the research during today’s Cabinet meeting, concluding the effects of duty-free shop cancellation into five points:

1. Impact on spending by foreign tourists: Foreign tourists will spend more domestically. Spending and income will be distributed more widely. It is expected that each foreigner would spend 570 baht more per person if the duty-free shops were scrapped for a year.
2. Impact on the spending of domestic tourists: Thai travellers may opt to buy duty-free products from other countries.
3. Impact on domestic business operators: Duty-free business operators will lose revenue from the closure of the shops on arrival. However, other business operators in the tourism industry will receive a new cash flow of up to 3,460 baht per year. This will create more opportunities for business operators, more investment, and more employment.
4. Impact on the Thai government: The circulation of money will be distributed to a wider range of business operators, resulting in an expansion of the government’s tax collection base, especially income tax and VAT.
5. Impact on the overall economy: The suspension of duty-free shop operations is expected to increase the gross domestic product (GDP) by 0.012% per year.

According to Ratchada, three business operators have licences to operate duty-free stores, which are located at eight airports including Suvarnabhumi International Airport, Don Mueang International Airport, Chiang Mai International Airport, Phuket International Airport, Hat Yai International Airport, U-Tapao Airport, Samui International Airport, and Krabi International Airport.

Ratchada revealed that total sales of duty-free products were about 3 billion baht last year, and this is considered to be the amount that the Thai Customs Department lost.

Ratchada emphasised that the three duty-free business operators agreed with the measure and are willing to cease their operations according to the government measures.

The spokesperson, however, did not reveal when the cancellation would be implemented.