The impact of Russia’s spluttering economy and the slide of the ruble is being felt on the beaches and shopping arcades of Israel’s southern report town Eilat.
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The number of overnight stays by foreign tourists in the city’s hotels dropped 17% in the past two years to 807,500 in 2014, almost three times the decline nationwide, according to figures from Tourism Ministry Director General Amir Levy.
Part of the drop in Eilat last year was due to Operation Protective Edge, which caused a wave of cancellations over the summer, but most of it was because Russian tourists are no longer coming. Occupancy rates at Eilat hotels are still averaging 70% as in past years, but that’s because more Israelis are vacationing in the city.
“The Russian economic crisis has been a catastrophe for us,” said Eilat Hotels Association CEO Shabtai Shay. “This winter we had planned five direct [weekly] flights from Moscow and four from St. Petersburg, but they were canceled in October after two travel companies went bankrupt. We were talking about 1,000 potential tourists arriving from Russia every week.”
Russia emerged as a major source of visitors after Israel canceled its visa requirements for its citizens. In 2013, the number of Russians staying in Eilat – which serves as a “sun and fun” destination for tourists who arrive there directly and never see Israel’s historic and holy sites – jumped 27%. That year they accounted for close to 60% of all foreign tourists visiting the city.
Israeli visitors are not a substitute for overseas tourists because they come mainly during holidays and the summer vacation, rather than year-round.
Despite the economic crisis in Russia, there are some travel wholesalers still ready to organize groups to Eilat, but they are complaining about the steep room rates hotels are demanding for the summer. Rates typically go down in the winter, but start climbing in the summer as Israelis start making reservations and demand surges.
“We need to make Eilat a destination for incoming tourists all year round, and not just during off seasons. The hotels will have to cut room rates by 25% or 30% in Eilat for Russian tourists, to rates lower than what Israelis pay,” said Levy.
Dan Hotels CEO Raffi Sadeh has already said he will cut room rates this summer for 20 rooms at the Dan Panorama in Eilat to winter rates. But he admits that is not enough rooms to reverse the decline in Russian visitors.
“Twenty rooms in just a drop in the ocean, but if the Isrotel and Fattal chains join with a similar quantity of rooms in their hotels, it was have an impact,” he said.
On top of their Russian problem, Eilat hotels are also meeting growing competition from resorts in Jordan and Egypt, which share the same coastline but offer much lower prices. Eilat, which has not see any new hotel development in 12 years, offers a more “Western” holiday experience but at a much higher cost.
“Our personnel costs are higher, we have taxes, municipal rates, kashrut and security costs and regulations from the Health Ministry. It all adds up to costs that Egyptian and Aqaba [Jordan] hotels don’t have,” said Shay.
Tourism from other countries is also on the decline. Shay noted that twice-weekly flights from the Netherlands are now down to one, and that often isn’t full.
He said the city is too distant from Ben-Gurion Airport and connections by air to it are poor, so tour packagers arrange direct flights. The problem is that with Open Skies – the Israel-European Union aviation pact that has liberalized the aviation market – low-cost carriers have become a more attractive way to fly than charters, which fly at fixed times and days.
“To attract low-cost carriers we have to offer them incentives, and this the country isn’t doing,” said Shay. “Last week I met with [the low-cost airline] EasyJet because they’re interested in flying to Eilat. At Aqaba they get exemptions from fees and even a grant on each flight that lands. You ask why those airlines are going there instead of Eilat?”