After 18 months with almost no foreign tourists visiting Israel, announcing the opening of a new hotel chain in the country would seem to be disconnected from reality. On the other hand, more and more countries are beginning to realize that they cannot keep their borders closed forever and make their tourism resources redundant.
It's not clear when Israel will finally get the message but looking to the future, many companies are seeking to reduce the shortage of hotel rooms in Israel and in Tel Aviv in particular. The accommodation shortage is especially felt at the budget end of the spectrum and this is what the entry of British company easyHotel seeks to address. Next year easyHotel will open its first hotel in Israel in Tel Aviv.
"The easy brand is a magnet," easyHotel franchise director St. John Harvey tells "Globes." "Even before we have opened our first easyHotel in Israel people already recognize it through our sister company, the airline easyJet."
In addition to easyJet and easyHotel, the easy brand also has low-cost car rentals, dry cleaning, fitness clubs and even coffee. The brand's model is the same in every sector - a budget price for a basic product with additional charges for any extra services.
easyJet has been welcomed with open arms by Israelis since it started flying routes between Tel Aviv and Europe in 2009. In 2019, easyJet was already the third largest operator flying out of Ben Gurion airport. Now easyHotel is landing in Israel. Describing itself as super-budget, it aims to offer a basic price of £30-40 per night (NIS 150).
Founded in 2004, easyHotel like the airline, simplifies the product for a basic price with services available at extra cost, if required. At the end of 2019, easyHotel announced that it would be opening three hotels in Israel and it now plans 7-8 hotels. The first will open in the Ramat Hahayal district of Tel Aviv in 2022. It will comprise three floors covering 5,000 square meters in the Ziv Tower. The owners have leased the area for 25 years for NIs 80 million.
Harvey said, "easyJet was responsible for an aviation revolution. It changed the thinking of companies and passengers and made the travel sector accessible to populations that could not indulge themselves. This was achieved through price and getting rid of expense elements that we had previously paid for, even if we didn't need them. That's the way we work with hotels - you pay for the bed, a clean room and an air-conditioner. Everything beyond that costs more money. "easyJet is still a lot larger than us but we will reach their size. We have 40 hotels, 33% of them owned and the rest on franchises - as the chain will also operate in Israel."
Is the message that you shouldn't expect to be pampered with a product that is just a bed?
"That's right. We offer a safe, clean and comfortable room. The motto is that you don't come to a city in order to see it from your hotel room. In our hotels there are no cafes or restaurants but just what you need in order to rest and to freshen up before spending time outside in the city. Our experience is the budget experience."
"In Tel Aviv in particular and Israel in general, hotels tend towards the direction of luxury. There are almost no budget hotels except those belonging to unknown chains, or there are apartments and in terms of the guest that is a risk."
Israeli hoteliers claim that real estate and construction are expensive and it doesn't pay to build a budget price hotel.
"It's true that it is not cheap in Israel but you can look at things differently. Our model is to reach average occupancy of 88%, with aspirations to get to 100%. We recently reopened our hotels in South London and they're full. The average charge per night is £40 and that allows us to cope with the competition around us. At the peak of the Covid pandemic only 35% of our hotels were closed and the reason is in the cost-benefit calculations. Each of our hotels only has 4-7 employees, so that it still pays us to employ them and bring in cash, even if we have 10% occupancy, rather than closing.
"The moment that the restrictions were lifted we switched from covering costs to profit. We have proved to our investors that the model allows us to be resilient to seasonal fluctuations and also crises, and to recover from them quickly. Within six months of opening most of our hotels, we reached 85% occupancy.
"Our costs model means we will always offer the cheapest rates in the district. We will soon stop our separate charge for Wi-Fi, because it seems to us that today this is a product that has to be part of the basic price but everything else will remain as extras: from viewing content on screens (via cellular connection) to late checkout."
Have you reached a situation where the extras are a major part of the profits, as with the airline?
"The extras provide us with revenue but at a lower level than the airline. We aren't relying on these revenues."
Not only the young
Your model is not unique. Other hotels have also simplified things and charge a basic cheap price
"That's correct because they are trying to imitate us. The rivals can offer a similar product but it will probably be outside of the city center but with us the location is critical. The hotel has to be within walking distance of public transport, restaurants and bars and in Ramat Hahayal there will also be the light rail near the hotel. When there is a good location everything fits around it. We also seek exclusive use of the building and we are together with office or businesses. This reduces the risks for investors and gives them flexibility."
The risk today is from the reality and the damage to tourism - Israel has not allowed tourists in since March 2020
"Our forecast is that by March 2022 global tourism will return to the pre-Covid levels. In some of our locations, we have already returned to what it was and in other places we will get there within six months. In England, we already have 90% occupancy and that's interesting because it's not due to tourism from the US or China, who are coming in small numbers.
"We are talking about domestic tourism - British people vacationing in Britain, even though out hotels are not located in classic places for a vacation, on the seafront for example. Even when Israel eventually opens for tourists, we need to learn to live with the pandemic."
You are less built for families or businesspeople because of the design of the rooms
"Our customers include young people but not only. We also have businesspeople. Many of them want to extend their stay when they come to London and to Tel Aviv for sure and then they move to cheaper hotels.
"Travel by junior employees is limited to a daily budget. People make the calculation that if they spend less on accommodation, they'll have more for restaurants and entertainment. If the budget is £100 per day and the hotel costs £40 instead of £90, easyHotel leaves you more money in your pocket.
"In some of the markets we have set up family rooms, mainly next to airports (Luton and Charles de Gaulle). If we see that there is demand for this segment, we will think in that direction."
No investment in advertising
Something else inherent in the hotel chain's model is the number of rooms in each building. "Our properties cannot contain less than 150 rooms. In Tel Aviv, we are looking for properties with 200 rooms. For the mechanism of costs and feasibility of the business that is the right number.
"Our largest hotel is in Barcelona, where we have more than 200 rooms and that is one of our most profitable assets. In Edinburgh we have a hotel with 34 rooms and that's the smallest that we have. In Tel Aviv, there are 8,000 hotel rooms and the segment for lower prices is neglected. This really stands out now, after the pandemic - the tourists will be more selective on everything about travel, how they will travel and for how long, and to where."
If we are talking about travel at the moment with all the uncertainty, being able to cancel is part of the equation. What is your policy?
"We have also taken this from the world of flight tickets. You can add £5-10 for being able to cancel. In places that were forced to close, we refunded the money even to people that booked a room that could not be canceled. We have decided that nothing must disappoint customers, because ultimately everything is seen in online criticism and everything appears immediately in social media.
"Consumers are more loyal to companies that care about them. You see this both in hotels and in aviation. The subject of refunds was very sensitive and people will remember how companies behaved towards them. We have received positive reviews like 'I will book again and I will tell my friends.'
"Positive reviews are the most important thing for a business. Instead of spending millions on advertising, we are investing in a website, which will do what it is designed to do - that is to say to be an efficient and convenient interface for bookings - and to be top of the listings for comfortable accommodation, in data and in marketing. At the same time, we are trying to reduce the bookings conducted through online travel agents, so that people will book directly with us."
But don't you still need a presence on Booking.com, despite their high fees?
"When we entered the sector in 2004, all bookings were conducted through Booking.com. That was a decision that we took, even though the fees were not suited to our lean model. Today bookings are conducted through both Booking.com and Expedia, who both have an important role in the market but the easy brand has aroused curiosity and attention and it is prominent in searches for low cost vacations, both for flights and for accommodation.
"In all markets people seek value for money. That increases loyalty not only because of the price but also because people don't want to take a risk with their money and book a room in a hotel that they haven't heard about before."
"Tel Aviv is no bonanza"
Has Covid opened up an opportunity for you because hotels have closed down and offices have been vacated?
"There have been hotels that haven't survived and offices that were vacated but despite that prices haven't gone down. In Tel Aviv, for example, there are opportunities on the market but it's no bonanza. The opportunity is to grab two or three floors in an office building. I believe that in the long-term there will be more opportunities because they hybrid work model will stay. Companies still see the importance of the presence of employees in the office and with team meetings but people will also work from home. In another decade this will influence real estate in city centers and that won't pass Tel Aviv by."
In Tel Aviv you are competing with Airbnb's short-term apartment rentals and there are more of those than hotel rooms.
"We are competing with every model that offers a bed for the night. Apartments can be close to us in price but we have the advantage when it comes to the risk in the model - you don't really know what you will get in an apartment or how clean it will be. That is our strong point. We take our rivals seriously, but if you will ask people in the street what is easy and EasyJet, they will connect easyHotel to a reliable low-cost product."
International brands in your segment have already come to Tel Aviv, such as Selina, an Israeli owned chain that mainly operates in South and Central America.
"Competition is good and healthy but with all due respect to rivals, some of them aren't really known. They know us before they arrive."
Prices will begin from NIS 250 per night in Tel Aviv
easyHotel is operating in Israel through Index Real Estate, which undertakes all property procedures for the hotel chain. From locating a property through to turning it into a hotel. Index Real Estate chairman is Noam Brender. He says that easyHotel plans opening one hotel per year until it has eight hotels here.
Brender said, "We are conducting negotiations in Tel Aviv, in Jerusalem and in Haifa to convert offices that have been recently vacated. We will also get to Eilat and to the Dead Sea where we will locate suitable land of 5,000 square meters at least. The aim is to find locations in city centers in areas with restaurants, cafes, and public transport. The model is a hotel without amenities like restaurants. There is a future for this sector with the size of a room (about 11 square meters) also influencing the cost for guests.
"We are working according to easyHotel's precise book of procedures, which sets the way the hotel should look and operate. The company also has a lean management model as well as an operational model. Everything is done through outsourcing and the costs are 50% lower than a 3-4 star hotel. So we will also be looking for domestic tourists."
According to Brender, the price per room per night in the hotel in Ramat Hahayal that will open in another 18 months will begin at NIS 250. "In central Tel Aviv, I believe that the price will be a little more expensive but the chain's model, even with 40% occupancy, will be profitable. We are moving into a segment where there is a huge gap between demand and supply."
Index Real Estate and easyHotel teamed up in 2019 before the Covid pandemic. On the timing of easyHotel's entry into Israel when there are no foreign tourists, Brender said, "We are preparing for an industry that will recover and investing for the long-term, and it is clear to us that hotels like this are better able to survive, and in particular the gap between demand and supply in Tel Aviv is large - if today there is supply of 8,000 hotel rooms, we believe there is a shortfall of another 8,000 rooms.
"So far easyHotel has only operated in Europe but now it is also opening in Dubai and it plans to deepen its position in the Middle East. The ambition is to offer combined deaqls for tourists from Europe to fly (with easyJet) and accommodation in easyHotel."
Published by Globes, Israel business news - en.globes.co.il - on September 30, 2021
Copyright of Globes Publisher Itonut (1983) Ltd. 2021