Western Europe Prices, Eastern Europe Standards: Tourists in Israel Shocked at Hotel Rates

Israel’s high room rates may be driving away foreign tourists; hoteliers point to costs of labor, kosher food, security and regulation

Tourists in Atlit.
Rami Shllush

When Doris and her partner booked a flight from Australia to Israel, they thought the airfare would be the most expensive component of their vacation. But when they went to Booking.com and started to look for hotel rooms in Tel Aviv, they realized they were wrong.

“All the hotels that received a reasonable rating were offering rooms at a minimum of $200 a night. It’s crazy that those are your prices. How do tourists come to Israel at all?” asked Doris.

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In the end, they reserved a studio apartment in a building of vacation rentals, $130 a night. But the quality was in keeping with the “bargain” price: “The air-conditioning in the room didn’t work, the door squeaked and was difficult to open, and the room itself was dirty and full of dust,” Doris said. “The towels weren’t clean, and there was mold in the shower. We fled after a few days, to a hotel in the area, where we paid $250 a night, but at least it was pleasant.”

The couple wound up paying more than they expected, and suffered some anguish along the way. According to a survey conducted this year of foreign tourists to Israel, that’s not an uncommon experience. In this year’s poll, conducted by Mertens Hoffman Management Consultants, Israel received its lowest grade in five years in the category of “value for money,” 3.1 points out of 5.

Israeli hotels more expensive than Europe and the U.S.

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“We’re considered expensive by European standards, but we lack European conditions,” says Gal Mor, a partner in the Abraham Hostels and Tours.

“It’s not like we have a subway and everything is clean and under control. Anyone touring here gets Western European prices but feels like this is borderline Eastern Europe in terms of advancement, development and service,” he said.

The price differences in Israel and in Europe are significant. A random examination of properties in Israel and in Europe of international hotel chains shows that Israel is more expensive, or at the very least as expensive, as major cities in Europe.

For instance, a couple renting a room with breakfast at the Rome Waldorf Astoria in December would pay $283 a night, versus $372 in Jerusalem. The Barcelona Ritz Carlton is charging $265 per night for December, versus $490 in Herzliya. Israeli-owned hotels reflect a similar price point: the Leonardo hotel in Ashkelon is charging $192 this month, compared to $119 in Vienna.

Tourists in Eilat, August 16
Ofer Vaknin

The cost of vacations in Israel is also reflected by a World Economic Forum 2017 report, which examined and ranked the competitiveness of the tourism industry in countries around the world. The report ranked Israel 95th in terms of hotel cost, with an average price of $204 per night at a luxury hotel. In comparison, France was ranked 80th, at $147 a night; Britain ranked 59th, at $126 per night and the United States was 54th, at $124 a night.

“Clearly the high cost of vacations is harming our ability to draw four million to five million tourists a year,” acknowledges Tourism Minister Yariv Levin. A record three million foreign tourists visited Israel this year. “It’s entirely clear that if we could offer lower prices it would be easier, but that’s not what’s preventing us from increasing the number of incoming tourists — look at our success this year,” Levin says.

Levin’s attempt to put an optimistic spin on the situation doesn’t stand the test of reality, particularly when comparing the situation in Israel to that in Jordan or Egypt. Israel’s neighbors are much cheaper, and also draw many more tourists than Israel, even though Israel has sites holy to the three major monotheistic religions.

Local hoteliers say they can’t offer the low prices found in Jordan, Egypt or Turkey, since their expenses are entirely different. One of the main expenses that Israeli hotels pay is labor; according to 2015 data from the Central Bureau of Statistics, this accounts for 34% of hotels’ costs.

Israel has been raising its minimum wage every few years, and labor laws require hotels to pay overtime on Shabbat and holidays. All of this puts Israel at a disadvantage in comparison to Egypt, Jordan and even in Europe, where wage costs are lower.

Another factor increasing prices in Israel is kashrut, Jewish dietary restrictions. While adhering to kashrut is voluntary, Israel’s hotels don’t want to lose their observant Jewish customers or their conferences and events business. Thus, most have kashrut certificates from Israel’s rabbinate. Maintaining kashrut involves hiring a permanent kashrut supervisor, who generally brings his family to stay at the hotel on holidays and weekends. Israel’s hotel union estimates that maintaining kashrut costs a hotel 3% of its revenues.

Municipal taxes eat up another 2.5% to 3% of a hotel’s revenues. Israel’s hotel union says that municipal taxes are at least four times the average in Western Europe, and don’t take into account a hotel’s occupancy rates. In Europe, in comparison, the tax is per hotel guest.

The armed guard stationed at the entrance of every hotel costs the industry about 75 million shekels a year.

Local hoteliers add that they are also required to ensure that their wastewater is treated to meet the standards for irrigation and that they must have lifeguards at their pools, regardless of the season and the hotel’s occupancy.

A conversation with Sean, a tourist from London, indicates the solution many foreign tourists have found. “Your hotels can ask for however much they want, but I can’t pay those prices,” he said. Ultimately he rented a studio apartment on AirBnb, and he’d recommend that other friends visiting Israel just look there, or for a hostel, he added.

The Tourism Ministry is aware of the role that AirBnb plays in the country’s tourism industry, and apparently won’t be taking an active role in regulating this segment of the market, in contrast to city governments in Berlin, New York and Paris.

Some 300,000 people rented AirBnb apartments in Israel between January and July of this year alone, a 25% increase over the parallel period last year. If this option didn’t exist, it’s likely that many tourists simply wouldn’t come to Israel, or would stay for a shorter period of time.