Coronavirus: Israel’s tourism industry faces its fiercest battle

Economic Affairs: “The ‘corona war’ is not like war in the Gaza Strip or Lebanon, because this war is all over the country.”

By EYTAN HALON
WAITING FOR tourists, a vendor stands at the entrance to his shop in Jerusalem’s Old City, this week. (photo credit: RONEN ZVULUN/REUTERS)
WAITING FOR tourists, a vendor stands at the entrance to his shop in Jerusalem’s Old City, this week.
(photo credit: RONEN ZVULUN/REUTERS)
Israel’s open skies have been slammed shut.
The winding stone streets of the Via Dolorosa, usually brimming with thousands of Christian pilgrims, are almost silent. One hour away in Tel Aviv, street vendors at the usually energetic Nahalat Binyamin crafts fair are expecting very few customers on Friday.
The government effectively sealed off the country’s borders to all prospective visitors earlier this week, as it announced new quarantine measures for all arrivals from abroad – the most dramatic move yet to prevent the continued spread of the novel coronavirus.
For many in the Israeli tourism industry, no strangers to crises of a military-related nature, the outbreak of the virus has led to a war of survival.
“This is far worse than times of difficult security situations, when people still come,” said Samuel Green, a 36-year-old tour guide from Tel Aviv. “Now people can’t come if they want to. It’s a complete cutoff of incoming tourism. Unless you’ve got a little bit of a hand in the internal Israeli market, which is normally less profitable, you are basically sitting at home at the moment.”
Green, originally from London, said all bookings had been canceled and there had been no new inquiries ahead of the coming months. March and April are usually a profitable period for the tourism industry, as interest increases during spring break vacations, Passover and Easter. While some of his tour guide colleagues might have a side job, Green said the volatile nature of the tourism business makes a rainy day fund essential.
“I don’t feel comfortable keeping deposits of people who can’t come even if they wanted to,” Green said. “I offer refunds, but I’m asking people if their insurance will cover the deposit. While some people have been covered, some others have been willing to help out because they understand the situation is difficult.”
Just as the Israeli tourism industry was savoring its “golden age,” welcoming unprecedented numbers of tourists and revenues for three consecutive years, much of the industry has been plunged into the red. From already struggling airlines to tour operators, hotel staff, caterers and commercial laundry facilities, the rapid drop from record revenues to essentially zero income has resulted in vast layoffs and unpaid leave, crippling industries and eradicating livelihoods of entire families.
Facing falling customer demand, flagship carrier El Al has already announced plans to lay off 1,000 workers and place another 4,000 on unpaid leave, including 600 out of 650 pilots, as flights are canceled to many destinations. Following the introduction of the new quarantine measures, the carrier informed the Tel Aviv Stock Exchange that it is currently unable to estimate revenue losses, but that “many flights” would be canceled.
While hotels expect average occupancy rates at this time of year to reach approximately 70%, hotels in Tel Aviv and Jerusalem are currently one-quarter full. Six out of 10 hotels in Nazareth have temporarily closed due to declining demand. An expected increase in domestic tourism is not expected to compensate for losses in revenue.
Eshet Incoming, one of Israel’s leading inbound tour operators, employed 36 full-time members of staff last week. Thirty have since been placed on leave, with remaining staff spending their days canceling bookings made for clients who never arrived. The same grim picture is being painted across the country’s outbound and inbound tourism agencies, as the pool of tourists turns into a desert.
“All 120 members of the Israel Incoming Tour Operators Association are either laying off a lot of the staff or sending them on leave of absence,” said Eshet Incoming (Eshet Tours Group) CEO Amnon Ben-David. “At this current moment, my staff are canceling services, hotels, guides, buses, restaurants and venues, and sending back money. We are sending back all the money that we received.”
Cancellations during the past week amounted to a loss of $4 million for the Israeli economy, Ben-David said. The company is still required to pay social benefits to its employees on unpaid leave. Many employees, he added, will likely find other jobs and not return.
“This is just a complete collapse of the industry,” said Ben-David. “First of all, it comes after the best year of tourism ever for Israel. Second, we had no time to prepare for it. And third, we are not getting help or support from the government at all.”
BEN-DAVID DISMISSED the “first aid” package presented by Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon on Wednesday, offering NIS 8 billion ($2.2b.) in low-interest loans for struggling businesses. Even with low rates of interest, he said, loans have to subsequently be paid back from significantly reduced cash flow.
It will likely take a “very long time” for Israel-bound flights to return to their original frequency, said Ben-David, even after the outbreak subsides. “Thousands and thousands of tourists who left Israel extremely unhappy” after their trips were ended at short notice will take even longer to return, he said.
While estimates regarding the financial impact of the outbreak vary significantly, and will ultimately be driven by attempts to contain the virus and the government’s response, the Israel Hotel Association predicts that the annual damage to the tourism industry is likely to reach NIS 4.2b. ($1.16b.).
Despite the impact on Israeli hotels, which have been forced to place thousands of employees on unpaid leave, IHA president Amir Hayek made it clear that the association will accept all government measures to control the coronavirus outbreak. He does expect, however, that hotels will be compensated for their losses.
“The government caused the damage and they will have to pay for it,” said Hayek. “We also need to think about the days after the coronavirus, when we will need a strong industry capable of growing again.”
Describing the current period as the “corona war,” Hayek said international tourism accounts for approximately half of the hotel industry’s business. While appreciative of domestic support for the industry, he said it’s not enough to support businesses dependent on both domestic and international visitors.
“The ‘corona war’ is not like war in the Gaza Strip or Lebanon, because this war is all over the country. When we have a war here in Israel, we have reduced numbers of tourists, but we still have tourists. There is a large difference,” Hayek said.
“The tourism industry is usually the first to be harmed and the first to recover. Now we are the first to be harmed, and we are not sure we will be the first to recover. When the outbreak is over, it will take time for people all over the world to calm down and understand that it is over.”
While Hayek said loans can help some hotels, government grants are required by others to ensure their continuity. If funds needed by businesses stood at NIS 5b. ($1.38b.) last week and NIS 10b. ($2.76b.) this week, he said, lack of action means that required funds will surely reach NIS 20b. ($5.53b.) by next week.
“We don’t need all these press conferences and all the things that the government is doing in order to put themselves at the front,” Hayek said, adding that he is skeptical regarding the translation of political statements into available funds. “We need to be at the front now, the public needs to be at the front now, together with the healthcare system.”