Hotel Stays by Foreign Tourists in Israel Still Far Below Levels Before 2014 Gaza War

Recent violence in Jerusalem and the West Bank are helping keep visitors away, Israel Hotel Association says.

The Crown Plaza hotel in Eilat.
Rami Solomon

Hotel stays by foreign tourists were up 2% last month compared to January 2015 but were down a whopping 22% against January 2014, the Israel Hotel Association said Tuesday.

In an effort to boost supply and lower hotel prices for foreign tourists and Israelis alike, the Knesset gave initial approval Monday for legislation to declare hotel projects national infrastructure. That would streamline the planning process for hotels and, it is hoped, speed the construction of new hotels, boost supply and drive down the price of hotel rooms.

The Israeli hotel industry has been facing a number of challenges, including a volatile security situation and competition from people who rent out their apartments using services such as Airbnb.

The hotel association said foreign visitors made 537,000 overnight hotel stays last month, beating the figure from last year, when the industry was still recovering from the Gaza war in the summer of 2014. That conflict, also known as Operation Protective Edge, depressed tourist arrivals in what had been shaping up to be a banner year for tourism.

That’s the background for the 22% drop between January 2014 and January 2016. That month this year has also been hit by the knifing and car-ramming attacks by Palestinians, especially in Jerusalem and the West Bank.

“It’s a year and a half after Protective Edge and we’re still in a crisis with incoming tourism, with the number of tourists arriving in the country declining, especially since the beginning of the terror wave in October,” said Eli Gonen, the hotel association’s president.

“Unfortunately, these continuing declines in tourist arrivals in Israel are creating cash-flow difficulties and could lead to the closure of hotels, as we’ve experienced in the past.”

The Tourism Ministry has said the main factor driving up hotel prices in the country – by about 70% over the past decade – is the low supply of hotel rooms. The ministry says that since 2005 only about 3,000 hotel rooms have been built around the country.

The pending legislation designed to spur hotel construction, sponsored by Tourism Minister Yariv Levin, must still be considered in the Knesset Interior and Environment Committee followed by two additional votes in the full Knesset before it becomes law.

As currently worded, it would not only streamline the construction process for hotels but also let independent local committees give developers the right to enlarge projects by up to 20% – for space given over for residential apartments.

That would lower the risk to the developer, boost available financing for the projects and cut the period the developer faced to recoup the investment. By defining hotels as national infrastructure, the approval process would be handled by the National Infrastructure Committee.

The slow construction pace stems from the cumbersome approval process and the high financial risk involved, the ministry said. Boosting supply will increase competition and lower accommodation costs by 20%, the ministry hopes.

The hotel association welcomed the new legislation but said that more needed to be done urgently to boost foreign tourist arrivals. That should be accomplished through a massive marketing effort to highlight Israel’s unique attractions, sources at the association said. The high cost of hotel rooms stemmed from government regulation and not a lack of competition, they added.

For her part, MK Tamar Zandberg (Meretz) objected to the provision letting hotels be approved as national infrastructure, bypassing the regular approval process. The projects should not come before the National Infrastructure Committee, particularly when they would include a residential component, she argued.

Yael Dori, responsible for the issue at Adam Teva V’Din, the Israel Union for Environmental Defense, said streamlining the planning process could come at the expense of the environment.

The country’s Mediterranean coast is prime property for the tourist industry, she said, adding that the proposed change could drastically block the public’s access to the sea.