In search of affordable lodgings

Government finally recognizes Israel is too expensive for many tourists.

The King David Hotel (photo credit: WIKIMEDIA COMMONS/DANNY LYULEV)
The King David Hotel
The Tourism Ministry and the Israel Lands Authority have belatedly recognized an open secret that every licensed tour guide knows – the country is too expensive for many tourists, and offers poor value compared to other eastern Mediterranean destinations such as Greece, Turkey and Cyprus, which similarly beckon with sun and sea, as well as religious and historic sites.
In an attempt to lower the cost of hotel rooms, the two government agencies last week announced a joint plan to tender state land to build a chain of five budget hotels with 850 rooms. The low-cost two- and three-star inns will be built in the following areas: Eilat: 150 rooms in the Mafiya district in the city center; Mitzpe Ramon: 100 rooms in the Spice Quarter; the Dead Sea: 300 rooms at Ein Bokek; Kiryat Gat: 100 rooms near the northern entrance to the city; and Nazareth: 200 rooms near the northern entrance to the city. The plan does not call for budget hotels in Jerusalem, Tel Aviv or Haifa.
“The option of establishing a budget hotel chain in various locations around Israel will encourage international hotel chains to invest and build in Israel. This will add to the supply of hotel rooms at a budget level, thereby offering cheaper vacations for families and FITs, and encouraging tourists to stay in Israel for longer periods – which will ultimately lead to cheaper vacations in Israel,” said Tourism Minister Yariv Levin in a press release.
FIT is industry jargon meaning “Free Independent Traveler” or “Free Individual Tourist” – i.e. individuals traveling on their own, rather than as part of a group.
“This is the first time that we are marketing land in one bundle without fixing a minimum price in order to allow one entrepreneur to win and build five budget hotels to internationally recognized standards, so that families and FITs can enjoy hotel accommodation at an affordable price,” said ILA acting director Adiel Shomron.
The tender is in line with a worldwide trend in the hotel industry, whereby international chains such as Hilton and Carlton have been establishing discount brands.
There are hundreds of budget hotel brands worldwide, and the ministry hopes that the tender will generate international interest in entering the Israeli market.
But the tender process itself reflects the Tourism Ministry’s over-regulated and bureaucratic nature. The tender is restricted to entrepreneurs who are vetted and approved by the ministry. The winning company will initially sign a five-year contract for the development of the five hotels. Subsequently a 49-year contract will be signed for the leasehold land.
Similarly, the ministry will oversee planning and construction of the hotels, rather than let the tender winner have a free hand in determining the room mix. The tender- winning entrepreneur will be permitted to select 40 percent of the mix of room types (double, suite, studio, etc.), which is twice the ministry standard.
The entrepreneur must commit to at least 100 rooms of C or D Tourism Ministry classification. For the remaining building rights, the entrepreneur can build the hotel to a higher – or lower – standard, in accordance with the ministry’s standards for the planning and classification of tourist accommodation facilities.
Further restricting the winning entrepreneur’s options, it will not be able to sell hospitality units to create a mixed resort serving both tourists and suite owners.
The Tourism Ministry believes that building a budget hotel chain rather than individual lodgings will lower construction and subcontracting costs, and offer more viable marketing – all factors theoretically reducing prices for tourists. Having a single owner will also facilitate packages.
Asked why hotels are so expensive, Tourism Ministry spokesman Anat Shihor Aronson explained, “Israel is expensive in general, and not just for tourists. A hotel is like a home. It purchases bread and yogurt, etc. On top of that, there are extra expenses, such as kashrut and security, and municipal taxes are high here. Nevertheless, we at the Tourism Ministry believe competition is good for business. The government wants to foster competition.
Together with the Treasury, the Tourism Ministry has been trying to reduce bureaucracy, and to expedite the process of getting a building permit for hotels.”
“It is absurd that a tourist can fly here on a cheap flight from Europe for 100 euros, but can’t find a hotel for less than that per night,” she added.
Asked why hotels should follow the laws of kashrut – and thus incur an additional expense – if the vast majority of their clients are not observant of Halacha or even Jewish, she responded: “In times of crisis, hotels rely on Israeli tourists. Most Israelis keep kosher out of their homes.”
Statistics on incoming visitors reflect the malaise of Israel’s tourism industry. In 2013 there were 2.9 million visitors, and in 2014 slightly less. Provisional numbers for 2015 indicate a further drop this year. Exacerbating the decline, some cruise ships have stopped docking in Israel and Egypt because of fears that passengers could get harmed by Middle East terrorism.
Even those numbers don’t reflect the true extent of the contracting tourism sector. The Interior Ministry, which tallies the number of entries to the country through Ben-Gurion Airport, the harbors of Ashdod and Haifa, and the land crossings at Taba, Jericho and Beit She’an, does not differentiate between tourists and those arriving on business.