Tourism Is Dead, but Israeli Hotels Seize a Coronavirus Opportunity to Expand

Some hope that better times will return soon; others say the cost of stopping construction is higher than continuing

Hadar Kane
Hadar Kane
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The Tiberius boardwalk sits empty during the coronavirus lockdown, April 13, 2020.
The Tiberius boardwalk sits empty during the coronavirus lockdown, April 13, 2020.Credit: Tomer Appelbaum
Hadar Kane
Hadar Kane

Roni Manor comes every morning to the Nof Ginosar Hotel on the shore of the Kinneret, even though it has been closed due to coronavirus restrictions. He inspects the rooms, looks at the birds and at the fish swimming in the nearby Zalmon River.

The calm that Manor, the hotel’s CEO, is enjoying now will come to an end in less than a month, not because of a surge of guests but because bulldozers and construction crews will be building another 60 rooms for the facility.

Kibbutz Ginosar bought two lots adjacent to the hotel several years ago to expand the 56-year-old hotel at a time when tourism was growing.

Today the world and Israeli tourism industries have been laid low by the coronavirus and no one can say with any certainty when the situation will change, but that hasn’t altered the hotel’s expansion plans. Indeed, Manor says it’s much easier to build when there are no guests getting in the way.

“If you’re in the tourism business, you have to behave fearlessly,” he said. “The return on the investment in building a new hotel is 12 to 15 years, so you have to be optimistic to embark on something like this. It’s easier for us because we have been at it for 56 years. We started in 1964 and since then we’ve only grown and expanded.”

The Nof Ginosar Hotel in 2017.
The Nof Ginosar Hotel in 2017.Credit: Gil Eliahu

Manor said he believed the situation would start turning around in about another year. “We can live with that as long as we aren’t eroding our capital,” he added.

Nof Ginosar is one of dozens of Israeli hotels now undergoing upgrades and expansion, despite the coronavirus crisis. Many had put their plans into motion before the pandemic.

Less than four years ago, the Tourism Ministry had warned that the country faced a hotel-room shortage of 10,000 rooms, The estimate was based on forecasts for 5 million visitors to Israel in 2020, up from 2.7 million in 2016. To encourage hotels to meet the challenge, the ministry offered to cover up to 20% of the cost to expand new and luxury hotels, and up to 33% for more popularly priced ones.

Scores of hotel companies took up the offer. Today, many have been debating whether to continue the projects, in which they’ve already invested heavily, or bring them to a halt.

Isrotel, for instance, has 12 new hotels under construction, eight of them in Tel Aviv and two in the southern resort town of Eilat. Atlas, a chain of boutique hotels, is adding two new Tel Aviv facilities to its chain of 16 hotels. Astral Hotels is building a giant 400-room property in Eilat.

Roller-coaster ride

On a smaller scale, the Ein Gev Holiday Resort on the Kinneret is developing 59 family units in addition to 120 renovated rooms. Selina, an international chain of hostels, is renovating an unused hostel on the Kinneret that will offer 120 rooms.

The coronavirus has been a roller-coaster ride for the Israeli tourism industry. It was among the first sectors to be hit with restrictions starting last March, including a ban on incoming tourists and two lockdowns when hotels were forced to shut down altogether.

Even when they could open, nearly all hotels remained closed for lack of guests. The one exception was a brief surge in the summer, when Israelis couldn’t vacation abroad and crowded into local hotels. That came to an end, however, when the second lockdown began September 18.

The Ein Gev Holiday Resort in April.
The Ein Gev Holiday Resort in AprilCredit: Avi Arish

Although bed-and-breakfasts were given a go-ahead to resume operations as of November 1 on a limited basis, regular hotels remain closed to this day. A reopening is expected to occur gradually by region, with Eilat and the Dead Sea last week declared “tourism islands” whose hotels can reopen subject to guests being tested for COVID-19. An actual start date has yet to be announced.

The bigger question for the hotel industry is what lies in the post-coronavirus future.

Amir Halevi, the Tourism Ministry’s director general, said the situation should be a lot better in one or two years’ time. “The coronavirus crisis caught the industry unprepared, as if we were traveling at 150 kilometers an hour and suddenly went down to zero,” he said.

A survey the ministry conducted showed that many hotel companies are going ahead with expansion and upgrade plans, Halevi said many view the crisis and hotel closures as an opportunity to speed up construction and reduce costs. The ministry is even still disbursing grants and trying to cut the red tape involved in getting them.

“It’s clear that it will take time, but I think that tourism will recover within one or two years, not 10 years. People have a lust for life. Already today we’re seeing a lot of interest from the reservation sites from tourists, mainly pilgrims, who want to know when they can return, and from Israelis asking about vacations in the ‘green Islands,’” he said, referring to Eilat and the Dead Sea.

Industry executives are divided on whether to develop and expand. Some have brought a halt to the work to wait and see what happens.

The optimists say they have had to deal with wars and other traumas the industry has had to contend with over the years, such that they can take the coronavirus in stride. One of them is Manor, whose guests in ordinary times are about 60% foreign tourists and the rest Israeli.

Lior Raviv, CEO of the Isrotel chain, likewise has no plans to halt development plans, although he expresses a little more caution about them.

Lior Raviv, CEO of the Isrotel chain, in 2017.
Lior Raviv, CEO of the Isrotel chain, in 2017.Credit: Eyal Toueg

Facing a dilemma

“This [the pandemic] is a global event and it seems that business and city tourism will undergo significant change,” he said. “We did face a dilemma about what to do, whether to slow down or continue to invest money. We went over each project and decided in the end to move forward on all of them, although we had thought of delaying some.”

The decision was predicated on the assumption that Isrotel has strong enough finances and because after the first lockdown ended, tourism revived quickly. “That gave us the confidence to continue with our development plans and to go against our instinct to stop,” he said, adding that he understood other hotel owners with fewer resources who decided otherwise.

The summertime tourism revival wasn’t felt all over Israel. Tourists flocked to hotels and B&Bs in rural areas like the Galilee and resort towns like Eilat. But they avoided urban hotels, which also suffered from the absence of foreign tourism.

As a result, said Raviv, Isrotel was adopting some of its plans to the new tourism reality. Some of its city hotels, which cater to business travelers, are being reconfigured to “resort” standards, for instance with bigger rooms and swimming pools that are family-friendly.

Danny Lipman, one of the principals of the Atlas Hotels chain, is even more cautious. The pandemic arrived as the 16-property chain was engaged in two development projects, which have continued to advance even amid doubts, he said.

“It’s simply impossible to stop. The cost of doing so is higher than the gain,” Lipman explained. “What we did stop is investing in renovations of existing hotels. Can you say I’m optimistic? No. I have no expectations for 2021. It will be a bad year and I think it will stay that way for several years afterward.”

The project underway in Tel Aviv on Hayarkon Street on the site of the former Ohel Theatre was already far along when the pandemic struck. Stopping it would not only have cost money but left the unfinished structure exposed to damage, he said.

“So we’re doing everything we can to complete it almost to the final stage before opening it in the hope that maybe by then [the crisis] will be over and we’re in a new place,” Lipman said.

Lipman said he knows of other hotel operators that did freeze development or even abandon it. One such entrepreneur, who asked not to be named, explained why.

“I have no money left to continue. The tourism industry is regarded as high-risk and the banks won’t give you money. I realized that all I was doing was running up expenses and burning cash every month, so I decided to minimize the damage,” he said.

B&B owners are also weighing how to change direction. Some, said Yaakov Rosenwasser, who’s been in the business for 15 years, have converted their properties to other uses, such as offices, even though that is illegal. Others have stopped applying for building permits because once one is submitted, the owner has to begin construction within a year.

“The banks aren’t really trying to help B&B owners,” Rosenwasser said. “They’re asking for a lot of capital and people are stuck.”

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