With the number of tourists headed towards five million, the hotel sector in Israel is growing and four hotel chains have made "Globes" list of the country's top 100 brands - Isrotel, Hilton, Dan and Fattal.
A series of hotels have recently opened, among them stunning boutique hotels in Tel Aviv, Haifa, and elsewhere. Veteran hotels, such as Dan Caesarea and Mizpe Hayamim, are being renovated and upgraded. Capsule hotels and hostels are also flourishing.
All this is good news. If the supply increases, the high prices of staying in hotels in Israel should fall. If the supply increases, vacationers should be able to find the price and type of vacation that suits them. This requires the development of inexpensive hotels, because these are being opened at a slower pace than luxury hotels. There is hope, however - global hostel chains, including Selina, Meininger, and A&O are already on the way to opening branches in Israel. At the same time, Abraham Hostels, a successful local chain, is also gaining ground.
Israel has boutique hotels and luxury hotels. The Dead Sea area is being rejuvenated with new hotels. Even Eilat, after 20 years of stagnation, is celebrating the opening of new hotels, despite the closing down of Sde Dov Airport.
All of this is well and good, except for one thing - the price. A survey among tourists visiting Israel shows enthusiasm about the tourist wonders that we have to offer, but also justifiable complaints that it is expensive here. This is a universal consensus among everyone from backpackers to families, and applies to everything from beer and food to hotels.
Israel competes for tourism with quite a few countries and destinations. The high price of hotel stays is blamed on burdensome regulation, with fingers pointed at the government (the absence of differential municipal property taxes in off-season, for example). Salary costs are also high, and there is a severe shortage of personnel, which has on occasion forced the closure of floors and rooms for lack of anyone to clean them. The high costs are passed on to the consumer. Competition and construction of more hotels may ease this problem.
Competition is not only between hotels. Hoteliers in Tel Aviv and Jerusalem must also contend with short-term rental apartments rented through Airbnb and the like. In Tel Aviv, there are more than 11,000 rooms for short-term rental, more than the number of hotel rooms in the city. The range of prices in this market is attracting both quite a few vacationers and quite a few apartment owners. It is to be hoped that this market will soon come under regulation.
55,000 hotel rooms are registered with the Israel Hotel Association. The rising trend in the number of overnight hotel stays in Israel continued in the first quarter of 2019, while the number of hotel stays by Israelis is falling. 8.5 million Israelis traveled overseas in 2018, and the number is growing every year. Hotel stays totaled 5.3 million days in the first quarter of 2019, with a majority of them being in hotels in Jerusalem and Tel Aviv. Tel Aviv hosted the Eurovision Song Contest last May. Although the number of tourists arriving was far below expectations, amounting to a few thousand, there was a concrete impact on the city, and on Israel in general, as a tourist destination.
Furthermore, the Ministry of Tourism, headed by Minister of Tourism Yariv Levin, has realized that the bureaucratic barriers are keeping developers from building hotels. A program for encouraging developers, including grants and the possibility of integrating residential apartments with hotels, are now attracting more developers to the sector. To this can be added the changing trend in office real estate, resulting in the conversion of existing buildings to hotels in an abbreviated process.
The hotel sector is prospering, with quite a few fascinating hotels scheduled to open this year. Keep in mind, however, that tourism is the first sector to react to security unrest. This is less so than in the past, because terrorism has become a worldwide phenomenon, but the sector, which directly and indirectly employs tens of thousands of workers, still needs peace in order to thrive and grow.
Isrotel - 48th in the overall ranking
Discovering Tel Aviv
Last March, Isrotel general manager Lior Raviv held a press conference in which he presented the chain's 2018 reports. These were satisfactory for the company, with record revenue for Isrotel, which accounts for 13% of Israeli hotels, and 22% growth in net profit. Raviv also presented a plan for expanding the chain from 19 to 30 hotels by 2025, with an emphasis on opening hotels in Tel Aviv. The plan is to reach 1,500 hotel rooms in Tel Aviv alone.
Raviv and Isrotel played an active role in the struggle against the closure of Sde Dov Airport, and claimed that fewer vacationers would visit Eilat and development in the city would be affected. Raviv told "Globes" that following the airport's closure, Isrotel had shelved plans to build another hotel in Eilat. Isrotel currently has eight hotels in Eilat, which account for 50% of its revenue.
Hotels that Isrotel plans to open in the near future are Kedma Hotel in Sde Boker, a suite luxury hotel at Ein Bokek by the Dead Sea, and a hotel in a room marked for preservation at 99 Dizengoff Street in Tel Aviv. Isrotel also plans to spend NIS 210 million on renovating and upgrading existing hotels in Eilat and at the Dead Sea.
The public holds only 10% of the shares in Isrotel, with an estimated value of NIS 3 billion. The chain's revenue totaled NIS 1.44 billion in 2018, compared with NIS 1.32 billion in 2017, thanks to an increase to 76% in the average occupancy rate, among other things. 80% of vacationers staying at Isrotel are Israelis.
Isrotel was founded in 1984 by UK developer David Lewis with the King Solomon Hotel in Eilat. The chain currently has 19 hotels containing 4,022 rooms and employing 5,200 workers. The chain expects to reach 30 hotels containing 5,700 rooms, and to employ 6,800 workers, by 2025.
2. Hilton - 56th in the general rating
The veteran brand that is stronger than the new brands
Hilton's story is a lesson in the power of a brand. In the consciousness of Israeli consumers, Hilton is a strong and esteemed brand of hotels, more so than other hotel chains that have gained ground in recent years, such as Brown Hotels and Atlas Hotels.
In contrast to other chains having branches all over Israel, Hilton's only branch in Israel is in the heart of Independence Park in Tel Aviv. The hotel, which was officially inaugurated in 1965, is located in an old 17-storey building with 560 rooms. After launching a luxury hosting department named Vista on the top five floors last year, Hilton renovated the restaurants floor, the event hall, board rooms, and the business lounge this year.
Hilton also manages the Waldorf Astoria Hotel in Jerusalem. The chain celebrated the 100th anniversary of its founding last May 31. Hilton has 585 hotels on six continents, 17 hotels and guest house brands, and 923,000 rooms in 113 countries.
3. Dan Hotels - 61st in the general rating
Increasing its presence in outlying areas
The Dan Hotels chain's major development this year was acquiring the Rimonim chain from Israel Land Hotels. The chain currently has 18 hotels throughout Israel and one hotel in Bangalore, India. The acquisition of Rimonim Hotels will enable Dan Hotels to reach new groups, increase its presence in outlying areas through hotels in Tzfat and Nazareth, and bolster its presence in Eilat with another hotel. Enlarging the chain will also enable Dan Hotels to better compete with Isrotel and Fattal.
Dan Hotels, founded in 1947, is listed on the Tel Aviv Stock Exchange. The company's market cap is NIS 2.85 billion, and its revenue totaled NIS 1.26 billion in 2018. Dan Hotels' chairman in Michael Federmann, and its CEO is Ronen Nissenbaum. It came to Israel after years of trying to manage hotels around the world. The chain, which also manages a business lounge for travelers at Ben Gurion Airport, has 3,630 employees.
Last May, in order to meet the changing demands of foreign tourists, who account for 54% of the chain's guests, Dan Hotels entered the category of technological urban hotels with the Link Hotel in Tel Aviv. The chain recently reopened the Dan Caesarea Hotel following eight months of renovations. Major changes are also planned at the Dan Acadia Herzliya, one of Israel's iconic hotels, with the number of rooms slated to soar from 200 to 1,325. The expansion plan, which contains two eight-storey buildings and one 17-storey building, was approved despite objections by residents of the area.
4. Fattal - 69th in the general rating
Moving beyond the hotel business
The Fattal chain is still growing and expanding, and not just in hotels; it is also entering tangential spheres. This year, the company entered the short-term rental apartments sector (on the Airbnb format) through a number of buildings in Tel Aviv in a venture is called Master. Fattal also launched a rental office space venture called Rooms on the WeWork format. Its first foothold was in Tel Aviv in conjunction with the chain's Nyx Hotel. Another branch will be opened in Ra'anana, followed by additional locations in Israel and Europe.
The chain also inaugurated its business terminal at Ben Gurion Airport. Another venture involves the emerging global trend in the travel tech industry: Fattal and developer Aviv Refuah have founded a tourism investment fund. In the hotel sector, Fattal expanded with hotels in Tel Aviv, including a hotel to be established in a building marked for preservation in the vicinity of Dizengoff Square.
Fattal has 12,000 employees worldwide, including 8,000 in Israel. Its market share in Israel is 17%, with NIS 1.95 billion in annual sales. Since the hotel industry suffers from a severe shortage of employees, the company is carrying out a program to empower employees and managers, and to develop a managerial reserve among its employees. Another program being developed by the chain is "Fattal in the Community," in which 100 special needs workers are employed.
Published by Globes, Israel business news - en.globes.co.il - on August 20, 2019
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