Tel Aviv restrictions could hurt Airbnb's Israel interests

The Tel Aviv Promenade runs along the Mediterranean seashore in Tel Aviv.
New regulations will enforce a higher tax rate on Airbnb hosts in Tel Aviv. Photo credit: iStock / Getty Images Plus / Danor_a

Late last year, Airbnb came to a controversial decision regarding some of its accommodations in Israel—and Israel is taking steps to fight back.

Citing "conflicting views regarding whether companies should be doing business in the occupied territories that are the subject of historical disputes between Israelis and Palestinians," Airbnb decided to remove listings for rooms in the occupied West Bank in mid-November.

"For us, the question centers on the approximately 200 Airbnb listings in Israeli settlements in the West Bank and whether they should be available for rent on our platform," the company said in a statement. "Our team has wrestled with this issue and we have struggled to come up with the right approach." 

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According to Airbnb, the platform has more than 20,000 hosts in Tel Aviv, Jerusalem and other parts of Israel, and the platform continues to be available for bookings in East Jerusalem and Golan Heights. "Our announcement affects approximately 200 listings in the West Bank,"  Airbnb stated, noting major U.S.-based global hotel chains also do not offer accommodations in these areas. The platform added it had previously removed listings in Crimea as a result of international sanctions, so Israel was not alone in this situation. "To be clear, our announcement does not apply to more than 20,000 listings in Israel, including in Jerusalem and Golan Heights."

The announcement came just as Israel was expecting to break records for inbound tourism. According to analytics company STR, Israel had more than 7,500 guestrooms in its hotel pipeline at the end of 2018, but with more than 4 million tourists arriving last year, insufficient supply could drive visitor numbers down..

Backlash

According to the Jerusalem Post, critics pushed back at the Israeli decision, which it claimed targeted Israelis living in settlements and was not applied to Palestinians in the West Bank.

By the end of November, Airbnb was facing at least three legal cases in the United States over the decision, and faced new regulations in Tel Aviv that could drive down profits from one of its more-lucrative cities.

Around the same time that Airbnb removed the disputed listings off of its site, the Israel Hotel Association began calling for the Israel Tax Authority to enforce statutory tax requirements for short-term rentals, alleging that industry currently encourages tax evasion and constitutes unfair competition for hotels.

Tel Aviv residents renting out their apartment for more than three months per year could be subject to a tax rate that is comparable to those paid by hotels. Those rates can reportedly be four times as high as regular taxes.

“The proposal was made in light of the sharp rise in the number of Airbnb apartments rented commercially for long periods in the city,” the city council said in a statement, adding the rental service had damaged the quality of life for permanent residents and caused rental-market prices to rise.

The motion was approved and this week the Tel Aviv municipality announced it would raise taxes for short-term accommodations to match an increase in long-term rentals. The municipality  did not say by how much it would increase property taxes or when the new policy would take effect.

Tel Aviv currently has more than 8,000 apartments and rooms listed on Airbnb, which the Post says is similar to the number of hotel and hostel rooms in the city, which has a further 3,700 rooms in the pipeline, according to STR. The city also reported an occupancy rate of 74 percent last year.