Which is the most successful mall in Israel? All the ratings say it's Mall Hayam in Eilat, with 100 percent occupancy, a waiting list of businesses wanting to get in and rent exceeding $100 per square meter.
They are wrong. The most successful mall in Israel is by the city of Lod. It is called "the duty free stores at Ben-Gurion Airport."
These stores boasted $300 million turnover in 2003, which was a dreadful year for tourism. In 2000, a great year, their turnover was $400 million. Mall Hayam's sales amounted to $120 million in 2003. No other mall in Israel, is reported to make half what the duty-free stores do.
One key difference underlying its success is that the state subsidizes the "duty free mall" in that all the goods are bought free of tax. Another is that the population passing through is relatively wealthy, considering they're en route to flying abroad. They are people in the mood to spend money as their vacation starts.
There is another key difference. Unlike all other malls, the duty free one is publicly owned. Meaning, the Airports Authority, which is the government monopoly in charge of Israel's airports, runs it. The authority is the one that gets the NIS 581 million franchise fees a year, which is NIS 166 million more than originally estimated. And the authority hasn't even finished publishing tenders for duty free shops at the new terminal, Ben-Gurion 2000.
That high level of franchise fees reflects how stupendously well the shops are doing. It also reflects the authority's decision to publish tenders, which are won by the highest bidder. For the same reason, the authority promised each winner that it would get exclusivity in its field at the duty free mall.
The result, as said, is that the Airports Authority is getting NIS 166 million more a year than it expected. It must view that as a feather in its cap, and it should. If it were a company, that is. But the Airports Authority is not a company, it is a government unit.
Public monopolies are supposed to watch out for the public's welfare. The public's welfare, not their own.
The public's greater good dictates that the choice of duty free shops be based on the best, cheapest service to the public, not on who pays the Airports Authority more. The public's greater good should have required competition at the duty free mall, not one exclusive store after another. At other Israeli malls, the shopper can decide whether to buy aftershave at Hamashbir, Super-Pharm or the April franchise; at duty free he has James Richardson. End of list.
The problem is that assuring the public's welfare would have been at the Airports Authority's expense, and without inflated revenues, how could the poor authority continue to star on the treasury's wage report year after year, because of the inflated salaries it pays its workers? They earn roughly the most in government circles.
The Airports Authority commented that the duty free area was planned in consultation with international experts to best serve the population of travelers. "The basket of prices at the duty free is 35 percent below similar baskets at other airports in the world, and Ben-Gurion is considered a world leader in terms of sales per passenger, which indicates that the Airports Authority's decisions were based on the needs of the consumers."
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