“Six years ago, the question going around was who would possibly spend the night in Be’er Sheva. Today the question is less common. We have always talked about our potential, and in recent years, it is being realized," said Miki Howard, a hotel developer in the city of 200,000.
“I’m amazed to see the huge demand for accommodations in the city. There’s a large business community that comes to stay overnight – from Defense Ministry people to guests of the Dead Sea Works, Soroka Medical Center and the university,” a reference to Ben-Gurion University of the Negev.
“From one holiday to the next, I’ve been seeing amazing occupancy from families who come to tour in Be’er Sheva or to set out from here for hikes” in the area. “Over the holidays, there wasn’t a room to be had. We were at full occupancy,” he added. “It’s fun to see that if at one time Be’er Sheva was a place for a bathroom break on the way to Eilat, now people come to the city because of what it has to offer.”
Five years ago, Howard opened a 15-room hotel near Ben-Gurion University called Habayit Bematityahu, and a year ago, he opened Ottoman House, a 20-room hotel. He’s now at work renovating the Negev Hotel in Be’er Sheva’s Old City – at an investment of 20 million shekels ($5.7 million). It will have 30 rooms.
Be’er Sheva, which is known as the capital of the Negev, set itself a major goal of developing hotels in the city as part of a tourism master plan. As part of the effort, last week dozens of developers and business people from the tourism and hotel industry gathered in Be’er Sheva’s Old City for a hotel industry conference. Held in cooperation with the Tourism Ministry, it was aimed at forging contacts between potential developers and real estate owners and to promote tourism in the city.
“Be’er Sheva won’t be Israel’s cyber-technology superpower if it doesn’t have a basic quantity of overnight accommodations, from the level of hostels to hotels,” Tourism Ministry director general Amir Halevi noted.
“Currently, the numbers are very low and they need more. We understand that this will be a long process.” In 2014, the Israeli cabinet designated the city Israel’s “cyber capital,” and since then, the presence of cyber-technology activity in and around the city has grown significantly.
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It’s still early to talk about a revolution in the hotel sector in the city. In the last two years, about 100 hotel rooms have opened, mostly in the Old City. There are also an estimated 120 apartment units that are available in town through Airbnb. But things are looking up in a city that a just a few years back had just one sizeable hotel, the 250-room Leonardo, which is part of the Fattal chain.
Lilach Nagid, director of tourism and the Old City Authority in Be’er Sheva, said the pace at which hotels are being developed in the city is inspiring, noting that four international hotel chains have recently expressed an intention to tour the city in the near future after seeing Tourism Ministry presentations about the town at conferences around the world.
“It can’t be taken for granted, and we are very excited that they are coming. It’s clear to me that were it not for the urban development and the creation of a tourism master plan, it wouldn’t have happened,” she said.
Be’er Sheva Mayor Ruvik Danilovich, who spoke at last week’s conference, made reference to the Leonardo Hotel and said he has been asked why there isn’t a more developed hotel sector in the city. “With regard to criticism of the existing hotel, I’ve told anyone who needed to hear it and I don’t want to engage in shaming, but that’s what happens when there’s an exclusive,” meaning a lack of competition.
The mayor also welcomed the change that has been taking place in his city in recent years. “Look at how many hotels have been opened by developers who recognized the potential. Currently Be’er Sheva can attract guests for a night or two because it has content and this content is only expanding. So, for example, in the coming years, the market will change and become an international tourist market with cuisine and culture and entertainment. That’s a major opportunity for developers. It doesn’t have to be a luxury hotel. Attracting tourists isn’t another five-star hotel. Tourists want to see places and connect with the local people.”
How much will it cost a couple to stay overnight in Be’er Sheva? A night in the middle of next week (not including breakfast) at the time of this writing at the Leonardo Hotel or at the smaller Anilevich Estate and Spa was going for 597 shekels ($171). Less expensive rooms were available at Beit Eshel and the Aladdin Hotel. (Foreign tourists do not pay value added tax on hotels).
Spurred on by a government grant
Developers who have already taken the plunge have said that occupancy and demand for rooms are high. They also express an interest in expanding in Be’er Sheva. Aviv Kopel, who opened the eight-room Anilevich Estate in Be’er Sheva’s Old City about a year ago, said his hotel has about a 70% occupancy rate and he will fully earn his investment in the business in another six years. “I already have plans to establish another hotel in the Old City, which will open in a building that will also have commercial space and offices,” he said.
There are several new hotels currently in the planning stages in the city, but the first guest will only be arriving at these projects in several years. Plans include a 200-room hotel, a 80-room hotel in the Old City and a 300-room facility in the city’s high-tech complex that has already been put out for bids.
Other than in Tel Aviv, developers of hotels with more than 25 rooms are entitled to a Tourism Ministry grant of up to 33% of their investment. The ministry has approved a total of 22 million shekels in grants in recent years for two Be’er Sheva hotels, an 81-room project on Rager Boulevard developed by the Oshira real estate firm and a 50-room project in a historic preservation building on Hehalutz Street.
“The grant is critical to me,” said one tourism sector developer in the city who has just embarked on plans for a hotel in the Old City. Beyond that, he said, the Be’er Sheva municipality has a program that facilitates the approval process and provides step-by-step support. “They address any problem that arises. You send one concrete, professional email and they deal with it, without any complications.”
The authorities are concerned
Nevertheless, at this point, the real transformation of tourism that the city had hoped for has not occurred, particularly in light of the fact that Be’er Sheva is not mentioned in the major hotel chains’ strategic plans.
“There’s no doubt that Be’er Sheva constitutes a destination where there is demand for overnight accommodations, particularly from the business sector,” said Michael Hai, the development director for Atlas Hotels. “But ultimately construction costs in Be’er Sheva are the same as in the center of the country. The land is cheaper but it still costs money, so it is an investment with risk and the major chains are not prepared to assume it. If in Tel Aviv we are prepared to open a 40-room hotel, then in Be’er Sheva, it needs to include 70 rooms and up because there is a limit to the average price per room that you can ask of guests and of course it’s much lower than in Tel Aviv.”
“We look at the cost of converting a building, the occupancy forecast and the average price that we can ask and get results that aren’t sufficiently satisfying for us to come to the city. We are very selective about where we invest our own capital,” Hai acknowledged. “While in Jerusalem and Tel Aviv, we are prepared to make the major investment, in Be’er Sheva, we would want a partner who is prepared to share the risk, when most of the investment is from the developers.”
Lior Raviv, CEO of the Isrotel hotels, which has plans to open ten more hotels around Israel in the next five years, also said that Be’er Sheva doesn’t feature in his company’s plans. “Our efforts are being directed at Tel Aviv and Jerusalem and to special hotels in other areas such as the Kedma Hotel, which we will be opening shortly at Sde Boker, which can be an alternative to Be’er Sheva.”
Sde Boker, the kibbutz that was home to Israel’s first prime minister, David Ben-Gurion, is less than an hour’s drive south of the city, in the Negev Desert.
“The potential in the city doesn’t justify opening a significant hotel for us, and if a smaller, more modest hotel were opened, the profitability would be commensurate, so are choosing to focus on other places.”
The Fattal hotel chain, which, as noted, includes the Leonardo Hotel in Be’er Sheva, has no plans to expand its operations in the city. “With all of the momentum that there is, there’s still no justification for another hotel, apart perhaps for a boutique hotel with 10 to 15 rooms in the Old City, which could exist due to its uniqueness,” said Ya’akov Sudri, Fattal Hotels’ regional director and director of business development. “The chart shows improvement but I would be pleased if the pace were faster.”
According to Sudri, the annual occupancy rate at the Leonardo in Be’er Sheva is 60%, but developers in the city have said that they’ve seen a different picture. Aviv Kopel, of the Anilevich Estate hotel, who also owns event and production companies, said: “When they’ve asked us to provide overnight accommodations for people coming from outside the city, I’ve seen that, other than in a handful of cases, the Leonardo hotel is always full. Then I understood that there is demand for quality accommodations in the city.”