Tourism minister announces overhaul of hotel construction protocols

The Tourism Ministry is also working with the Interior Ministry to make visas more accessible to attract more tourists.

By DANIEL K. EISENBUD
Updated: SEPTEMBER 21, 2016 22:13
A hotel is seen against a backdrop of mountains in the Red Sea resort of Eilat [Illustrative] (photo credit: REUTERS)
A hotel is seen against a backdrop of mountains in the Red Sea resort of Eilat [Illustrative]
(photo credit: REUTERS)
Citing stifling bureaucratic red tape that has hindered hotel construction in the country for decades, Tourism Minister Yariv Levin on Wednesday announced an amendment that will allow local and international contractors to build at a vastly expedited rate.
Levin and other high-ranking government officials, including Jerusalem Mayor Nir Barkat, explained the favorable and far-reaching implications of the overhaul to hundreds of prospective real estate developers during a conference at Jerusalem’s David Citadel Hotel.
In an exclusive interview with The Jerusalem Post, Levin lauded the new policy, known as “Amendment 107 for the Law of Planning and Construction,” as a welcome “game changer” in Israel’s real estate sector, that will spur tourism, while lowering hotel costs.
Approved by the Knesset in late July, the changes were enacted immediately to revitalize growth in the stagnant market, Levin said.
“We have a problem here,” said the minister. “We don’t have enough hotel rooms – and the lack of rooms is not just in numbers but also in diversity. We lack three-star-and-minus hotels, especially in the city centers; we lack motels; we don’t have [enough] hostels here; so what we wanted to do was promote the building of new hotels, with an emphasis on building low-priced hotels.”
To that end, Levin said, the amendment addressed several key factors that have delayed or discouraged construction.
“For the first time we created a nationwide committee that deals with all the permits in order to build hotels,” he said. “That means that if in the past you wanted to build a chain of hotels and had to get a permit from each district committee, now you can get approval for a nationwide project from one committee that will issue all the permits very fast.”
A second benefit, Levin said, is that the amendment will allow builders to allocate up to 20% of the hotels for residential units, which he believes will enhance profitability.
“This is helpful because when you sell flats, you get immediate payments,” he explained. “We will also allow [builders] to receive credit from banks. We have a problem with lack of credit in that area, so while they are able to build the flats, it narrows the time it takes to pay back the loan, and the risk is reduced.”
The third measure, he said, was to open unprecedented access to grants that previously were not available.
“For the first time we have opened the map for receiving grants,” Levin said. “Up until now, the map was quite restrictive. I thought we should follow the private sector in a way in which if someone wants to build a hotel somewhere and put money in it, we should help him, not tell him ‘no, we don’t want you to build here. Build in another place.’” The grants offered will cover up to 33% of the costs to build three-star-and-lower hotels to encourage affordability for visitors, and 20% of the cost for four-star-and-higher hotels.
“So now an American entrepreneur can find himself in a situation where he can build various hotels in a very short process,” Levin said. “Therefore, developers can get the loans for the money they need for the rest of the project and pay it back to the bank in a shorter time.”
Noting that prior to the amendment’s passing, building a chain hotel in the country was extraordinarily difficult, Levin said developers will now have all the tools they need to bypass the many former government restrictions.
Additionally, he said the Tourism Ministry is working with the Interior Ministry to make visas more accessible to attract more tourists.
“We want to encourage airlines to open more routes [to Israel], so more tourists will come,” he said, adding that Chinese tourism doubled after airlines in China added flights, and that the country is adding another one due to strong demand.
To get the word out to tourists and prospective investors, Levin said that NIS 1 billion for marketing has been approved by the Finance Ministry for 2016 and 2017.
“The overall budget for the Tourism Ministry is NIS 1.1 billion per year,” he said. “Out of that, almost half is dedicated to marketing.”
Asked what type of investors the ministry will target, Levin said it is casting a wide net.
“The truth is that everyone is welcome,” he said. “But I do want to see, apart from the Israeli entrepreneurs, international entrepreneurs who will build chain hotels here that are international chains. Because once you have a chain here that, for instance, is based in China, immediately it becomes far easier to market it, and that attracts more tourists.”
Ultimately, Levin lamented, the ministry cannot engender growth alone and must rely on the private sector.
“The truth is that we can’t even do a small part of the job – it is completely dependent on the private sector, whether it’s air companies, hoteliers, travel agents, etc.,” he said.
“And what we have to do is help them by encouraging them to come here, because we know if they come here, their ability to market Israel is much better than the Tourism Ministry’s.”