Israel set to ‘bounce back’ from pandemic as lessons have been learned before - Insights
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Israel set to ‘bounce back’ from pandemic as lessons have been learned before

In a buoyant message to a webinar audience of some 300 hotel operators, investors and owners, held 1 September 2020, Israel’s Minister of Tourism was confident the country’s hotel sector would make a full recovery post-COVID, because historically the country had done so before.

Asaf Zamir, speaking on an international webinar hosted jointly by HVS and the Israel Tourism Ministry, said: “because of the country’s history – with war and security – it has learnt how to bounce back more than anywhere, because we know how to do it.”

Israel’s tourism sector, he said, was already showing recovery with hotels that had reacted and adapted since the outbreak of the pandemic, now reaching strong levels of occupancy on the back of domestic tourism.

“The number of people going to hotels in the middle of the pandemic was outstanding – over 50% of hotels were open and August [2020] was record-breaking,” revealed Zamir.

Visitation was, however, concentrated in hotels outside the major cities and future demand was expected to focus on less crowded areas and those closer to nature. “When we look back this will be the best time to develop hotels, when demand is so high and supply so low,” he added. “In every crisis there are options and opportunities and Israel is a land of opportunity post-Corona.”

Israel’s hotels have been assisted throughout the pandemic by a series of government initiatives including the cancellation of city tax, a furlough scheme which runs until June 2021, as well as grants to assist with running costs until next June.

STR director Thomas Emanuel reiterated the successful performance of hotels in Israel post lockdown, with occupancies across the country almost back up to pre-COVID levels, driven by the domestic market. Rates were also in line with where they were, in some cases even higher, although RevPAR [rooms revenue per available room] remained firmly in negative territory. Leisure guests, he said, were driving recovery with hotels in Eilat leading the way, while Tel Aviv, traditionally more dependent on MICE business and corporate travel, lagged behind.

The pandemic followed a record-breaking year for Israel’s tourism, with demand in 2019 up across the country and an active hotel pipeline of both international and domestic development. HVS’s recent report on the country’s hotel sector – The Path to Recovery – showed that arrivals to the country last year hit 4.5 million and hotel values gained a further 5.2% on the back of similar average RevPAR growth.

Russell Kett, chairman of HVS London, told the audience that HVS expected to see a gradual but accelerating recovery for Israel, with some international demand coming back later this year.

“Some of the growth in supply planned in Israel is likely to slow down. There will be inevitable delays in some projects and some are likely to be abandoned altogether,” he said. “Likewise, hotel values have declined in the country this year, and will remain depressed until EBITDA hits the bottom and there’s evidence of recovery. In the longer term values will recover and it will be a good opportunity to invest as there’s opportunity for high returns if well-capitalised buyers purchase distressed assets.”

Looking forward to full recovery, Kett said: “We think it will be 2024 before RevPAR, occupancy and average rate are back to where they were in 2019. In the most likely scenario hotel values will fall by 10-25% this year, but recover by 2024/25.”

“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. Last year saw a phenomenal number of visitors to Israel and hoteliers will benefit greatly from persuading a proportion of them to return to help spearhead the recovery.”

An engaging panel session concluded the webinar, with panellists Ronen Nissenbaum of Dan Hotels, Alexis Delaroff of Accor, Shirly Kaplan of Bank Leumi, Jonathan Falik of JF Capital Advisers and Carmit Bar-On of Meitar. Topics tackled by the panel included how well Israel was dealing with operational challenges, maintaining a positive cash flow, dealing with lease disputes, and what more can be done to attract international investors to the country.

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