How Israel Became One of the Most Expensive Tourist Destinations in the World

Record demand while Tel Aviv hosts Eurovision song contest certainly pushes prices up, but it brings to light a genuine problem: Even compared with hotels in expensive cities such as Zurich, Paris, London, Israel's are costly

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File photo: The Tel Aviv seaside promenade.
File photo: The Tel Aviv seaside promenade.Credit: Tomer Appelbaum
Moshe Gilad
Moshe Gilad
Moshe Gilad
Moshe Gilad

Searching for accommodation for the time the 2019 Eurovision Song Contest will be held in Israel, May 14 to 18, reveals that a lot of Tel Aviv's hotels are already fully booked. Forget a reservation at the upmarket Carlton, the Renaissance, the Crown Plaza, the Royal Beach or the David Intercontinental, and the hotels that still have rooms quote prices that seem downright insane.

A room at the Hilton in May will cost 2,200 shekels ($584) per night, the Sheraton will set you back 2,695 shekels, the boutique hotel Nordoy wants 2,295, the Herbert Samuel charges 2,700, the Cucu 1,800, the Gilgal 2,154 and the Alma 2,965. Yes, the prices are for a night, not a week.

You might think these sky-high prices are a function of the Eurovision. Record demand. Once in a lifetime. Let them make hay.

But these record prices for a hotel stay in Tel Aviv bring to light a genuine problem, which the time has come to put on the table: In recent years Israel has become one of the most expensive tourism destinations in the world. Even expensive cities such as Zurich, Paris, London and Moscow pale in comparison to the pleasant Mediterranean promenade or modest guest rooms in the Galilee.

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The number of tourists expected to visit Israel is likely to break records in 2018 again, with more than 4 million visitors. The Tourism Ministry is delighted, but does that justify such price levels? Are we simply deterring millions of additional tourists who could have come?

Here are eight answers that come up whenever we ask why the prices of hotels in Israel are among the highest in the world:

1. Demand is high and there is a huge shortage of rooms.

2. Real estate prices in Israel are extremely high.

3. Regulation (including mandatory supervision that the food is kosher, and lifeguards at the pool) forces the hotels to raise prices.

4. The cost of living is among the highest in the world — and the hotels aren't spared.

5. The strength of the shekel against the dollar and euro makes it impossible to lower prices.

6. The high wages make high prices unavoidable.

7. The high prices make up for the recession that hits hotels every two to three years, when war deters tourism.

8. The hoteliers are greedy

Which of the answers do you consider believable, and which sound like an excuse?

File photo: The Tel Aviv beach, December 2018.Credit: Moti Milrod

Not Jaffa, Barcelona

To check price disparities between Israel and the rest of the world I chose an additional, random date, not during the Eurovision and not during a holiday, just a room for two on a fall weekend. I decided that there’s no point in looking in pricey Tel Aviv or Jerusalem.

So I tried Tiberias, not exactly a tourism superpower, yet evidently, accommodation is tight.

At the Fattal chain’s Leonardo Plaza, they asked for 941 shekels a night. Fattal’s Leonardo is an international chain, so I compared the prices of the chain’s hotels in other destinations. In the Leonardo Milano they were asking for 358 shekels on the same weekend. In the Leonardo Berlin 286, in Budapest 299, in expensive Zurich 563 and in Barcelona 337 shekels.

Why does a hotel in Tiberias charge three times more than the same chain in Barcelona, or nearly double the cost of a room in Zurich, the Swiss city that is considered one of the world’s most expensive? The Fattal hotels chose not to response to this question.

I tried the Sheraton. At the Sheraton Tel Aviv they were charging 1,139 shekels. At the Sheraton Milano 857, in Berlin and Zurich 565, and in Barcelona, 394 shekels per night.

Airbnb had been expected by some to solve the problem. Its supply (almost 9,000 rooms at present in Tel Aviv) they said, would lower hotel prices. In effect, the opposite happened. Airbnb's prices for rooms and apartments for the short term soared to a level similar to that of the hotels. And we still haven’t mentioned what they did to the long-term rental market in Tel Aviv. Recently it was reported that even the owners of the Fattal chain, which is presumably capable of fighting the Airbnb phenomenon, is operating apartments for rent in this context.

File photo: Hilton hotel in Tel Aviv.Credit: Assaf Evron

I also looked at a third chain — Accor Hotels. Fortunately they have a hotel in Netanya too. For a room for a night at the Sofitel David Tower Hotel in Netanya they wanted 762 shekels. An Accor hotel in Milan costs 315 shekels, Berlin 514, Budapest (the Mercure) 399, Zurich 444, Barcelona, 292.

Amir Hayek, president of the Israel Hotel Association, is concerned about the image of Israel’s 400 hotels and feels they are being treated unfairly by being portrayed as greedy. They don’t jack up prices due to greed but rather necessity, he says. “We would be happy to lower prices and raise occupancy, but have no magic solutions," Hayek says.

Hayek also says that prices aren’t high all the time, but mainly at peak periods - holidays, summer vacations and so on. Also, Israel is an expensive country in every aspect: property tax in Tel Aviv is four times that in Barcelona. Electricity and water cost more more, as does food.

“A hotel is composed of real estate, property tax, electricity, food and communications — all cost more in Israel than elsewhere. Also, wages have risen by a third in recent years," he says.

Hayek also notes the absence of a safety net to help hoteliers weather times of war or tension: if they had one, they could price rooms differently, he claims.

But comparing the cost of living and the prices in Zurich and Tel Aviv ruins most of the hotelier’s arguments. Based on the data website Numbeo, the cost of living is 60 percent higher in Zurich than in Tel Aviv. The cost of (long-term) rentals is 54 percent higher. Restaurant prices are 45 percent higher. The average price of groceries is 90 percent higher than in Tel Aviv and the Swiss franc is considered a strong currency.

File photo: Leonardo hotel in Tiberias.Credit: Gil Eliahu

Zurich is far more expensive than Tel Aviv and yet, a perusal of the website indicates that on a random date in mid-January you can find a room in a good hotel in Zurich at prices that even a youth hostel in Tel Aviv doesn’t offer. The Sheraton Zurich offers a room for 888 shekels, the H+ hotel in Zurich (4 stars on Booking) for 390 shekels, the Leoneck Swiss Hotel for 621, the 25hours Hotel for 539 and Fattal’s Leonardo Zurich for 480 shekels. All that in a city that is far more expensive than Tel Aviv. Where is the logic?

For lack of choice, we are left with answer no. 8.

David Jenkins, Vice President of Business Development for the Radisson Hotel Group, is an international tourism expert. He came to Tel Aviv for an international conference organized by the Tourism Ministry for investments in the hotel business. In the past year he has been conducting a study of the hotel market in Israel in general and in Tel Aviv in particular, in order to open a first Radisson hotel in Israel.

“We decided to open a first hotel in Tel Aviv and we’re looking for the best solution and the suitable place. The market here is important and in our estimate it offers interesting opportunities. Hotel occupancy is high and there’s a shortage of rooms, in other words, demand is high. The beach is wonderful of course, but there aren’t many opportunities along it. We may find a suitable place in the heart of the city or even in Herzliya.”

Jenkins plans to open a 200-room, 5-star hotel here. He says the Israeli market is stable, new airlines are joining it, demand is high and supply is low, and he says it’s clear that prices are very high.

Why are the prices high? Jenkins has several explanations: Other cities have far greater seasonal fluctuation. Here, at the end of November it’s 28 degrees Celsius (82 Fahrenheit) and people go to the beach, so clearly the hot season is long. When he compares the situation to Moscow, where he has been living for the past 20 years, he points out that the ruble has been depreciating significantly while the shekel is strong.

To that he adds the fact that many of those visiting Israel come because of an emotional or family tie and not only as tourists, and will visit even at a high price. He also attributes the high prices to the soaring real estate prices here and the high prices of construction. All these, he says, lead to the development of luxury hotels — the only way to justify the high costs. The chain for which he works is also planning to open such a hotel.

Security issue is not an issue, he says. The world is a dangerous place. What can you do. “Look at Brussels, Paris, Nice or London. They all recovered quickly after attacks.”

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