Plans to Make Israel Cheaper for Tourists Not Implemented, State Watchdog Says

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Occupany rates are up in Tel Aviv hotels.Credit: Daniel Bar-On

Tourists may be coming to Israel in record numbers, but it isn’t because of the low prices.

Not only has the shekel been strengthening against the dollar – this year alone by 7% – but the government’s plan for reducing the cost of a visit to Israel has yet to be put into effect, four years after it was first proposed.

The proposals seemed reasonable enough. They included plans to increase the number of hotel rooms, help the tourism industry obtain bank financing and reduce red tape. Israel’s state comptroller, in a report released on Tuesday, wanted to know why prices remained high and came up with several reasons.

Over the last year the Tourism Ministry has taken steps to make it easier for new hotels to obtain building permits, but the comptroller said it was not enough.

Loans are critical if Israel is going to develop more hotel rooms and spur competition. But banks are traditionally hesitant to extend credit to the hotel industry, unless the borrowers have substantial equity, because the record on repayment by the industry isn’t good. But the comptroller reported that the Tourism Ministry’s proposal to offer guarantees to hotel developers is still awaiting approval by the treasury, whose budget division and accountant general are fighting over terms.

The good news is that once they can agree, the money is there. The treasury said the 2017-18 budget allocates 50 million shekels ($13.8 million) annually for the program.

Another problem the comptroller identified is the government’s failure to allocate enough land for hotel development. There is no multi-year program to market land designated for hotel use and the Tourism Ministry doesn’t coordinate its plans about what land should be designated. with the Israel Lands Authority.

In addition, prices are high and few companies make bids for the properties that do come up for sale. The comptroller found that in 2011-15, 14 tenders for 17 sites zoned for hotels attracted only five successful bids. The ILA never bothered to examine the reasons for the failure.

Even when a company has won a bid, it often encountered obstacles to developing the land and the ILA has shown little interest in helping the company obtain approvals and overcome other obstacles. It simply holds another tender.

Red tape not only ensnares hotel development, but also raises costs for hotel operations and cuts into profitability, the comptroller asserted. Regulators deluge hotels with rules about kashrut, security, employment terms for swimming pool lifeguards and fitness room instructors.

At the end of last year the Tourism Ministry, with the help of the Prime Minsters office, eased some the regulations on hotel buildings, but the onerous employment rules remain in force.

Kashrut certificates, the comptroller’s report said, are a particularly vexing issue that even the PMO’s intervention hasn’t been able to solve. The PMO director general told the state comptroller that a plan was devised last December to lower the cost of kashrut supervision, but it failed to win cabinet approval “due to opposition from people connected with the matter.”

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