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Domestic tourism boosts Israel's hotel sector while international chains seek development opportunities, says HVS

Despite Israel’s ongoing geo-political instability the country’s hotel sector has cause for optimism, according to a report from global hotel consultancy HVS.
With a number of new properties due to open over the next four years and leisure destinations in the country remaining relatively resilient, international hotel chains are still showing an interest in the region. Smaller scale boutique hotels are proving a key trend, particularly in Tel Aviv and surrounding areas.

“Visitation to Israel may have fallen, but total bed nights have declined by only 1.4%, which is not as severe as anticipated. New supply coming on stream over the next few years includes properties flagged by Marriott, Starwood, Kempinski and Isrotel,” commented report co-author and HVS analyst Jill Barthel.

Hotel occupancy in 2014 fell by a relatively modest two percentage points to 69% compared with the previous year, while visitation to Israel fell by 3.6%, including a decline in cruise visitors.

However, an overall shortage of hotel rooms has meant that average rates rose during this period, from US$205 to US$209.

The country’s brightest spots are the leisure destinations of Eilat and the Dead Sea, which attract a good proportion of Israel’s 35% domestic tourism.

“Domestic tourism has become more important to the hotel sector as many Israelis choose to holiday in their own country rather than travelling abroad because of the tensions between Israel and Turkey,” commented report co-author Russell Kett, HVS chairman.

“In the longer term Israel’s historic sites, places of religious importance, warm weather and highly developed tourism infrastructure mean it has strong tourism potential, which is why hotel chains are still keen to open in the region.”

Internationally branded hotels entering the market recently include Ritz-Carlton Herzliya (opened December 2013) and the Waldorf Astoria Jerusalem (opened May 2014), while the opening of the W Tel Aviv-Jaffa Hotel has been postponed until 2017.

“The hotel market in Israel continues to provide interest and excitement, and despite the tensions the country is experiencing interest from international brands remains strong,” added Kett.

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