The government of Israel has approved grants for developers to convert offices in Tel Aviv into hotels. These grants will represent 10 percent of developers' total investment.
While developers who take on these hotel projects are entitled to a grant with the new ruling, the ceiling for hotel construction grants in Tel Aviv hasn't been determined yet. However, the limit is expected to be approximately NIS25 million. There is no limit on the number of guestrooms permitted in a hotel with a ceiling grant of NIS250,000 per room. There is also no restriction on the area in the city where conversions are undertaken.
The Ministry of Tourism and the municipality of Tel Aviv plan to set up a track for developers to gain bureaucratic concessions that grant them construction approval solely from the Tel Aviv Local District Planning and Building Commission, rather than the Tel Aviv District Planning and Building Commission.
The Ministry has also planned to conduct its own search for empty offices to encourage hotel conversion projects over the next two years. "The tremendous momentum in incoming tourism to Israel and the growing demand for vacations in Israel require creative solutions on short timetables for increasing the supply of overnight infrastructure. Encouraging the conversion of buildings in Tel Aviv to hotels, which I am urging, comes on top of a series of other measures taken by the Ministry of Tourism over the past two years aimed at making it easier for developers to increase the number of overnight rooms in Israel in order to lower prices," Yariv Levin, Israel's minister of tourism, told Globes.
With these criteria alterations, the Ministry of Tourism aims to encourage construction of new hotels. The Ministry is mainly attracted to hotel conversions in Tel Aviv due to the shortage of land in the country and the time and money saved through these projects. Converting an existing building into a hotel requires 12 to 18 fewer months of construction than building one from the ground up.
The Ministry is also focused on bringing more mid-level hotels to the country, which these types of conversions usually produce. The Ministry of Tourism expects Israel to see the construction of 1,000 guestrooms in the next few years.
Prime Minister Benjamin Netanyahu stated during the vote that grants for hotel conversions should extend to residential buildings, even if it reduces the city's housing supply. He said these conversions would attract as many people as possible to Tel Aviv. Meanwhile, Herzliya will be the remaining area excluded from development priority in the country.
The Ministry of Tourism's grant budget for this year totals NIS250 million while last year's budget was NIS181 million. Last year's grants are financing the construction of 35 hotel projects with 2,570 guestrooms, which will be developed within in coming years. The largest of the grants at NIS35 million went towards funding the preservation and construction of a 248-room hotel in Jerusalem.
Jerusalem alone scored grants for five hotel projects with 482 guestrooms. More hotels coming to the region also include a 356-room hotel in Netanya, a 240-room hotel in Rishon Lezion and a 275-suite hotel in Bat Yam.