Calcalist, Dov Cohen, 04.03.2020
The hotel industry in Israel is constantly boiling over. If, until about 6-5 years ago, most of the activity in the industry was in the hands of three main groups - Fattal, Isrotel and Dan, then more and more large real estate players who have not yet had a foothold in the field, jump on the train. Azrieli, which by the end of 2019 has announced that it will expand its operations to the branch with the acquisition of the Har Zion Hotel in Jerusalem for NIS 275 million, and will invest another NIS 600-500 million in the expansion and renovation of the property. The Israel Canada Group, controlled by Barak Rosen and Assi Tochmeyer, The same manager Reuben Elks (former CEO of Fattal), under the PLAY HOTELS brand. The company intends to operate several hotels - in Tel Aviv, Tiberias, Eilat and Herzliya.
However, at the same time, there is no less interesting phenomenon - expressing interest from more and more international networks in the Israeli market. The Easy Hotel chain, for example, recently announced its entry into Israel, and is expected to open its first branch in Ramat Hahayal in Tel Aviv in 2021, with some 200 rooms. The chain even announced its intention to open three hotels in Tel Aviv with about 600 rooms in total.
The Euro Hotel chain, which manages Western European hotels, has also recently expressed interest in entering Israel, while trying to locate a hotel management property. Similarly, as Globes recently reported, large chains such as Marriott and Mandarin have received inquiries from local hotel management entrepreneurs in Jerusalem and Tel Aviv in the past year, respectively. According to the same report, the chains are also interested in the feasibility of setting up hotels in combination with branding, ie properties that combine hotel and short-term rental apartments owned by private developers.
The confidence that real estate players, both foreign and domestic, have in the hotel industry is based on numbers: More than 4.5 million tourists visited Israel in 2019, compared to 4.1 million tourists a year earlier. Only a million tourists, with the prevailing view that we are only at the beginning of a trend.
The increase in tourism, of course, leads to additional figures for real estate companies - yield. According to industry sources, compared to the office sector, which knew how many years after the yields on the housing market moderated, and the average yield is currently 6.5%, the hotel yield can in some cases even reach Not for nothing, international chains are looking for areas where the demand for accommodation is higher than supply - this could be in Tel Aviv, where there is a shortage of about 10,000 beds, or rather in less central areas of the country, which lack strong hosting infrastructure but close to tourist attractions.
From hotels to hotels
The flourishing of the hotel sector in Israel is undergoing another trend, which has been expanding in recent years thanks to government encouragement measures - a change of designation and conversion of office buildings and hotel trade. One of the most prominent names in this area is the Brown Hotels chain, which in recent years has converted a number of properties that served as hotel offices. The most notable are the Lighthouse Hotel in the Tel Aviv Lighthouse, and Bobo was placed in the Menorah Tower adjacent to Rothschild Street. Now, the widespread phenomenon of converting office buildings into hotels is arousing the curiosity of international networks considering joining the trend.
"The hotel market has dramatically changed the aspect of improving the yields of office buildings," says Gilad Maoz of the Epstein, Rosenblum, Maoz (ERM) law firm , whose office is accompanied by, among others, local and international hotel entrepreneurs. "It also affects purchase prices and the willingness of hoteliers to purchase properties above market price, with the understanding that even if you purchased an office building 10% above market price, the day it changes its purpose to the hotel - its value will continue to rise and prices continue to improve. It only rises, especially in the heart of demand areas. "
Maoz explains the growing interest of international bodies in the Israeli market, among other things, in the Open Sky Reform, which he said has changed the global tourism map: "For many Europeans, Israel has become a preferred option for vacation, but even from a security standpoint it is no different from Western European countries.
"To this must be added the changes of recent years in the tourism market in Israel, especially the establishment of boutique hotels with a unique concept, which purport to offer a different hospitality experience than the traditional hotels. Clearly, Israel's relative advantages play a real role here - sun, sea, holy places, etc. However, the potential of the local market is still far from being realized, and further government investment in tourism infrastructure, advertising and branding is lacking. In addition, the government must work to remove unnecessary barriers and regulation. "