A Suite Deal: Hotel Apartments in Israel

Spa treatments and room service in the comfort of your home? If you’ve got deep pockets that just might be an option, as the concept of the hotel apartment begins to make headway in Israel

3dvision

Have you ever wished you could be like Eloise living at the Plaza Hotel, or that you could just order room service to your apartment? That option has now started appearing in Israel – for those who have the money for it.

These hotel apartments – hotel complexes that also contain residences – can be found in several new projects including the Waldorf Astoria Jerusalem, the West Boutique Hotel on Hatzuk Beach (at the northern end of Tel Aviv), the Kempinski Tel Aviv on the city’s beachfront promenade, the W Tel Aviv-Jaffa hotel, the Lagoon and Briga complexes in Netanya and the Ritz-Carlton in Herzliya, which opened last December.

The projects combine hotel and residential living in one of two formats: vacation apartments – like those offered at the Ritz-Carlton – where the principal residents can live for up to six months a year, while they are rented out to tourists as part of the hotel’s inventory of suites the remainder of the year; or regular apartments that can be lived in year round, as in the Waldorf Astoria or the Kempinski.

The concept was previously attempted in Israel more than 15 years ago. Tel Aviv’s Dan Hotel was the first to include residential apartments, followed by the Okeanos Suites Hotel in Herzliya and the Sheraton City Tower – now called the Leonardo City Tower Hotel – in Ramat Gan’s Diamond District. The market is now undergoing a renaissance.

“This is a high quality American concept,” says Miri Azuri, sales and marketing manager at the Ritz-Carlton. “The resident wants location, and brand-name hotels are in excellent locations,” she says.

“For the residents, it means enjoying all the amenities a hotel has to offer – at extra cost, of course,” adds Azuri. “It’s easy to provide luxury living in this type of project, because five-star hotels have plenty of common areas; a fitness room constantly staffed with a trainer; a swimming pool where there’s always a lifeguard on hand; and a 24/7 spa where you can get a treatment at any time. Whereas a residential tower has one or two spa rooms but you need to set an appointment for a treatment, a hotel has various treatment rooms, saunas, showers and towels.

“These hotels usually also have an excellent restaurant. The apartment owner can come down for breakfast. Dry cleaning is available, and the owner doesn’t have to worry about keeping the apartment clean – he can order cleaning from the hotel with an hour’s notice and as often as he wants,” she explains. “If he’s hosting, the hotel chef can cook up a meal. Conference rooms are also among the amenities. This is a level of service that doesn’t exist in a normal residential tower.”

The developers behind the Ritz-Carlton project – Tidhar Group and Adi’s Investments – originally bought the land with the intention of building a regular apartment block there. But then, in 2004, the Protection of the Coastal Environment Law was passed. The law forbids construction within 100 meters of the coastline and permits only hotels within 300 meters of the shore. In 2006, the High Court of Justice ruled that the owners of vacation apartments in the adjacent Marina project were to be forbidden from living there all-year round and would need to rent them out as hotel units for at least three months of the year.

“Building a hotel wasn’t the original plan,” confirms Azuri. “But after giving it some thought, we understood the need to hook up with one of the world’s most prestigious hotel names.”

Currently, mixed-use projects – hotels and dwellings, offices and dwellings, office towers and hotel space – are common planning approaches around the world. Mixed usage generates more activity around residential areas during the day and more activity around business centers at night. Hotels near business centers are widely accepted and geared toward business people.

There’s an economic consideration behind all this: Restaurants and cafés that provide necessary auxiliary service in business areas shut down early in the evening unless there’s a residential neighborhood nearby to provide an additional source of activity during nights and weekends.

The same could be said for combining a hotel with residential space. A hotel requires heavy investment during construction, which takes years to recoup, while homes, in contrast, are sold during the construction phase – sometimes even earlier – and generate income that can help offset the large investment needed for the hotel. The home sales finance construction of the hotel, and once finished, the income from the hotel finances the project’s upkeep.

High-class services

The David Promenade Residences project at Hayarden Street in Tel Aviv (between Herbert Samuel Street and Hayarkon Street) consists of two towers: a 26-story residential tower, and a 220-room hotel under Kempinski management. The project belongs to Henry Taic’s Nahal Group, which also owns the David InterContinental Hotel in Tel Aviv, the David Dead Sea (formerly Le Meridien) and Jerusalem’s Grand Court Hotel.

Unlike the Ritz-Carlton, which also combines apartment and hotel living, home buyers at the David Promenade Residences can live there all-year round without having to turn over their units for tourist accommodations. And since these are residential apartments, they are also much larger.

Noam Dzialdow – owner of Neot Shiran, which holds exclusive marketing rights to apartments at the David Promenade Residences – says the residential tower is completely separate from the hotel. All they share, he says, are common blueprints and the parking lot.

“The advantage of a joint residential-hotel complex is that hotel services are available in the residential tower,” says Dzialdow. “There are a variety of services in the residential tower – such as a swimming pool and fitness room – that are meant to provide privacy. On the other hand, the residents have access to all the hotel’s services and facilities, including 24-hour room service, housekeeping, spa and a larger pool.

“All over the world, we see the concept of high-class hotels at prestigious locations providing high-class services to homes,” adds Dzialdow. “This concept doesn’t work for the middle class, because there is no need – or really, the means – to buy hotel services.”

Dzialdow explains that service levels and prices in the luxury segment are varied. The classier the hotel, the more prestigious the apartments are considered. “If you sell a 500-square-meter high-ceilinged beachfront apartment,” he says, “you need to hitch it to a chain like Four Seasons or Bulgari so the service will be on par with the apartment price.”

He doesn’t see any drawbacks to living in such a project. Given two otherwise-identical apartments – one in a residential project, the other in a project that includes a hotel – he prefers the latter, as long as the residential tower has an entrance separate from the hotel’s and there are separate facilities for residents.

“Living alongside a hotel creates the option of receiving hotel services at extra charge, and if you don’t use them you don’t pay,” he adds. “This is always better, provided the residences are completely separate from the hotel.”

The third way

RFR Holdings of Manhattan chose a third type of project, different from those at the Ritz-Carlton and Kempinski: A residential project within the same building as the hotel, rather than separate. These are regular residential apartments, not vacation apartments like those at the Ritz-Carlton.

The W Tel Aviv-Jaffa project is located at Louis Pasteur Street in Jaffa, and contains 125 hotel rooms and 38 apartments. Construction is scheduled to be completed in the summer of 2015. The hotel will be run by Starwood Hotels & Resorts.

“The W brand targets a young clientele, so the hotel also has a club and bar,” explains Shahar Perry, CEO of RFR Israel. “The residences are part of the hotel and can be reached through the hotel. But there are also fully separate elevators for those who want them. All the associated services, installations and facilities are shared.”

Perry says the concept behind connecting the hotel and the residences was to create a sense of activity, because the building is targeted toward foreign residents and therefore isn’t always fully occupied.

“The target population is mainly people for whom Tel Aviv isn’t their permanent place of residence,” says Perry. “People come to the country several times a year and want to stay in an apartment of their own rather than a hotel, but they still want hotel service. I believe people are looking for an experience beyond regular accommodations. I’ve lived in buildings that were full, and it still feels lonely in the elevator and fitness room. In a normal building you don’t feel the residents living there, and some people seek such an experience. A hotel is more vibrant and livelier than a regular residential tower. There are people in the lobby and at the pool, and the place is more ‘alive.’”

Unlike the Ritz-Carlton in Herzliya, the two projects along the Tel Aviv-Jaffa coastline aren’t restricted to just vacation units, since they fall under municipal zoning laws that predate the Protection of the Coastal Environment Law. There are several additional “old” plans on the drawing board for Tel Aviv, but otherwise only vacation apartments will be allowed from now on.

“When we bought the property it was zoned for residential and hotel use. This suited us here and is similar to projects we’ve done overseas,” explains Perry.

Most of the 25% of apartments already sold in the W project have been bought by foreign residents – Israelis living abroad, or foreign Jews. Prices range from 70,000 shekels (about $20,000) to 80,000 shekels per square meter.

Neot Shiran
Yael Engelhart
Assaf Pinchuk