Israeli B&Bs Are Only Lacking One Thing - Tourists

Occupancy rates were down to 25% in 2015, with expensive room fees and low-cost airfares to Europe deterring Israelis seeking a low-cost vacation.

An Israeli B&B (or zimmer) in the Arad Desert (illustrative)
Ilan Assayag

Some authentic winter weather – with snowy mountaintops in the Golan, some accumulation in the Judean Hills and floods in the Negev – has brought rare relief to the many hundreds of people who own and operate bed and breakfasts (zimmers) across Israel.

But it’s nothing more than a temporary respite for an industry that grew rapidly in the early 2000s, until the market was oversaturated. And a subsequent turn toward the luxury market priced B&Bs out of the reach of many Israelis.

Most recently, the industry has had to contend with the sharp drop in airfares created by the 2013 Open Skies agreement with the European Union. Traveling overseas and staying in a B&B in Norway or Switzerland is often not significantly more expensive than staying in Israel.

For instance, a week at a luxury B&B in Israel – assuming two families rent together – could easily cost 7,000 shekels ($1,870). By comparison, TheMarker found a comparable zimmer on the Norwegian coast for the equivalent of 6,400 shekels.

The industry is helpless to compete with lower prices, said Yaakov Rosenwasser, chairman of the Zimmer Owners Association.

A home away from home
Prices for zimmers in Israel in NIS

“Because demand is limited and concentrated on the summer months and holidays, our costs have to be covered by relatively few days, so prices have to be high,” he said. “We each spend thousands of shekels on advertising, which can sometimes exceed our monthly revenue, so prices can’t come down.”

As a result, B&Bs can’t reach what should be their core market of people looking for inexpensive country getaways. While zimmers can be rented off-season for as little as 400 shekels a night midweek (including breakfast), weekends at luxury properties during peak season can run to five times that, and even more.

The average occupancy rate for Israel’s approximately 6,500 B&Bs was just 24.5% in 2015, the last year for which figures are available. That compares with an average of 61.5% for the country’s hotels the same year, which was a bad one for tourism. Turnover for the industry, which does the lion’s share of its business in July through September, was 501 million shekels.

The number of rooms is down sharply from the peak of 8,000 in 2008. Many owners have dropped out of the business or gone part-time, renting their rooms and cottages on weekends and holidays.

According to the Zimmer Owners Association, some 1,500 cottages have been converted to residential use, either for students or young couples seeking an inexpensive rural home.

“It’s pitiful for those whose livelihood relies on the industry, especially for the older owners, people 60 and over, who invested in their B&Bs in the expectation that it would be their pension,” said Rosenwasser. “They can’t even pay the monthly mortgage. Without help from somewhere, the situation will be very bad in a year or two.”

The situation is a far cry from 15 or 20 years ago. Back then, everyone was jumping into the business.

“They thought that the more they invested, and the more luxuries they offered in the cottages built next to their homes, that the guests would just come. It was a big mistake,” said Dr. Alon Gelbman, who heads the Tourism and Hotel Management Department at the Kinneret Academic College. “By 2008, supply exceeded demand.”

Even today, the industry is filled with lots of small, independent owners – some 2,000 operate the country’s 6,500 rooms, and many don’t have much experience or knowledge about business or tourism.

A B&B in the settlement of Nimrod, in the Golan Heights. Most B&B websites and apps are only in Hebrew, meaning they miss out on foreign tourists.
Gil Eliahu

“The market for romantic getaways is relatively small,” said Gelbman, talking about a market segment that many B&Bs target. “People took big loans from the banks without a real business plan and lost a lot of money,” he added.

Shmulik Hazan, who’s in charge of tourism for the Golan regional council, has tried to get local B&B owners to join forces and cooperate. For instance, B&B owners who get reservations from big groups that they can’t fulfill have a way of referring them to other B&Bs. The council has also launched a website and app, but it’s only in Hebrew and inaccessible to non-Israelis, Hazan admits.

“Zimmer owners who get themselves onto international websites, like Booking.com or Trip Advisor, or translate their sites into Russian, English and Chinese, enjoy higher occupancies,” he noted. “Anyone who’s geared only to domestic tourism has seen a big drop in occupancy in the last few years.”

Industry sources said the B&B industry can turn itself around by becoming more orientated to overseas tourists, many of whom aren’t even aware that the option exists.

Another option is for the industry to segment itself into different markets, offering popularly priced packages that include local attractions or services that cater to religious tourists, like bigger rooms and access to a synagogue.