A real-estate finance approach on pricing duty-free leasing: understanding conflicts at Korea's Incheon International Airport. Issue 12 (17th June 2020)

• Record Type: Journal Article
• Authors: Song, Woon-Kyung; Lee, Hyun Cheol
• Is Part Of: Current issues in tourism. Volume 23:Issue 12(2020)
• Page Start: 1454
• Page End: 1459
• Publication Date: 2020-06-17
• Subjects: Air travel -- airport concessions -- duty-free leasing price -- Incheon International Airport -- real options; Tourism -- Social aspects -- Periodicals; Tourism -- Environmental aspects -- Periodicals; Travel -- Periodicals; 338.479105
• DOI: 10.1080/13683500.2019.1638891
• Languages: English
• ISSNs: 1368-3500

Abstract

ABSTRACT: This letter proposes a real-options pricing model and determinants influencing retail rents from real-estate finance in an attempt to shed light on pricing airport duty-free leasing. A real-options approach suggests that the current leasing price conflicts at Incheon International Airport are incurred by the increased withdrawal option value after negative sales shocks. Determinants of retail leasing rents explain high duty-free rents at Incheon: great location to draw large passenger traffic, diluted anchor tenant power, and favorable-to-the-airport contract type.