Israel's hotels set for strong growth as tourist numbers rise

The Setai Tel Aviv, Israel. Photo credit: The Setai Hotels (Israel’s hotel market is expected to see a second year of strong growth in 2018 as visitor numbers to the country continue to rise.)

Israel’s hotel market is expected to see a second year of strong growth in 2018 as visitor numbers to the country continue to rise, according to data from HVS. 

The country welcomed more than 3.6 million visitors in 2017, a year-on-year increase of nearly 25 percent. Hotel occupancy rose across the country from 67 percent to 73 percent in response. 

The most tourists visiting Israel come from the U.S., Russia and France. Meanwhile, German, China, Poland and Romania visitor numbers are growing. The HVS predicts Israel's hotel market will have a positive future as the country becomes a more affordable and popular destination. “Last year was the first time in Israel’s history that visitor numbers reached three million,” said Russell Kett, chairman of HVS, in a statement. “The drivers of this growth have been a combination of improved geopolitical stability in Israel, successful marketing, the celebrations surrounding the 50th anniversary of Jerusalem’s reunification and additional incoming air routes."

Jerusalem, for example, saw an increase of more than 30 percent in international room nights while Haifa experienced an impressive 28-percent surge. International room nights in the Dead Sea region rose 22 percent while Eilat's hotels recorded a 16-percent increase. As a result, hotels in Israel saw ADR grow to $209 in 2017 from $203 the previous year. RevPAR in this period also grew 11 percent to $151.

A government grant scheme providing additional finance for developers has boosted hotel investment in Israel. Approximately 35 projects received grants close to $50 million last year. These incentives amounted to the approval of some 2,570 additional hotel guestrooms, rising 33 percent on the previous year’s growth. “This suggests investors are showing a growing interest and more confidence in the strength and potential of the Israeli market,” Kett said.

The sector's inventory is mainly comprised of hotels in the top end of the market, with a growing supply of boutique hotels. However, now that international hotel chains are focusing on cities like Tel Aviv suggests that the lack of branded hotels is likely to be addressed in the future. “As Israel celebrates 70 years since its inception, its hotel pipeline is expected to become much more significant, with both local and international operators expected to strengthen their presence,” said Lionel Schauder, an associate with HVS, in a statement. "The budget and hostels segments remain untapped markets, which in a country where low-cost air carriers have become the norm means that growth in this sector would considerably enlarge Israel’s target market and fuel further growth."