Israel’s hotel sector expected to bounce back within five years

Written by on September 4, 2020

Industry experts predict hotel revenue rates to return to 2019 levels by 2025 thanks to Israel’s resilience.

The Market House Hotel (photo credit: Courtesy)

The Market House Hotel

(photo credit: Courtesy)

Israel’s hotel industry is expected to bounce back from the coronavirus pandemic to it’s 2019 peak within five years, thanks to the country’s resilience and ability to recover at an accelerated pace, industry professionals have said.

The tourism industry worldwide took a broadside hit in the second quarter of 2020, as the coronavirus lockdown grounded flights and closed borders to visitors. Israel’s hotel industry was no exception, with occupancy dropping from nearly 70% in late February to less than 5% for much of April.

But industry insiders are pointing to a swift short term recovery as evidence that Israel’s hotel industry will return to the 2019 peak by 2025, and are advising investors to follow the money. A report by tourism market analysts STR showed that seven day rolling occupancy rates had already returned to a reported rate of 65% by late August, outperforming Europe, the Middle East and the United States in terms of bounce-back. By contrast, those regions were reporting occupancy rates of 44.6% (Europe) to 48.5% (USA).

The report was presented by STR’s Director Thomas Emanuel at a recent webinar co-hosted by the Israel Tourism Ministry and HVS which attracted more than three hundred entrepreneurs, senior executives from international hotel chains, property owners and real estate agents from 32 countries, including Israel and the United Arab Emirates.

Addressing the webinar, Israel’s Tourism Minister Asaf Zamir said: “Israel’s characteristic, as a country accustomed to emergency situations that knows how to return to routine faster than other countries in the world, will help the tourism industry in this crisis as well. We at the Tourism Ministry will do our utmost so that the hotels can get through this difficult time, to allow them to remain open even now and to promote the speedy return of incoming tourist groups within the capsule format.

“We hear about people who are just waiting to visit Israel again and this is the time to invest in the tourism industry here and in its enormous potential.”

Tourism arrivals in Israel hit a record high in 2019, with 4.5 million people opting to visit the Jewish state. The growth in tourism drove a 5.2% increase in hotel values in the same year.

That trend has been reversed by the coronavirus lockdown, but analysis by hospitality consultants HVS suggests that the industry will return to 2019 levels by 2025, delivering a revenue per available room rate approaching $200 – nearly three times the 2020 rate.

“We are cautiously optimistic when considering the Israel hotel industry’s ability to recover at an accelerated pace compared to other countries in the Mediterranean region. Although this crisis is unprecedented and still deeply uncertain, Israel’s hoteliers have had exceptional experience on how to thrive in periods of uncertainty,” HVS said in their report ‘Israel Hotel Market Overview 2020,’ also presented at the webinar.

Chairman of HVS London Russell Kett and Senior Associate Simon Huttel said: “We are of the opinion that the hospitality industry in Israel will recover and, as in the past, this downturn will create the opportunity for strong returns through well-timed and well-executed investment strategies.”

The Tourism Ministry has pledged to provide assistance to entrepreneurs looking for a long-term opportunity in the current downturn, pointing out that establishing a new hotel takes years of preparation and construction. They have advised, therefore, to exploit this period in order to be in a strong position when tourism returns to previous highs.

The HVS report noted that “Occupancy is expected to recover by 2023, followed by average rate a year later (in real terms).” However, they cautioned: “We note that the situation remains fluid; forecasts may change as time passes and as more light is shed on the rate of recovery.”

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