Inbound tourism growth brings good year for Israel's hotels

The Israeli government has approved grants for developers to convert offices in Tel Aviv into hotels.
Tel Aviv reported the state's highest absolute occupancy and ADR. Photo credit: noamarmonn / Pixabay

This has been a good tourism year for Israel, with a strong increase in inbound visitor numbers. 

The state saw approximately 13 percent more international entries in 2018 than 2017, a 38-percent increase over 2016. Notably, 40 percent of this year's tourists had visited Israel before. 

“I am excited to welcome next week Israel’s four millionth tourist in 2018,” Minister of Tourism Yariv Levin told local newspaper The Jerusalem Post. “This represents the unprecedented success of the Tourism Ministry, which invests in marketing Israel around the world. This includes the latest agreement signed with the Philippine Minister of Labor to increase the quota of up to 1,000 foreign workers in the hotel sector.”

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Direct revenues from tourism for the year reached NIS 24 billion.

The ministry invested NIS 350 million in marketing Israel as a tourism destination around the world, including in countries such as the United States, Germany, Russia, Italy, England, China, Ukraine, Brazil and the Philippines. This investment yielded an average increase of 13 percent in the number of tourists from those countries, with top visitor numbers arriving from the U.S., France, Russia, Germany, the UK and China. 

“We see demand growth as being positive for Israel with new airlines bringing more tourists to Israel,” Navneet Bali, chairman of Meininger Hotels, said earlier this year. “Supply increases also are taking place but at a slower pace. Overall the supply/demand dynamic is positive for hotel investment. We also feel that the supply/demand dynamic favors the budget/economy or value-orientated customer, for which little supply of good quality exists.”

Record-Breaking Year

The Tourism Ministry also invested significant funds to expand hotels throughout Israel, allocating NIS 145 million to help develop 3,829 new guestrooms across the state, representing an annual growth of 49 percent.

Even in November, Israel's hotel sector was preparing for a record-breaking year, with average daily rate (ADR) the main driver of performance. According to STR, through the first 10 months of 2018, Israel posted an ADR of NIS 806.28, a 7.8-percent increase when compared with the same 10 months in 2017. Additionally, that absolute ADR level was the highest for any October year-to-date in STR’s Israel database. Israel’s occupancy was 70.1 percent through October (-0.4 percent year-over-year), while revenue per available room (RevPAR) was NIS 565.26 (+7.4 percent year-over-year). The absolute occupancy level was the second highest for October year-to-date, while the RevPAR level was the highest. 

“Solid growth in demand that began in 2016 has given hoteliers in the country the confidence to push room rates—even as the presence of the sharing economy continues to broaden,” said Thomas Emanuel, STR’s director of business development. “Occupancy comparisons have been fairly flat thus far in 2018, but ADR increases continue to drive positive year-over-year developments in RevPAR. Over the past two years, both occupancy and ADR have been maintained at roughly 10 percent above the previous performance peak in the country. All of this points to a healthy marketplace overall.” 

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