The long summer break is here and many Israelis are preferring staycations rather than traveling abroad, amid the national mood and reluctance to travel abroad caused by the war, and the uncertainty of air travel as so many foreign airlines cancel flights. There may be no foreign tourists staying in Israeli hotels, but the absence is more than compensated for by domestic tourism, and the hosting of evacuees from the north and south, which is paid for by the government.
The high demand at home has pushed up hotel prices. Despite the high cost of accommodation, Israeli families feel the need for a break from the ongoing stress of the conflict. Sources in the domestic tourism industry report a 30% rise in demand for domestic vacations, mainly in Eilat and the Dead Sea.
According to the Central Bureau of Statistics, hotel occupancy in Eilat in June (the latest figure available) was 88% compared with 79% in June 2023. Hotel occupancy at the Dead Sea was 69% in June compared with 68% last year. Tiberias hotels had 71% occupancy in June compared with 67% last year and Haifa hotels had 83% occupancy compared with 68% last year.
At a time when Israelis do not have many options for vacationing other than in Israel, some hotels are exploiting the situation. Hotel prices in Eilat and the Dead Sea, have jumped. Eshet Tours says the average price for a vacation this August is significantly higher in all Israeli resorts and destinations - NIS 4,799 compared with NIS 3,748 in the same period last year.
Ophir Tours sees a similar situation and reports that the average price per night at a hotel in Eilat, for example, has increased by about 30% compared with the corresponding period last year. In August, a hotel room for a night in the Red Sea resort for a couple and two children costs NIS 1,933, while last August it was NIS 1,480.
Kinneret College Lecturer in the Department of Tourism and Hotel Management Dr. Shay Ronen says, "When demand is high then prices rise as well as when supply is low. Hotel prices are also affected by the date of the booking, usually, the closer you get to the date, the higher the price. In recent years, computerized booking algorithms have been introduced that price rooms accordingly. In addition, in places like Eilat, the Dead Sea, and Tiberias in particular, the hotels are routinely booked by groups that fill a significant portion of the rooms. This can reach 50% of the room inventory, and this is another element that reduces the supply and causes a natural price increase."
Dr. Ronen adds, "In the summer there are dates that change the pricing such as the period between the 17th of Tamuz and Tisha B'Av and these are periods that are less popular, when there are fewer tourist groups and religious people who prefer not to come."
Even earlier in the year, Israeli hotels were seeing an uptick in tourism. Fattal, Israel’s largest hotel group, reported 68% occupancy in its Israeli hotels in the first quarter of 2024 compared with 61% in the corresponding period of 2023. Revenue from its Israeli hotels was NIS 384 million in the first quarter of 2024 compared with NIS 356 million in the first quarter of 2023.
The elephant in the room: Evacuees are still in hotels
Another factor generating high occupancy in hotels, and possibly also the prices, is related to the evacuees from the south and the north since the outbreak of the war who have been staying in hotels at government expense. Ministry of Tourism figures show that there are currently 21,674 evacuees in 416 hotels around the country. This includes about 5,000 residents of the south, who were due to leave the hotels on August 15, in accordance with the government's decision in June. Does this mean that all the rooms of the evacuees from the south have already been vacated? It is not at all certain, because some of them petitioned the High Court of Justice against the eviction and at present the situation is uncertain.
In the first half of 2024, there were 10.4 million overnight stays in Israeli hotels, up 53% from the first half of last year, and most Israeli overnight stays were by evacuees. Room occupancy nationwide was 63%, with some hotels operating on a hybrid format for both evacuees and guests, with each group requiring different levels of service.
Although the government pays lower prices for evacuees than the tourism market price - from NIS 850-1,000 per night for a couple per room and NIS 1,300-1,500 per night for a couple and two children (all meals included), the financial reports of the hotel groups show that hosting evacuees is profitable. Isrotel wrote in its financial report, "The profitability of the hotel sector was affected by the compensation paid by the state for the guests from the conflict’s borders and the adjustments made in the hotels for personnel and food and beverages, such as closing points of sale, reducing personnel, etc." Isrotel added that despite the war and the uncertainty it creates in the hotel industry, there is high demand for domestic tourism and corresponding revenue.
"Big hotels have also profited"
So have the hotels really made a profit from the evacuees who have been staying with them for over ten months? According to Prof. Alon Gelbman, head of the international master's program at Kinneret Academic College, the answer is definitely yes. "Those who have earned less are mainly the big hotels, who have also had an assured income," he tells "Globes." "We are talking about high occupancy rates in hotels that take care of evacuees, and even if the price is lower than the average they are used to, thanks to the high occupancy, they can remain profitable."
He adds, the more the hotels provide a more basic and less luxurious product, the more their chance of high profits increases. He explains that good management can currently be crucial. "At the time when the hotels started hosting evacuees, there were those who knew how to adapt quickly and there were those who took longer to adjust. The swifter the hotel was in promoting its services and adapt its product to the new reality, the more its profitability increased."
The fact that accommodating the evacuees, at least initially, was accompanied by a great deal of help from outside sources, including donations, affected the hotel's ability to make a profit.
Prof. Gelbman says, "In cases where we see that there was no profitability in the first quarter, it was in situations where there was a reduction in other profit centers of the hotel such as restaurants, events, shops, and this is more significant in the luxurious hotels. The more basic the service, the more its profitability will be maintained. In Dan hotels, for example, which also earns money from additional income beyond rooms, there is more of a drop."
Published by Globes, Israel business news - en.globes.co.il - on August 16, 2024.
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