The conflict between Israel and Hamas, or Islamic Resistance Movement, is resulting in a humanitarian calamity. As many people have been displaced or are under fear of attack, Israel’s hotel industry is playing a critical part in housing, sanctuary and relief efforts.
The war also will affect Israeli tourism, with Israelis being per capita among the world’s largest sources of outbound travel demand.
Hoteliers’ efforts are directed at looking after Israeli victims of the attack launched on Oct. 7 by Hamas, designated as a terrorist organization by the U.S., United Kingdom and European Union.
The United Nations stated on Oct. 17 that more than 4,200 people have died in the attacks.
Israeli firm Fattal Hotels is the largest hotel owner and operator in the country. The company operates 270 hotels in 20 countries, including 41 in Israel.
A statement sent by the firm in Hebrew and translated via Google Translate stated “the management of Fattal Holdings (1998) Ltd. is doing everything in its power … in the war effort and wishes to share in the grief of the families of the fallen, to wish a complete and speedy recovery to the wounded and to offer a prayer for the return of captives and abductees home.”
Staff welfare is the first focus, said Joseph Fischer, owner of Tel Aviv-based business consultancy Vision Hospitality & Travel.
“Three years of the coronavirus pandemic assisted hotels here to be very nimble and flexible to emergency situations. Hotels are housing many employees, those not called up among the 360,000 reservists. The hotels that remain open are operating on skeleton crews,” he said.
Fischer said nothing had fully prepared Israel for this latest situation, despite its complex history.
“We had to evacuate many people in one go. What do you do next? Universities and banquet halls are being used as dormitories, and there are so many volunteers, organizers do not know what to do with them,” he said.
He said the hotel industry needs to do two things to prepare for normality, which he added probably is months away.
“The most important is the people. We have to keep them inside the industry, not let them go. Secondly, we must keep the marketing channels open, not for now, but for the future,” he said.
Outbound Dip
It is not just Israel that will experience a drop in travel and hotel demand, although it will be larger there than elsewhere.
Israelis are keen outbound travelers, Fischer said.
“Israelis are probably the biggest travelers in the world in terms of population. Countries such as Cyprus, Greece, Egypt, Jordan and the United Arab Emirates all see large numbers of Israelis. In Cyprus, Israelis are number two after the British. These places will suffer,” he said.
Flight carriers such as Turkish Airlines, Emirates, Lufthansa and British Airways all run numerous flights daily to Tel Aviv, and all have stopped service to the city.
“Turkish Airlines’ service from and to Istanbul and Tel Aviv, 12 to 14 flights daily, with more than $600 million earned a year, and they stopped flying. Emirates started recently to come to Tel Aviv with daily three flights on Boeing 777s, and, again, they stopped,” he said.
Fischer added the Israeli government is helping to fund privately owned El Al Airlines during the crisis.
“[Israel] needs to keep open channels,” he said.
The United Kingdom’s Foreign, Commonwealth & Development office has advised “against all but essential travel to Israel and the Occupied Palestinian Territories.”
Of the country’s approximate stock of 57,000 hotel rooms, most will be used to house evacuees and the displaced, Fischer said.
Hotels in and around “Eilat and the Dead Sea, out of range of Hamas rockets, are now full. Of course, you cannot really say they are sold out,” he added.
Rays of Hope
Optimism comes from the uniqueness of Israel, Fischer said.
“There is only one Holy Land, only one Dead Sea. Israel has 18 or 19 UNESCO World Heritage Sites in a country of very small scale. There also is nature, with migration seeing 600 million birds crossing the country.
“Israel does not need to sell itself. I am not concerned about that, how we keep the product. It is more about keeping our teams in place,” he said.
Logistically, the situation is a nightmare, he said.
“The country might well look different from an investment perspective. Investors might have second thoughts and divert funds to other destinations,” he said.
He added that when the conflict is over, solidarity might encourage more investment.
“Most hotel rooms are Israeli operated, and investors are mostly Jewish. Solidarity might increase investment, but there will obviously be an influence on [average daily rate], which now is basically 0%,” he said.
He added Israel's hotel industry has not experienced a post-pandemic upswing in the same way that other Middle Eastern countries have.
“Israel has had high [average daily rates]. It is one of the most expensive countries for tourism, and the rebound was not as quick as it was for Cyprus, Turkey, Egypt’s Sinai region and the UAE. [Israeli hoteliers] will have to reduce rates, but perhaps guests, too, will wish to come back to show solidarity.
“Religious tourists still want to come, and they are just postponing. I am optimistic. Israel is different … [but] sanity is something we are missing from here, and not just today. We are a village surrounded by a jungle,” he said.
Tourism is the fourth or fifth largest industry in the country, despite the government not focusing on it due to the nation’s volatility.
“Every two years or so we have something happen, so the industry is not a strategic one, and which is why we’ve been stuck at 57,000 hotel rooms and 4 million tourists [per year],” he said.
Fattal Hotels’ translated statement underlined its financial challenges.
It said the conflict has caused the closure of “about a quarter of the company’s active hotels in Israel.”
“The company estimates that the scope and nature of the activity is expected to have a negative impact on the company’s results in the sector,” the translated statement said.
“As long as the fighting continues, there may be a negative impact as well as on the results of the Israel sector in the following quarters, the extent of which at this stage cannot be estimated.”
Fattal said its Israeli portfolio accounted for approximately 20% of its global earnings before interest, taxes, depreciation and amortization in the first six months of 2023.
Most global hotel firms with an Israeli presence issued blanket statements.
Hilton said it is “continuing to monitor the situation in Israel closely, and our top priority is — and will remain — the safety and security of our team members and guests.
“We are also working to support those whose travel plans have been impacted by waiving any cancellation penalties for accommodation at our two hotels in Israel, which remain operational.”
According to data from STR, CoStar’s hotel analytics division, there has been a notable dip in rooms bookings for Tel Aviv, Jerusalem and all of Israel.
The data shows that hotel occupancy in Israel dropped from 73.6% on Oct. 6, the day before the conflict started, to 56.6% the next day, a Saturday. The following day, Oct. 8, occupancy fell more, posting at 40.6%.
For the country’s main two cities, Tel Aviv and Jerusalem, the trend was identical.
In Tel Aviv, occupancy dropped between Oct. 6 and 8 from 66.6% to 52.8% to 31.1%, and in Jerusalem the corresponding levels were 86.7% to 74.2% to 52.9%.