A real-estate finance approach on pricing duty-free leasing: understanding conflicts at Korea’s Incheon International Airport

Woon-Kyung Song and Hyun Cheol Lee

Current Issues in Tourism, 2020, vol. 23, issue 12, 1454-1459

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.

Date: 2020
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DOI: 10.1080/13683500.2019.1638891

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