There are huge opportunities available to Israel by improving its tourism sector, attracting more international visitors and achieving the potentially considerable boost to the Israeli economy that can ensue therefrom.

Our last review of the  Hotel Market was published in the summer of 2020 when the world was immersed in huge uncertainty owing to the COVID-19 pandemic – many countries were in varying states of lockdown, travel was suspended for most and no-one was quite sure whether this was just a short-term inconvenience or something more serious.

As I write this in February 2022, we are in an equally unprecedented situation as the Russian invasion of Ukraine unfolds in front of us, making the subject of recovery in the hotel sector less certain as across the world we hope and pray for a swift solution.

Our report focuses on the issues specific to Israel that will encourage recovery and the fact the world has admired the way in which the country has dealt with the pandemic, not least for the speed with which it vaccinated its population, with most now having had a fourth jab. Sadly, that also meant closing down the country to international visitors and the consequent impact that had on Israel’s previously burgeoning tourism sector. Somewhat remarkably during this period, the Abraham Accords were signed with a number of countries – most notably Bahrain, the UAE and Morocco, where tourism plays an enormous part in each country’s economy.

The importance of tourism to each country’s GDP cannot be overstressed. Israel’s contribution at 2.5% lags well behind those of Bahrain (5.3%) and the UAE (5.8%), and Morocco’s tourism contribution is a staggering 12.2%.

There are huge opportunities available to Israel by improving its tourism sector, attracting more international visitors and achieving the potentially considerable boost to the Israeli economy that can ensue therefrom.

If Israel is to succeed in achieving its newly appointed Tourism Minister’s present goal of attracting 10 million international visitors (compared with the record 4.5 million achieved in 2019), there needs to be a substantial increase in the number and quality of hotel bedrooms, especially in Tel Aviv and Jerusalem, requiring significant capital investment.

If the tourism sector in Israel can be increased from contributing around 2.5% to GDP to a more realistic 4%-5%, this should result in the following.

• Increasing the number of international visitors, bringing foreign currency and improving the balance of payments.

• Aligned with the development of international visitation to Israel is the encouragement of more international airlines to seek bilateral routes, benefiting from Israel’s existing ‘open skies’ policy which is well established.

• The effect of the ‘tourism multiplier’ enables the country to benefit from visitors' spending in shops, restaurants and bars as well as hotels, transportation and attractions, and consequently the economic impact experienced by each of these enterprises, both secondary and tertiary.

• Increasing the employment of Israeli citizens within the broader tourism sector – not just hotels and restaurants, but in more general tourism employment including inter alia tour guides, coach drivers, car rental, taxis, workers in museums and attractions, and so forth.

• If the quality and pricing of hotels and holidays within Israel can be made more attractive to Israeli citizens, fewer would be inclined to travel abroad and would take their vacations within Israel, thereby further improving the sector’s performance, the overall balance of payments (by reducing ‘leakage’) and improving tourism’s contribution to Israel’s GDP.

• The development of new hotels – or extensions to existing properties – improves employment opportunities for Israelis in the construction and related sectors; suppliers of goods, materials and services; and with a consequent spin-off into secondary and tertiary sectors.

• As more hotels are developed, opportunities for branding with internationally known hotel brands will intensify, thereby broadening the reputation of hotels. 

However, the speed with which Israel can derive benefit from these initiatives will heavily depend on how quickly the government can be persuaded to reduce the ‘red tape’ associated with new developments (planning consents and so forth) as well as Israeli banks being encouraged to adopt many of the characteristics of their international counterparts.

My colleagues and I hope that this review of the Israel Hotel Market will assist investors, developers, owners and operators of hotels in Israel – both within the country and from abroad – to be part of the opportunity to grow the country’s hotel sector and the consequent improvement in its GDP as the travel and tourism sector increases its prominence within the Israeli economy.

Read the full report with charts here