The Israeli Tourism Ministry has announced a plan to offer subsidies for hotel developers to convert Tel Aviv office buildings into hotels—announcing the plan before it had established criteria for who can receive the deals.
The Ministry has been facing heavy scrutiny for favoring international hotel companies over local brands for this project. Doron Aharon, the deputy director general for investment and development at the Ministry of Tourism, told Haaretz that the ministry is focusing on partnering with overseas chains for the redevelopment because their marketing departments can attract more tourists to Israel.
The Ministry of Tourism has been making decisions like these to meet the rising tourist demand of the country. Israel has been rushing to accommodate the soaring number of tourist arrivals to the country, especially in Tel Aviv, as it quickly runs out of guestrooms. According to Aharon, other "unspecified legal reasons" were behind the late release of the criteria.
Other sources from the ministry claimed that advanced negotiations with an undisclosed international hotel brand are currently underway, driving the Tourism Ministry to rush the process. The hotel will be this company's first property in Israel. Aharon told Haaretz that the brand is considered an "urban" hotel.
As part of the investment initiative, international hotel brands automatically gain 25 points through the points system to receive subsidies. International chains that "present a declaration-of-intent letter" will score an additional 10 points. The Tourism Ministry will also grant larger-scale hotel development projects more money than smaller ones will receive. The ministry is offering grants up to 10 percent of the cost to convert a building into a hotel and up to 25,000 shekels per room.
The current budget for the initiative, which started in March, is $6.9 million, but Prime Minister Benjamin Netanyahu might consider increasing it. The budget can grant assistance for developing up to 1,000 guestrooms.
While the plan is to increase Tel Aviv's current hotel stock, there are no terms in the program stating the hotels must have low room rates. “Developers won’t refuse the money, especially if they’ve already started developing a property,” Michael Hay, founder and managing partner of Vision Hospitality, told Haaretz. “But what isn’t financially viable before the grant won’t become viable with it. Low-cost hotels won’t arise from this.”