Israel's hotels look to overcome challenges

Hotels in Israel have to face the same challenges as hotels everywhere else, but some recent developments paint a picture of an industry facing a steep uphill battle for profitability, even as visitor numbers climb.

Violence Threatens Businesses

As Israel’s conflict with Hamas continues, the impact on businesses, including hotels, has been "immediate and severe," as local news source Haaretz describes it.

Earlier this week, Finance Minister Moshe Kahlon promised Israelis living near Gaza that they would get some compensation for damage to their businesses caused by the fighting, but indirect damage, such as the cost of lost business, can be difficult to assess. This makes it harder to win compensation for business owners.

The Israel Hotels Association said earlier this week that fighting in the south has affected hotels all over Israel. “The sector is extremely sensitive to security problems and their impact is immediate,” it stated.

Gal Mor, head of development for Abraham Hostel Tours, told Haaretz that his hotels haven’t been affected yet. “Nevertheless, experience shows that if the situation continues and people are thinking about where to take their next vacation, they certainly aren’t going to pick Israel, and will go somewhere else.”

Given the situation, he said a solution in the form of a “security net” had to be found, which he said he hoped would emerge from an upcoming meeting between the Hotels Association, insurance industry executives and the Tourism Ministry.

Tourism insiders are reportedly worried that the fighting will lead to a wave of cancelled visits to Israel. Amir Levy, the ministry’s director general, is reportedly looking to downplay the violence to tourists, comparing the fighting in Israel to recent terror attacks in Europe. “Israel is one of the safest countries in the tourism world,” he said. “Beyond that, security personnel are found at every tourist site and the result is that the level of security for tourists is very high.”

Shai Berman, who heads the Israel Restaurants Association, said his group would be seeking aid for all small- and medium-size businesses.

Airbnb Gains Ground

Israel's hotels are facing another challenge: Fattal Group, the state’s biggest hotel chain, is throwing in the towel in the ongoing industry battle against Airbnb and decided to join the home-sharing service. The chain has reportedly leased two buildings in the Tel Aviv neighborhoods of Kerem Hateimanim and Neve Tzedek and turned the units inside into short-term rental apartments. These units are now being listed on Airbnb and other booking sites under the “Master” brand of Fattal’s Leonardo Hotels.

The move may be understandable. Israel is seeing record numbers of incoming tourists, but the number of hotel overnight stays has been falling in recent months, most recently by 3 percent year-over-year in September. Airbnb, meanwhile, has about 9,000 units in Tel Aviv alone, and according to the home-sharing service, the number of guests in Israel nearly doubled from 155,000 in 2014 to 300,000 in the first half of 2017. 

Following the lead of many other industry organizations, the Israel Hotel Association has been fighting Airbnb's growth in the State. Still, the group has not condemned Fattal's move to the other side of the business. Eli Ziv, CEO of the IHA’s Tel Aviv office, said the group wasn’t opposed to competition from Airbnb but to the unlevel playing field.

“Unlike other cities in the world, Israel’s cities still haven’t regularized the matter. The minute they operate lawfully, we’ll have no problem. It doesn’t make any difference who the operator is, only that the competition is fair,” he told Haaretz. Notably, the apartments in the two Fattal buildings are listed on Tel Aviv municipal tax records as residential units rather than hotel rooms that would be subject to higher tax rates.