Hoteliers reconsider Eilat expansion plans

Eilat

Isrotel CEO: The closure of Sde Dov airport has made us abandon the idea of building a new hotel on the north beach.

In mid-June, during a press conference held by the leaders of the campaign against the closure of Sde Dov Airport on July 1, Isrotel chain CEO Lior Raviv said that if the airport closed down, which indeed happened, Isrotel would cancel its plans to open more hotels in Eilat. The chain currently has eight hotels in the city. "We planned to build two more hotels in Eilat, and that won't happen if the airport closes down," Raviv said. "There is already a 30% drop in flights, and I think that it will go down by 50% if Sde Dov closes down. Eilat is not prepared for the increased number of vehicles that will be on the roads. In our reports, we refer to the closure of Sde Dov as a risk factor."

A month later, after Sde Dov was closed down, Raviv told "Globes," "We're reconsidering our organization in Eilat. We were going to build two projects: one a 200-room hotel in fairly advanced processes, which is now being reconsidered. We had also definitely decided to build a new hotel from scratch in the north beach area, and we have now completely abandoned the idea.

"After Israel decided to destroy inland air transportation by closing down Sde Dov, we'll invest in other places. Closing down the airport in Eilat and Sde Dov at almost the same time creates a real problem for tourism in Eilat. I traveled to Eilat not long ago on Road 90, which should have been turned into a two-lane highway a long time ago, regardless of Sde Dov. This also won't happen in the coming years. There's a big difference between what people in the government say about Eilat and their desire to develop it and what is actually happening. Eilat is Israel's only holiday town. In any normal country, a resort like this is developed. We see what's happening across from us in Aqaba, and in Sharm al-Sheikh and Cyprus. Here, instead of developing, they do the opposite."

"Globes": Are you already seeing a drop in occupancy?

Raviv: "No, because most of the vacationers in the summer are families, and families come by car."

According to estimates 80% of vacationers in Eilat travel by car in any case.

"That's incorrect. Closing down Sde Dov won't totally ruin tourism, but it will have a negative impact. Even a 10-15% decrease is a huge blow. It also affects the quality of life for our employees, who have been cut off from central Israel. We have 2,500 employees in Eilat, and we have a responsibility to them."

Will you cut prices in Eilat?

"Not right now, but time will tell. What could affect the prices are market forces through construction of more hotels, via competition."

Bringing Eilat closer to central Israel

For Dan Eilat general manager and Eilat Hotel Association chairperson Lior Mucznik, the picture is less gloomy. "Maybe Raviv was speaking from frustration and anger about the closure of Sde Dov, and it might also delay decisions by investors, but I hope that it will eventually turn out that the damage isn't so great, and then maybe he'll also think differently.

"The Dan Hotel chain knew that Sde Dov would be closed down, and nevertheless acquired the Rimonim Hotel in Eilat. The Astral Hotel chain is stepping up the construction of 400 rooms and another hotel is under construction. If we give the impression that there's trouble, it will be a self-fulfilling prophecy. I want to maintain optimism, even though I know that the closing down of Sde Dov will have consequences.

"It's no accident that we organized transportation from Tel Aviv for vacationers in Eilat and a shuttle from Ramon Airport to Eilat. Eilat has to be brought closer to the central region in terms of travel time, and I hope that the country will take up the challenge. The leaders of the struggle against the closing of Sde Dov will continue to act and campaign for the benefits that the government promised when Sde Dov was closed down (NIS 400 million in benefits, M.R.-C.), so that we'll know that this money, which is only an initial budget, will bring Eilat closer to the center. We haven't given up on Sde Dov. We want them to keep their hands off it for now, in the hope that after the elections, somebody will straighten up."

The Dan Hotel chain has 923 rooms in Eilat, including Rimonim Eilat, which joined the chain in May. Mucznik says that in July, "Occupancy ranged from 88% at Dan Eilat and Neptune Eilat to 94% at Dan Panorama Eilat."

Does that show that closing down Sde Dov did no damage?

Mucznik: "We'll be able to judge the consequences only in August, because vacationers in July are still from workers' committees and groups. From Tisha B'Av (August 11, M.R.-C.) until the end of the summer is a peak period during which independent vacationers come. Most of the rooms haven't been reserved yet for August. Many people still reserve a vacation only a week before. We usually enter August with 50% occupancy in order to finish with 90% occupancy. Only then will we know whether something has changed."

If so, will you lower prices in Eilat?

"People complain about prices in Eilat, and I'm telling you that they range from $50 to $600 per night in Dan Eilat. That's expensive, but in flights, there are people who fly business class and others who fly low cost. Prices are quite low in some cases. We have very high fixed expenses. The Dan Hotel chain pays NIS 12-13 million just in municipal property taxes and NIS 750,000 for three guarding positions I am legally required to put in the lobby."

Dan Hotel co-owners Leon Avigad says that an "urban" hotel with 155 rooms is involved. It will be built in an area vacated in central Eilat when the city's airport closed down. "We're very disappointed about the closing down of Sde Dov. We think it will be disastrous. Urban airports are being developed all over the world, and here they're deciding to put all of their eggs in one basket. At the same time, we continue to believe in Eilat's potential, and are looking for more ways to expand there."

Israel Hotel Association president Amir Hayek says, "Hoteliers will have to calculate a new route and consider the effects of the closure of Sde Dov on their activity in Eilat in real time, not under laboratory conditions - to see what happens to demand, not in July-August, because there's no problem about that, but for a number of months."

You warned against layoffs in the hotel sector if Sde Dov is closed down, but the sector has a shortage of workers.

Hayek: "If hotels in Eilat are hit hard, not only will new developers stay away, but there will be no avoiding layoffs."

Something else mentioned by Hayek is concern about cancellation of conferences regularly conducted in Eilat. "Conferences are really big money. If they are moved elsewhere, it's liable to be a blow that someone will have to answer for. Eilat was promised a NIS 1.2 billion development plan, from which we haven't gotten anything. Now they're promising NIS 400 million. I see no budgeted plan, unfortunately. I don't understand where the money will come from. The city needs support and an injection of infrastructure and attractions, plus a solution for reaching the city, in order prevent a halt in development, which will be another lethal blow to the city."

Published by Globes, Israel business news - en.globes.co.il - on July 9, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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