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Tourism: Rooms for improvement

Israel is a popular holiday destination, thanks to cultural and historical, but also leisure, attractions. But there are challenges to overcome.

Tourism in Israel has witnessed sharp growth since 2006, thanks to greater stability, economic growth, major marketing drives and an increasing interest worldwide in Israel as a rather unique tourism destination. According to the UN World Tourism Organisation, the industry has experienced an average of 12% growth in the past three years, while the ministry of tourism estimates tourism revenue at close to 2% of GDP.

The general manager of the David InterContinental Hotel sweeps his arm over the blue expanse of the Mediterranean, and then the row of high-rises along the northern shore of Tel Aviv. “You ask why tourism should grow here? Why shouldn’t it? Look at our assets: sunshine, smooth blue swells of sea, sand, and a vibrant economy,” exclaims David Cohen.

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His counterpart at the Sheraton, a few miles north, is as adamant. “Our occupancy rate? It averages over 80%, and in peak seasons, July and August, we top 100%! We see growth continuing at 10% to 15% per year in the future,” explains Jean-Louis Ripoche, general manager of the hotel. The Sheraton is now planning new hotels in Tel Aviv and Jerusalem, including an upscale boutique hotel in Jaffa, the first to have a non-kosher kitchen.

The ministry of tourism does not conceal their enthusiasm: “2010 was a record year, with $4.3 billion in tourist revenues, almost four times the 2002 income of $1.2 billion,” explains Stas Misezhnikov, minister of tourism.

By the year 2015, the ministry of tourism forecasts that tourism revenues will have jumped another 43% to reach $6.1 billion, derived from five million annual visitors. What is driving this growth? Experts point to several factors.

First, the indisputable advantage of being the location of a number of holy sites for the world’s monotheistic religions. Israel capitalises on religious tourism, and is planning and implementing further projects in this area.

Another strong driver of tourism growth is the booming economy. Business travellers represent a healthy segment in total in-bound tourism, and the increasing demands of various engineering, high-tech and green industry sectors point to larger numbers of visiting managers.

A third major growth factor for the industry is the opportunity presented by emerging markets. In order to increase visitor arrivals, Israel has signed co-operation agreements with over 30 emerging and other countries, with positive results. Minister Stas Misezhnikov notes that “there has been a significant increase in the numbers of Russian visitors to Israel since 2005, and now we are seeing increasing numbers of South Americans, tourists from Central Europe, and visitors from the Far East.”

Israel has a unique concentration of historic, cultural, religious and natural attractions, and is also one of the region’s most developed destinations, with modern infrastructure and a wide variety of services and facilities.

Israel has enjoyed prosperity and stability for the past few years, but must still face the ongoing challenge of changing perceptions, notably about security. For Minister Misezhnikov, “there are still common misconceptions among potential visitors related to security. We spend an excess of $55 million every year to position ourselves as a unique and attractive tourist destination. This is a slow cumulative process that will lead us to achieve our goals with time.”

Israel’s reputation as a relatively expensive tourist destination compared with other Mediterranean competitors, such as Turkey, Morocco or Tunisia, represents a challenge. On the other hand, proponents point to Israel’s excellent services and infrastructure, as well as its gourmet food and beautiful sites, which together mean good value for money.

Still, there are several bottlenecks to overcome, such as flight volume and hotel capacity. Building restrictions in Tel Aviv have slowed hotel growth, explain both the Sheraton and David InterContinental managers. “You must also consider that real estate prices are exploding,” says Jean- Louis Ripoche. “That does not help hotel investment or room rates.” That might well explain why no big new hotels have been built in Tel Aviv for the past 15 years.

But potentially the biggest challenge facing Israel is in relation to recent, and as yet unpredictable, political developments in the wider Middle East and North African regions, which could constrain tourism development in the short to medium term. Nevertheless, the ministry of tourism continues to encourage investors. Today, Israel offers 400 hotels with more than 42,000 rooms available. Moreover, eight new hotels are currently under construction, in Jerusalem, Herzliya, Ashdod, Netanya, Rehovot, Nazareth and Mitzpe Ramon.

Overall, the increasing number of inbound tourists in the past few years and the continuous growth of tourism revenues shed a bright light over the future of the Israel tourism industry. According to Alain Dupeyras, the head of tourism in the OECD Centre for Entrepreneurship, SMEs and Local Development, “the continued opening up of the country’s skies to low-cost airlines will certainly provide a powerful boost to Israeli tourism.” 

Mediaside

References

OECD (2010), Tourism Trends and Policies 2010.

OECD (2009), The Impact of Culture on Tourism.

OECD (2006), Innovation and Growth in Tourism.

Israel Ministry of Tourism

©OECD Observer No 285, Q2 2011