Tourism boom helps Israel's hotels: HVS

The Israeli Tourism Ministry has announced subsidies for hotel developers to convert Tel Aviv office buildings into hotels before establishing criteria for who can receive them
Tel Aviv showed the highest absolute hotel occupancy for the first 10 months of 2018, according to HVS. Photo credit: Glavo / Pixabay

A "lull in geo-political turmoil" and a rise in visitor numbers helped hotels in Israel achieve new performance records in 2018, according to a new report by global hotel consultancy HVS.

Tourism Boom

The state has seen significant growth in its tourism sector in recent years, with visitor numbers increasing 14 percent between 2017 and 2018, from 3 million (a record) to 4.12 million (a new record). As of June, the country reported 1.9 million visitors, compared with 1.75 million during the same period in 2018. In May, 440,000 tourists entered Israel, an increase of 11.3 percent over the previous year and a 26.8 percent increase compared with May 2017, according to data from the Israel Ministry of Tourism.

At the same time, hotels across Israel reported a 6 percent increase in revenue per available room last year, driven largely by a "healthy rise" in average room rates.

Jerusalem, one of the oldest cities in the world and Tel Aviv, the country’s financial capital, saw the biggest improvements, with room nights up 10 percent and 7.2 percent, respectively.

“The expanding number of air routes and the celebration of the 70th anniversary of the establishment of Israel contributed to the sharp increase in incoming tourists last year,” said Lionel Schauder, senior associate with HVS. “Total demand slightly outpaced rooms-supply growth between 2014-2018, and over the past three years that gap has increased with rooms supply growing by 2.9 percent and demand increasing by 6.7 percent, highlighting the strong potential of the country and the need for additional accommodations.” 

Supply and Demand

Total demand growth slightly outpaced rooms-supply growth between 2014 and 2018; however, the same comparison over the past three years indicates a much larger gap, with demand increasing 6.7 percent year over year and room supply growing 2.9 percent, the data show. HVS suggests this highlights the “strong potential of the country” and its need for additional accommodations, especially at the budget end of the spectrum.

Across Israel, 13 new hotels have opened recently and another 50 are in the pipeline, amounting to more than 10,000 additional hotel rooms across the country. The pipeline is focused on major cities as well as the Dead Sea region, where both local and global hotel operators are eager to gain footholds. Jordache Enterprises Group is opening six hotels across Israel this year, while Isrotel also has plans to open 11 properties across the state, eight of which will be built by 2022.

Smaller cities and towns like Ra'anana, Petah Tikva, Yeruham, Rehovot and Gedera are seeing an uptick in development, in spite of having few beaches or historical attractions nearby, the report indicated. For example, Prima Hotels operates new-build properties in both Ra'anana and Petah Tikva, both of which opened in 2017 and reportedly have occupancy rates of 60 percent in summer and 85 percent for the rest of the year (compared to 68 percent nationwide). Earlier this year, the company's CEO Avi Dor told Israeli news site Globes that business travelers to regional towns and smaller cities want to avoid the traffic jams to and from Tel Aviv.

“Over the next decade Israel will be seeing significant development from international operators, such as Six Senses, Nobu and Kempinski, as well as the development of more affordable accommodations with Selina and Brown Hotels, which is bringing the first pod-style hotel to Tel Aviv,” said report co-author Russell Kett, chairman/HVS London, suggesting while 2019 could break new records, visitor numbers depend "on continued peace in the region."