Tel Aviv’s real-estate market is decidedly hot. A recently published global Mastercard study found 1.7 million tourists have stayed in Tel Aviv in 2017, an increase of 21 percent over the previous period in 2016.
In addition, the average tourist stay in Tel Aviv was 7.9 nights and the average spend per day was $142, according to the study.
Hotel Infrastructure and Future Potential
While most luxury hotels in Tel Aviv are located along Hayarkon Street facing the Mediterranean, many boutique hotels are located in the neighborhood of Rothschild Boulevard and the “White City” areas. New hotels recently opened in Jaffa but there are very few new hotels actually located outside these areas.
Tel Aviv is becoming a serious metropolis and as of 2020, the city will likely be physically connected to the cities of Herzliya to the north and Rishon Le Zion to the south. It is already connected to Petach-Tikvah to the east.
These cities are not small, with between 200,000 and 300,000 inhabitants. These figures do not include satellite cities such as Bat-Yam or Holon. The Tel Aviv metro area (known as “Gush Dan” in Hebrew) is home to 3.94 million Israelis out of a total population of roughly 8.7 million.
Another factor to be seriously considered by potential investors is the current construction of the Tel Aviv Metropolitan Area Mass-Transit System, known as the NTA—a system that will include different types of rapid transit, such as light rail (which will run underground in some areas) and buses.
Work on the Red Line, the first in the project, began in September 2011 and is scheduled to open in 2021. Construction of both the Green and Purple lines will begin in 2018 and the two lines are slated to begin operating in 2024.
The Red Line will be the “backbone” of the mass transit system, and will pass through the most congested regions of the metropolitan area, serving the greatest number of passengers when compared with future lines to be constructed in the framework of NTA’s transit vision.
As has happened with other metropolitan areas all around the world, it seems likely that the beginning of the NTA’s operations will generate economic activity around stations of the Tel Aviv NTA; lodging, restaurants, bars and food markets will be a significant part of those activities.
The mass-transit system also will enable a new wave of hotels to be developed around the Tel Aviv municipal core, likely select-service, design-led hotels, hostels, hybrid hotel/hostels, mixed-usel buildings, standalone hotels and Airbnb’ offerings
In cities such as Bat-Yam, Herzliya and Rishon Le Zion, more urban-resort- orientated hotels will take advantage of the Mediterranean beaches.
These hotels will be financed to a large degree by integrating a residential element in the projects that allows up to 20 percent of a hotel’s main areas to be sold as residential units.
A good example of one hospitality company that is already engaging in looking actively for new sites for conversions is the South American Selina hotel-hostel hybrid.
This year, Selina signed a joint venture with AMPA Real Estate, owned by the U.S.-based Nakash family and the Israel Fogel Family. AMPA’s role in this partnership is to locate the right buildings and sites, acquire the buildings and conduct all the works converting the structures, getting the statutory municipal approvals and delivering the hotels and hostels to Selina on a turnkey basis.
Selina will pay for the purchase and the development of these projects by paying a high lease for a duration of 20 years; AMPA is already working on securing four conversions, two of which are in Tel Aviv.
The JV’s plan is to reach 7,000 beds by 2020 and, according to statements given to the Israeli press, the focus of development for the next two to three years will be the Tel Aviv metropolitan area, Jerusalem and southern Israel.
Joseph Fischer will be moderating the “Travel Panel: Meeting the Needs of Growing Inbound Tourism” at the upcoming Israel Hotel Investment Summit being held in Tel Aviv from Nov. 19-20. Visit www.israelhotelinvest.com.