For Tourists, the Promised Land Is Pricey

Flight and hotel prices could drop by 20 percent if reforms are approved by the government. But why is Israel such an expensive place to visit to begin with?

It’s expensive to come to Israel. That’s basically the conclusion of a government commission, headed by the Tourism Ministry, tasked a year ago to reduce vacation costs here.

Compared to other countries in the area and those with similar economies, Israeli hotel prices are through the roof.

The commission, headed by the ministry's director general Noaz Bar Nir, worked with various branches of tourism to draw up a list of recommendations meant to improve service, reduce costs, and overall make Israel a more attractive package.

The government is expected to vote on the recommendations this Sunday. If implemented, the Tourism Ministry expects flight and hotel costs to drop between 15 percent and 20 percent and tourism to Israel to bump up 10 percent. Half of that boost would be attributed to lowered hotel costs and the other half to an open-skies agreement signed in July between Israel and the European Union to increase competition between airlines flying to Israel.

But why the high costs to begin with? The committee blames low profitability stemming from excessive regulation.

One particularly heavy burden is the municipal property tax, which is three times higher here than what’s paid by hotels in Europe. The committee suggests swapping a fixed tax rate for one based on occupancy. If the government opts not to adopt this idea, they suggest revoking property tax on public space in hotels – like corridors and reception areas.

To further lighten the financial load, the Interior and Tourism Ministries planned to jointly proposition the state to pitch in during economic crises to the tune of one-third of the property tax while the city simultaneously lowers the rate another third, thus gifting hotels a hefty two-thirds discount on municipal tax.

Who needs security anyway?

Robust security costs are another ingredient in the priciness of Israeli hotels. To chisel it down, the committee suggests that the police lower their hotel security standards, hoping to cut into the more than NIS 185 million spent on security annually, according to the Israel Hotel Association.

Hotels also get tangled in a lot of red tape when they try to expand, or try to get built in the first place. High construction costs are scaring away investors so new rooms aren’t added – despite demand – and thus existing rooms can demand their exorbitant fees.

Among the remedies proposed, the committee suggests permitting cheaper building techniques and striking requirements that prolong the construction timeline. They’re also in favor of easing layout standards that currently require minimums for commercial space in all levels of hotels. For some classes of urban hotels, requirements on dining and kitchen space will become mere suggestions.

Furthermore, they’re giving the thumbs up to expedited construction permits for hotels in popular tourist destinations like Jerusalem, Eilat, Tel Aviv and Tiberias and telling the Israel Lands Administration to set minimum bids for land zoned for hotels at 30 percent of the assessed value rather than 50 percent, the current rate.

Dipping into the labor pool, the commission thinks the government should loosen restrictions on supervisory and maintenance staff for the pool and exercise rooms, as well as go easier on the kashrut supervisors at small-scale kosher hotels.

Of the many costs imposed on Israeli hoteliers, some are “superfluous and unnecessary, without parallel anywhere else in the world," says Ami Federmann, president of the Israel Hotel Association. Despite high occupancy and high prices, he continues, “in most parts of Israel it still doesn't pay for entrepreneurs to establish new hotels.”

Gil Eliyahu