A record 4.5 million tourists visited Israel in 2019, according to the Central Bureau of Statistics, compared with 4.1 million in 2018, 3.6 million in 2017, and 2.89 million in 2016, a poor year for tourism because of the conflict with Gaza. Tourism is a huge economic resource (tourists spend an average of $1,400 per visit), and the country's hotels are flourishing.
Ministry of Tourism director general Amir Halevi is stressing the development of additional tourism products, principally for the Negev and the Arava, "where we see the biggest potential for increasing the number of tourists and for economic growth in the entire region," he says.
The 4.5 million tourists in 2019 are a source of pride for the Ministry of Tourism and allow it to indulge in a little self-congratulation, but there is huge growth potential, far beyond the ministry's target of five million tourists a year. Looking at the numbers for the neighboring countries, which are exerting a magnetic effect on tourists, we discover that Cyprus, for example, which has a population of 1.2 million, had four million tourists last year. 4.5 million tourists visited Jordan, 7.6% more than in the preceding year, and its target for 2020 is seven million. The number of Israelis who took overseas trips was double the number of incoming tourists in 2019.
The millionth tourist landed at Eilat's Ramon Airport this week as part of the campaign to encourage winter tourism to the Red Sea resort. What is certainly bothering hoteliers in Eilat is the lack of a government that can give the Ministry of Tourism money for subsidizing flights from Europe to Eilat. Without a subsidy, we can assume that only a few of the current 45 weekly flights landing at Ramon Airport will remain, and the number of European tourists coming to Eilat to escape the European winter will plummet accordingly.
The hotel business is growing
2019 ended with 25.8 million overnight hotel stays, almost half of them by foreign tourists, whose hotel stays have risen consistently since 2016. Hotel stays by Israelis have not grown since 2016 (Israelis have been spending their vacations overseas). Occupancy of Israel's current 56,000 hotel rooms is 70%, and the number of hotel rooms is projected to grow in the coming years with the entry of new players into the sector, headed by real estate companies such as Israel Canada, Nitsba, and Azrieli, and expansion of activity by the existing hotel chains. "Real estate companies realize the potential in hotels as income-producing properties that generate better returns than properties used for offices or other commercial purposes," say Adv. Kfir Yadgar and Adv. Yiftah Farber, partners in the Gornitzky & Co. law firm who are responsible for the firm's hotel business.
"The real estate companies are taking advantage of the growing demand for hotel rooms in Israel, especially in Jerusalem and Tel Aviv, and are benefiting from stable cash flow," they say. An article published in "Globes" two weeks ago explains the hotel sector's attractiveness for developers, saying that an analysis of the financial statements of Fattal Hotels, Isrotel, and Dan Hotels shows that despite high operating costs (excessive regulation, municipal property taxes, etc.), the large chains are enjoying impressive growth. Fattal's revenue from hotel activity in Israel grew 15% to NIS 1.3 billion in 2019.
Fattal plans to open nine more hotels in Israel by 2023. Dan Hotels which acquired the Rimonim hotel chain, reported a 90% surge in profit in the first three quarters of 2019. Isrotel also reported higher gross profit, with the company planning new hotels in Tel Aviv and Jerusalem. "In the next decade, we'll open six more hotels in these cities, which will also serve our agenda of strengthening incoming tourism looking for a luxury vacation at an international standard. Occupancy at Isrotel hotels is currently 60/40 in favor of Eilat. We believe that this figure will become 60:40 in favor of central Israel," Isrotel says. The boutique hotel segment is also prospering. The Atlas hotel chain, which has developed hotels mainly in Tel Aviv and Jerusalem, and the Brown hotel chain, which is on an upward trend, are growing.
The chain, which currently has 13 hotels, expects to increase the number of its rooms, with an emphasis on overseas activity (Athens and Germany) within five years. The hostels sector, demand for which is high among the tourists visiting Israel, is also flourishing. In addition to opening new branches (such as Avraham Hostel in Eilat ahead of the Passover holiday), international chains, including Selina Hostels and Meininger Hostels, have signed for properties in Israel. The Ministry of Tourism is offering a program of grants to encourage developers to open hotels, including the conversion of office buildings to hotels. The Ministry of Tourism's goal is to increase the supply of the cheapest hosting, which is currently inadequate. Growth is not restricted to hotels; Airbnb apartments have also been undergoing accelerated growth, with the number of apartments in Tel Aviv alone having already exceeded 10,000 properties. Despite understandable calls for regulation, this sector remains completely open. The biggest beneficiaries are property owners, while the losers are residents for whom fewer rental apartments are available and hoteliers complaining about unfair competition.
Israel is expensive. When will this change?
A report on 2018 by Hatzlacha - The Consumers' Movement for the Promotion of a Fair Society and Economy under the Freedom of Information Law examined the characteristics of the tourists who visited Israel. Unsurprisingly, the report found that tourists focused on Jerusalem (77%) and Tel Aviv (67%). The two sites most visited by tourists were the Western Wall (72%) and the Church of the Holy Sepulcher (52%), followed by the Old City of Jaffa (51%). Half of the tourists were on their first visit to Israel. 55% of tourists came by themselves, and 25% flew on low-cost flights. On a scale of 1 to 5, Israel's value for money rating was 3.8. Businesses in the sector should take note of this figure. On the one hand, despite high prices that always come as a surprise to tourists, the numbers continue to grow. On the other hand, in describing her first visit to Israel, a Bulgarian tourist from Greece said, "Israel is a country to be visited once. It is a charming country, with nice people (except for the amateurish guide assigned to the tour in Jerusalem), and the food is tasty. However, the hotel prices are very expensive. As a tourist, I can't afford to return here." This is a big defect and failure that must be addressed, despite the fine tourism statistics.
Published by Globes, Israel business news - en.globes.co.il - on January 1, 2020
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