As Israeli Tourism Recovers From 2014 War, Sector Asks Itself What to Do Next

Israeli government's marketing budget has doubled and 24% more travelers are expected to come this year - but compared to its neighbors, the numbers are puny

Prime Minister Benjamin Netanyahu and Tourism Minister Yariv Levin with the 3 millionth tourists in 2017.
Doron Barski

A month ago Israel feted its 3 millionth tourist arrival for 2017, who was met by none other than Prime Minister Benjamin Netanyahu – and Tourism Minster Yariv Levin – when her plane landed at Ben-Gurion Airport.

Number 3 million is a signal achievement for Israel, which has seen the number of visitors rebound after the 2014 Gaza war. Arrivals are expected to grow 24% in 2017, making Israel one of the 10 fastest-growing destinations for the year, according to the UN World Tourism Organization.

But the fact is, compared to its neighbors, even Israel’s best-ever year for tourism looks poor.

Last year, when Israel hosted 2.9 million tourists, Egypt recorded 5.4 million arrivals while Turkey had 25.3 million. Even Jordan counted 4.8 million. And for Egypt and Turkey, 2016 was a bad year as terrorism and political instability sharply depressed their numbers.

Israel has also suffered security issues, its image is poor in many parts of the world and the cost of an Israeli holiday is expensive. But the country also has considerable tourism assets as a center for three world religions, as well as beaches and world-class cities. Israel’s failure to make better use of them is a loss for the economy.

Regional tourist arrivals millions

Even at current levels, tourism generated $4.7 billion in revenues last year. It directly employs 130,000 people and, according to a Tourism Ministry survey, 100,000 more indirectly. Tourism revenues account for 5% of all exports and 15% of all service exports (foreign spending in Israel is booked by the statistics bureau as a service export).

Industry observers say that on top of the security and cost problems, one reason Israeli tourism hasn’t fulfilled its potential is government indifference. One example is the Tourism Ministry’s marketing budget, which until 2015 never exceeded 265 million shekels ($76 million at current exchange rates) annually.

“You could call it a self-fulfilling prophecy. The Finance Ministry doesn’t allocate a big budget for it because it doesn’t believe anything will change and so nothing changes,” Levin told TheMarker.

“The biggest thing I did was to go to the finance minister, Moshe Kahlon, and tell him I wanted to double the marketing budget, not just add another 5% or 10% because with that increase I can’t do anything.”

Ministers are always bragging about the budgets they have coaxed out of the treasury, but in Levin’s case his term as tourism minister has brought about a real change, say industry observers. Levin is close to the prime minister, which gives him considerable political power.

Unlike most politicians, who look at the tourism portfolio as a second-strong ministry to be accepted reluctantly, Levin actually sought the job.

“The sector has been low on the ladder of priorities for years – no one treats it as a sector that brings fast economic growth and employs a lot of people, especially in the country’s outskirts and with people without skills,” said Amir Haik, president of the Israel Hotel Association. “But now government investment in the tourism industry is growing, particularly for hotels, very quickly, in fact as quickly as it can.”

The question is what Israel can do to take the industry to the next level, because industry sources say that stepped-up marketing isn’t enough.

One possible angle is focusing marketing on specific classes of tourists. Although arrivals are counted en masse, there’s a huge difference between visitors from one country versus another and their style of visiting.

A Tourism Ministry survey found, for instance, that in the first half of 2017, Central American tourists were the biggest spenders, at $295 a day, followed by Asians ($228), while Europeans spend $122 on average. Meanwhile, visitors arriving on their own spend an average of $128 daily, while those on organized tours shell out $242. Those on package tours are in the middle at $196.

But those figures are based on surveys and not everyone is convinced they are accurate, noted Gal Mor, a partner in the Abraham hostels and tours chain. Still, Mor is counting on independent tourists, who now comprise two-thirds of all arrivals, as Israel’s best bet for the future.

“We need to focus on independent tourists because they will rule the world in the future, while organized tourism will decline,” he said. “That’s because of technology, which the young use in a big way.”

Oren Boutboul, vice president for marketing and sales for Crowne Plaza Israel, said his choice tourist was Russian.

The Russian tourist consumes 100 shekels a day of food and drink, upgrades to more luxurious rooms, or from the outset reserves a luxury suite. And he requires two to four spa treatments a day – each at a cost 200 to 500 shekels, Boutboul said.

Yossi Fattal, CEO of the Incoming Tour Operators Association, is skeptical about pursuing focused markets.

“The government doesn’t distinguish between one tourist and another, and justifiably so,” he said. “To conduct focused marketing by tourist type and income level is too complicated and expensive for the Israeli government’s tourism budget.”

Levin agreed, saying the tourism market should be varied.

“Looking ahead, the nature of the tourists we should be seeking are those who travel mainly by public transportation, visit the country’s outskirts, and seek out and support the local businesses, whether it’s a small bakery, a spice store or a soap maker,” he said. “This is a segment neglected for many years, and now the Tourism Ministry is also working to promote it.”