As Israeli tourism grows, hoteliers look beyond major cities

Prima Hotels operates the new-build Prima Link in Petah Tikva. Photo credit: Prima Hotels (Prima Link)

By the end of 2018, Israel had attracted its four millionth tourist for the year, setting a new record that was approximately 14 percent more international entries than in 2017, and 42 percent more than in 2016. 

Those numbers are poised to grow, and while major cities like Jerusalem, Tel Aviv and Eilat are attracting the majority of these visitors, a recent report from the Israel Hotel Association noted the increasing number of tourists also can drive tourism to other areas. This, in turn, is driving both development and acquisitions of hotels in outlying destinations.

"Construction of more hotels in Israel in both high-demand and other areas is a welcome development that will be bolstered by changes and needs in the work, cultural, and leisure market that are increasing demand for hotels in Israel and worldwide," according to the Association.

Smaller cities and towns like Ra'anana, Petah Tikva, Yeruham, Rehovot, and Gedera are seeing an uptick in development, in spite of having few beaches or historical attractions nearby. For example, Prima Hotels operates new-build properties in both Ra'anana and Petah Tikva, both of which opened in 2017 and reportedly have occupancy rates of 60 percent in summer and 85 percent for the rest of the year (compared to 68 percent nationwide). The company's CEO Avi Dor recently told Israeli news site Globes that business travelers to regional towns and smaller cities want to avoid the traffic jams to and from Tel Aviv.

Growth Plans

Over 2018, the Israeli government allocated NIS 145 million to help entrepreneurs build 3,829 new rooms, representing an annual year-over-year growth of 49 percent (2017: 2,566 new rooms; 2016: 1,936 new rooms and in 2015: 1,333 new rooms).

Israeli hotel companies also are competing for assets. Last month, Dan Hotels acquired three hotels from fellow domestic company Rimonim Hotel Group in Eilat, Nazareth and Safed, and may acquire four more: one in the Negev Desert, two in Tiberias on the shore of the Sea of Galilee and one in the Golan Heights.

The government also is looking to develop 17 new hotels along the Dead Sea coastline, which could pose a problem given a lack of incoming water and increased depletion from both Israel and Jordan.

Dor noted plans are in place for a "major business center" that includes government offices in Beer Sheva, the largest city in the Negev desert. While the city already has a hotel, more development will mean more demand for accommodations.

Even with regional growth, not all areas across the state need new hotels. "Netanya already has too many rooms, and more plans are going ahead," Dor said. "I don't see any demand for the supply of rooms that the city is going to have. Demand is always high in Tel Aviv and Jerusalem, but land prices are rising accordingly."