Hotel Shilla and Hyundai Development Co. launched a joint venture on Monday to run a downtown duty-free store in Seoul, a burgeoning duty-free market worth 3.2 trillion won ($2.9 billion).

The event comes a week before the firms join a bid for a new downtown duty free license to be issued in Seoul later this year, which is expected to be a tight race against major competitors ― Hanwha Galleria, Lotte Duty Free and SK Networks.

If the joint venture is granted the downtown duty-free license in July, it will open a multiplex mall in a 65,000-square-meter plot that includes the existing I’Park Mall owned by Hyundai Development.

“We’re expecting about 1 trillion in sales only in the first year,” a manager-level official from Hyundai said, declining to be named.

Shilla and Hyundai plan to have a starting capital of 20 billion won for the DHC Shilla Duty Free and expect to inject an additional 350 billion won in the first year of business, according to reports.

Yongsan is one of the most actively developing regions in Seoul, with the planned relocation of the U.S. military base to Pyongtaek in Gyeonggi Province. It also has a major train station connecting to Jeolla, Chungcheong and Gangwon provinces.

Industry watchers say Hyundai’s geographical advantages in Yongsan and Hotel Shilla’s ample experience in the business will help them generate twice as much profit as they would alone.

About 27,400 square meters of the earmarked plot will be used for duty-free, with the rest used for a concert hall promoting K-pop, restaurants and parking.

In fact, parking provision could be the bid’s main selling point.

Many downtown duty-free shops in Seoul have failed to secure sufficient parking space, despite an increasing number of Chinese tourists, causing serious congestion in the surrounding areas.

Hyundai and Shilla said its parking area for coaches would have up to 400 spaces. Hanwha Galleria plans to have 100 parking coach spaces, but SK and Lotte have not announced parking details yet.

The government said in January that it would add three duty-free stores in Seoul and one on Jejudo Island, in addition to the six existing city-duty free stores in Seoul and two on the island.

By Suk Gee-hyun (monicasuk@heraldcorp.com)