Israeli Hotel Industry Faces a Tough Summer as a sharp decline in occupancy and tourist bookings

In what should have been one of the peak seasons for Israel's hotel industry, hoteliers are now grappling with a sharp decline in occupancy rates and tourist bookings. The imposition of a vacation coupon system, long-standing high room rates, and pricing strategies that raise costs during peak seasons have all contributed to a challenging year for the industry. This trend is evident in the latest data from the Central Bureau of Statistics (CBS), which reveals a low point not seen in eight years.

July, typically a strong month for tourism, has seen a substantial decrease in occupancy rates, dropping to levels reminiscent of 2016. In July 2016, the nationwide average occupancy rate stood at 62.4%. Subsequent years saw steady growth, reaching 72% in 2019. Although 2022 marked a return to the pre-pandemic level of 72%, this year witnessed a significant setback, with occupancy rates plummeting to 62.4%. This represents a 14% decrease compared to July 2022 and 2019. Consequently, total overnight stays in hotels during July this year also decreased, declining by 11% compared to July 2022 and 9% compared to July 2019.

The situation in August is not looking any better, with hoteliers and travel agents reporting disappointing results. Meanwhile, the bed and breakfast (B&B) industry is experiencing even greater hardships, with a reported 50% average drop in bookings for July compared to the previous year and a 40% drop in August. B&B owners, who increased prices during the pandemic, are now feeling the consequences as customers opt for other options.

Amit Bar-on, the owner and manager of a rural accommodation complex in the Western Galilee, expressed the industry's challenges, stating, "With the end of vacations in August, it can be summarized that there was a 30%-40% drop in revenue. Many hospitality complex owners are trying to rent or sell their complexes to avoid a financial crisis and defaults."

These declining numbers are attributed to the high cost of living and inflated prices in Israel, affecting both foreign and domestic tourism. Tourists visiting Israel and Jordan are now opting to stay elsewhere due to the high prices. European tourists, seeking to escape the cold, are also choosing more affordable destinations like Greece, Turkey, or Cyprus.

Political tension and protests against the coup d'état have also deterred tourists from visiting Israel during uncertain times. Additionally, the Russia-Ukraine war has led to a significant decrease in tourism from these countries, with Russia being one of Israel's largest sources of inbound tourism before the conflict.

Danny Lipman, CEO and owner of the Atlas boutique hotel chain, lamented, "The summer was not amazing at all. On the contrary, it was a disappointing summer that did not meet expectations or goals."

The competition from abroad, economic slowdown, rising interest rates, and the national mood all play a role in the domestic tourism industry's struggles. Many Israelis prefer to vacation abroad, where costs are often lower, given the current economic climate.

Even Eilat, a popular destination for Israeli families, has seen a decrease in tourism. In July, room occupancy in the city dropped by 5% compared to 2022 and 7% compared to 2019. Foreign tourist overnight stays plummeted by 48% in July compared to 2019, and Israeli overnight stays also decreased by 7% compared to 2019.

Itamar Elitzur, CEO of the Eilat Hotel Association, noted, "The farther you get from the boardwalk, the harder it is to fill the hotels. Accordingly, there were many promotions throughout the summer."

As the hotel industry grapples with these challenges, it remains to be seen how it will adapt and recover in the coming months.