The purchase of the Leonardo Inn is the first in his project to expand Jerusalem's hotels and then sell them.
By MELANIE LIDMANKevin Bermeister 521(photo credit: Courtesy Jerusalem 5800)
Kevin Bermeister, a digital technology mogul who founded the file-sharing software application company Kazaa and was one of the initial investors in Skype, fell in love with Jerusalem on his first visit, walking the ancient streets and meeting the city’s residents and leaders.“Jerusalem has a lot of complexity to it, and I’m fascinated by that,” he says.The Australian billionaire’s newest venture in Jerusalem is running an investment fund that will increase hotel rooms in Jerusalem by 400 percent in the next 28 years.Bermeister’s first visit to Israel was in 2004. But since then, he’s come about six times a year, stopping off during his six or seven “around-the-world” trips per year to run his various businesses.He was struck by the high level of poverty in Israel’s capital and the large amount of unskilled labor.“As I became more familiar with the city, I started to understand all the interest points in the city, all the wealth of interest – from archeology, history, religion, spiritual – but tourism generally was suffering,” he says. “There is an unnatural cap on inbound tourism to Jerusalem, and I struggled to find out why,” Bermeister says as he relaxes in the lobby of the Leonardo Inn, which he had purchased just three days before for NIS 70 million. “This industry is not exploited to the extent it could be.”Jerusalem Mayor Nir Barkat has been trumpeting this plan for years. His vision is to increase the number of Jerusalem’s annual visitors from three million to 10 million in the next decade through a combination of advertising, improved infrastructure and better outreach to the rest of the world.But Bermeister doesn’t talk like a politician, he talks like a businessman. “Eventually, I came to the conclusion that the absence of hotel inventory was preventing the city from servicing its optimum capacity because of the city’s inability to handle demand,” he says.So he took the business approach and went out and bought a hotel.Bermeister points out that in the past decade, Jerusalem has added just 300 hotel rooms, bringing the city’s total to 10,000 rooms. He attributes this to a “recoil effect” after the second intifada, when tourism plummeted in Israel, making investors extra cautious about tourism projects.The city also recognizes the shortage of hotel rooms and, starting in 2010, worked with the Tourism Ministry to earmark NIS 400 million towards helping develop hotels in the capital in the forms of perks and tax breaks. But Bermeister won’t be satisfied even if Jerusalem can double its hotel room capacity. He wants to see Jerusalem with between 40,000 and 50,000 hotel rooms.Bermeister actually takes a much longer-range view of Jerusalem’s problems. Earlier this year, he launched an innovative master plan for Jerusalem called Jerusalem 5800, the Hebrew year equivalent of 2039.Along with a team of Israeli experts, including architect Shlomo Gertner, Bermeister envisions a Jerusalem with an underground metro system that would be a leader in global tourism.He created the Jerusalem 5800 vision by layering existing master plans from the municipality and the Knesset with new ideas from his team of experts.Jerusalem lacks a comprehensive master plan, though the city uses a de facto master plan that has never been approved.Some of the ideas within Jerusalem 5800, such as a railway to Beirut and Damascus, are less realistic. But Bermeister says that Jerusalem 5800 is mainly meant to serve a dual purpose. First, it is an exercise to help his team understand Jerusalem from a planning perspective by introducing them to all the necessary government bodies and oversights in Israel. Secondly, it’s meant to inspire Jerusalem’s leaders to look at the long-term plan for the city rather than just planning immediately for the short-term, by introducing some novel ideas with the hopes of forcing leaders to respond to them.Bermeister is known in Jerusalem as part of the team of Jewish investors that bought the struggling Nof Zion, a Jewish apartment complex in east Jerusalem’s Jebl Mukaber neighborhood in 2011. Nof Zion was on the verge of being sold to Palestinian businessman Basher Al Masri, who wanted to develop the remaining 300 apartments for Arab families, when Bermeister and supermarket magnate Rami Levy stepped in with a lower offer that was ultimately accepted by Bank Leumi. Right-wing activist Aryeh King, of the Israel Land Fund, is an adviser. Though Bermeister insists that his project is apolitical, there are no Arab or haredi advisers on the team of experts for his Jerusalem 5800 project.But rather than wait for politicians to come around to his vision for the city, Bermeister has already set his plan in motion. On August 16, a group of investors led by Bermeister purchased their first Israeli hotel (and his first hotel), the Leonardo Inn, for NIS 70 million. It’s the first purchase for the investment group that he founded, the Jerusalem Tourism Development Fund, whose goal is to purchase hotels, renovate, refurbish, and rebuild them, and then sell them at a profit. Bermeister, who has no prior hotel experience, says he doesn’t want to be in the business of managing hotels, just selling them after he’s expanded them to their full potential.“There is a purely business motivation behind this,” Bermeister says. “It is driven as a business venture, though the output has a philanthropic effect.”Bermeister reasons that hotel and tourism work can provide thousands of jobs to the city’s unskilled and unemployed population, especially in the Arab sector.The Jerusalem Tourism Development Fund is in advanced negotiations for another hotel and in midlevel negotiations for four additional hotels in the city.The Leonardo Inn, located in the stretch of large hotels at the entrance to Jerusalem, was an attractive purchase for their fund because the zoning laws have just changed with the new plan to create a major business center with 12 skyscrapers. The Leonardo Inn currently has 150 rooms but has just been cleared to expand to 400 rooms.But as Bermeister moves from the world of technology and virtual reality to the messy reality of Jerusalem, he says he’s ready to take on that challenge.“It’s important that we service the needs of the poor through the opportunities that exist in the city and in tourism,” he says. “What frustrates me more than anything else is that this city could flourish if the right investments were made.” •
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