Bright future for Israeli hospitality says HVS

Israel’s hotel pipeline remains strong and, buoyed by new laws facilitating hotel developments, investor interest is expected to grow further in the country, according to a new report from global hotel consultancy HVS.

While the impact of continuing terrorist activity has resulted in fewer visitors travelling to Israel, those cities with strong corporate-driven business, such as Tel Aviv, have proven to be more resilient than mainly leisure-driven markets such as Jerusalem and the Dead Sea area, the report highlights.

Over the past year, the country saw a 25 per cent drop in the number of Russian visitors, while Italian visitation fell by 19 per cent.

As a result, hotel occupancies and average rates have been under pressure, said the report’s co-author Jill Barthel, associate, HVS London.

Despite this, the number of visitors from Germany, the UK and France has improved since the 2014 summer conflict, with the German and UK markets proving particularly resilient, recording remarkable growth of around 20 per cent and 18 per cent in 2015, respectively.

Appetite for investment

Not only did visitor numbers from those markets rise, but also the investment appetite of both domestic and international developers seems unmet, added Barthel.

Israel currently has a healthy development pipeline of some 7,600 hotel rooms. Around 2,000 of these are affiliated with international hotel brands, accounting for 27 per cent of the total pipeline.

The strongest investment interest is being shown in Jerusalem and Tel Aviv, as well as the northern coastal areas.

A new regulation, introduced by the Knesset earlier this year aiming to speed up the completion of hotel developments and enable up to 20 per cent of each hotel to be classified for residential purposes, is expected to stimulate demand further still.

Nevertheless, the number of bednights accounted for by international visitors to Israel fell in 2015 by 10.5 per cent, indicating that many people reduced their stays.

Airbnb has also claimed around five per cent of hotel bednights, constituting a non-neglectable competitor to regular hotels whose impact the Israel Hotel Association is actively trying to limit by fighting for the implementation of tax laws and stricter regulation on this market.

To view the full report, click here.