"The hotels begin preparing price lists for 2008 in August, and if the dollar exchange rate remains as it is, we will consider increasing prices to make up for the erosion" says the CEO of the Dan Hotels, Ami Hirschstein.

Prices have eroded by 10-12 percent compared to the same period last year. Meanwhile, the hotels are battling the falling dollar exchange rate by improving cost efficiency "since all of our costs are in shekels" said Hirschstein.

The situation of Tel Aviv hotels May through June is good, thanks to economic growth and a resulting increase in business tourism, but Hirschstein says there was no improvement in 2007 compared to 2006, and the number of tourists will not exceed the 1.6 million-1.8 million
pe

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person benchmark at the current rate of incoming tourism.

The possibility of reverting to a shekel-based pricing system has been discussed occasionally over the past few years. Although the solution of "shekelization" makes economic sense, since most of the costs are in shekels, the issue is problematic for agents overseas, who will have to take the risk upon themselves, says Hirschstein. They may prefer to increase prices, or not
sell hotels in Israel.

Airlines are also considering an increase of air fares.

Avi Freidman, chairman of the panel of foreign airlines in Israel and manager of Continental Airlines here said on Monday: "Why should we reduce air fares? We should increase the price of tickets because they are issued in
dollars, and we now receive fewer shekels."

A convenient marketing tool

Like every year, airlines, tourism wholesalers and tour agencies hold sales, but this year they have found a convenient marketing tool the low dollar exchange rate.

"Other than the dollar exchange rate, which may increase, air fares are expected to increase by tens of percent as we approach the summer season," says the manager of the Internet tour agency Gulliver.

"Reserving now for summer vacation can save hundreds of shekels." A family of five will save NIS 2,000 on a vacation to Turkey  if they order now." Issta V.P. Marketing adds that the differences between early reservations and regular flights may total $150-200 per ticket. Gulliver, for instance, offers a 25 percent discount for the summer months, for reservations made by May 31.

Sources in Gulliver say that because of the high demand there have been difficulties in finding seats and hotel rooms.

V.P. Marketing of Ofir Tours says there is generally more demand than supply during the summer months, and advance reservations are recommended. As for the dollar exchange rate, he adds, many are expecting the rate to increase as summer nears, so the recommendation is to reserve in advance at a lower exchange rate.

Daka-90 tourism agency reports the company's Web site shows that the rate of searches and telephone calls has increased by 50 percent in the past week. The company expects this trend will continue until early July.

Fluid list price

Sources in Tsabar tour agency say early reservation sales campaigns offer discounts off list prices that can add up to hundreds of shekels per traveler. But list prices are fluid, particularly up until Tisha B'Av, when demand has not reached its height, and list prices may go down.

After Tisha B'Av, when demand is great, prices are expected to remain stable, said the source, assuming there are no major geopolitical events that affect tourism, as occurred in 2006.