Minister of Tourism Yariv Levin's great dream is about soccer, of all things. Levin, a diehard fan of the Hapoel Tel Aviv team, a trait he inherited from his father, Prof. Aryeh Levin, an Israel Prize laureate in linguistics and a dedicated Labor Party supporter, says with no hesitation whatsoever, "My dream is for the team to one day win the European Champions League. At best, this dream sounds unrealistic, even to non-football fans - the stuff of science fiction, but Levin is insistent: "It's permissible to dream, and maybe it will happen one day."
Whether it does or not, Levin is busy right now with matters in which he has a real chance of making a difference, such as cutting taxes on hotel overnights and package tours in Israel. He is confident that his plans, involving mainly increasing the number of hotels and hotel rooms, will lead to lower prices. "The supply will lower the price," he says, repeating his mantra again and again.
"Tourism in Israel should be, and can be, a key economic anchor," he says. "Every million tourists bring in NIS 3.5 billion, and create 40,000 jobs. Even though this is well known, tourism in Israel has not been given weight in national priorities - not in the budget and not in attention devoted to the subject, and this is going to change. We're starting from a fairly low beginning of 2.8 million tourists a year, and as far as I'm concerned, we're at a turning point.
"I came to the Ministry of Tourism because I asked for it, not because I had to. I managed to increase the tourism budget from NIS 600 million in 2015 to NIS 800 million in 2016. We allocated NIS 340 million for marketing, double what was before. We're investing NIS 160 million in tourist infrastructure, and the same amount in grants for building hotels. If we continue and get a budget like this for three-four years, we can get Israel back on the global tourism map. It won't happen all at once, but you can already see the results of some of the things we're doing.
"Globes": It was only recently reported that the hotel occupancy rate in March was 58%. Hoteliers say that the empty rooms are forcing them to charge higher prices during peak seasons.
"Occupancy averages 60%, and it reaches 100% on the Passover holiday. These are good figures, considering that the demand from tourists for rooms is stable, and the demand from Israelis is rising. On the other hand, the supply of rooms isn't changing, and we're going to change that. It's out of the question for tourists who paid less than $100 for a flight to pay more than double that for a night in a hotel. There is a shortage of cheap hotels, hostels, and roadside motels. The few there are cost a lot, because demand is high."
Hoteliers claim that prices reflect high maintenance costs, not high profits.
"There's too much regulation in Israel in general, and that includes the hotel industry," says Levin, who as an MK submitted over 40 bills. In tourism, however, he lists a series of rules and regulations in need of change: "We eliminated the requirement for a fitness instructor in a hotel exercise room. We granted flexibility in overtime for employees, we revised the regulations governing night work, we're trying to extend hotels' business licenses to a five-year period, we changed security arrangements, and we eliminated the requirement for a pool operator. These measures will reduce costs, and should be reflected in the price. Due to relatively high wages, hotels in Israel can't be as cheap as those in Egypt, but reducing regulation can help."
"airbnb is a welcome development"
Together with Minister of Finance Moshe Kahlon, Levin recently presented an overall plan that he says will cut hotel prices by 20%. Under the plan, passed on its first Knesset reading in February, 15,000 hotel rooms will be built in the next five years. Developers will be encouraged by shortening construction procedures. "The reform recognizes tourism as national infrastructure. Such a measure will enable the foreign hotel chains to establish a significant presence here," he says.
But the hotel industry does not reward its investors.
"Hotels are an attractive sector. Dozens of developers, both local and foreign, have already met with me, including concerns from China considering the establishment of a hotel chain tailored to a Chinese audience from the signs posted to the type of food."
Levin is also allowing developers to increase the hotel space by 20% for residences. Dan Hotel chain owner Ami Federmann says that the initiative is impractical, because in high-demand areas, a 20% allocation is not enough to subsidize the price of the land; only a 50% allocation for residences will make the deal worthwhile.
Levin believes that this argument is incorrect. "A 20% addition dramatically improves the project composition and the ability to obtain bank financing. The aim is for developers to build hotels, with the residences being a side project, not half of it," he declares.
Other opponents of the idea assert that this evades the restriction on beachfront residences.
"In places where zoning residences on the beachfront is forbidden, it can't be done even in hotels. The idea is to encourage construction of hotels in the heart of the city center."
Levin supports the leasing of such apartments, for example in airbnb, in competition with nearby hotel rooms, as well as the entire idea of leasing apartments to tourists. "This is a welcome development, and brings a different type of tourism," he says. "airbnb is a growing phenomenon, and it must be understood that it increases the total pie; it isn't at the hotels' expense. I held discussions with the Israel Tax Authority in order to arrange this matter, with a tax that will not be burdensome. It mustn't be prevented."
Levin's plan also includes an expansion of the eligibility map for developers to the outskirts of Haifa in the north and up to Ashdod in the south. "We'll add grants for developers building hotels of up to three stars, mainly in converted buildings. This is worthwhile and cheap, and is designed to meet the needs of mass tourism. The supply will bring down prices."
The hoteliers emphasize that paying taxes to the local authorities is one of the main barriers to lower prices. They want a differential municipal property tax according to occupancy, as is the prevailing practice around the world.
"It's logical that when there is high occupancy, the local authority should get more, and vice-versa. We need approval from the Ministry of the Interior for such a measure, and we're promoting it. I proposed a pilot in Jerusalem to the Hotel Association in cooperation with Mayor Nir Barkat, with an attempt to adjust municipal property tax to occupancy. The Hotel Association wanted to stop it. I'm willing to renew the effort to run a pilot, but I won't force it on anyone."
The Hotel Association said in response, "Our request for a minimum and maximum municipal property tax was turned down, so the pilot did not go ahead." As for the state of the sector, the Hotel Association said, "Profitability in the market is very low. The main barrier to the entry of competitors and the reason for high prices and low profit margins is excess regulation that does not exist in other OECD countries, and which accounts for a quarter of the consumer price. Given the operating costs and crazy regulation, new hotels are also incapable of offering a lower and unrealistic price. Flooding the market with low-cost hotels will therefore not solve the problem of prices. Furthermore, in a crisis, the hotels are the first to go bankrupt."
The Hotel Association is calling on the government to invest in encouraging incoming tourism, and this is logical.
"We'll put effort into increasing incoming tourism, especially in the winter. In the summer, the hotels charge terribly high prices, because they are empty in the wintertime. Eilat falls off the tourism map in the winter, and we embarked on a campaign that proved that this can be changed. We gave the airlines a €45 subsidy for each passenger arriving through Ovda. 50,000 tourists from Russia, Lithuania, Hungary, and Finland visited Eilat this past winter, and the hotels that were quickly filled up were the cheap ones, of course. Next winter, we'll expand the campaigned with an additional NIS 15 million budget."
One of the airlines flying to Ovda Airport is Irish low-cost giant Ryanair. If Ryanair starts flying regularly to Israel, the cost of flights, which have already been lowered by the open skies policy, will be opened to new competition. What is bothering Ryanair is the high fees it will have to pay at Ben Gurion Airport.
"Emphasis must be placed on lowering fees and granting every assistance to a company like Ryanair," Levin declares. "The problem is that the government regards Ben Gurion Airport as the exit point for Israelis, instead of primarily the entry point into Israel. The working idea should start there. We have good cooperation with the Ministry of Transport on this subject. Until I became minister, the Ministry of Tourism didn't work directly with airlines. I made a big change in this."
Last week, the Ministry of Tourism launched a campaign to encourage foreign airlines to add more destinations to their route to Israel, with grants of up to €3 million a year for operating a new route to Ben Gurion Airport.
"Our duty is to identify strong markets with tourist potential for Israel, headed by China, and then India," Levin says. "116 million Chinese tourists took overseas vacations this year, and only 47,000 of them came to Israel. The potential in China is enormous, so I increased the marketing budget in China 10-fold. A substantial proportion of that went into agreements with agencies to start marketing and selling Israel."
Bar and Gal in the state service
On the other side, Levin says that his ministry will invest over NIS 10 million in a campaign aimed at the global gay community for the Gay Pride Parade - a tourist bonanza that has already proven itself, and has won the city of Tel Aviv renown in the gay community. "Israel has strongly emphasized the pilgrim community. This is an important market, and we are continuing to invest in it, but it is limited. Most of the world's tourists want to go the beach or visit a big city - we have barely addressed that, and this is actually the first time we're going for the great mass of tourists in the world."
Do you support the use of presenters like Bar Refaeli and Gal Gadot to strengthen Israel's image in the world?
"I'm in favor when it's a figure that can present Israel in the right proportions."
As part of their basket of gifts, the most recent Oscar candidates received a 10-day trip to Israel, paid for by the Ministry of Tourism. In a situation in which Leonard DiCaprio lands in Israel, the publicity value of a picture of him getting a tan on the Tel Aviv beach is enormous, and Levin is aware of it.
"I don't know if the Oscar candidates will come, but even if they don't, the deal is already good for us - mainly because we will pay for the trip only if the visit takes place. We're hosting 2,000 opinion leaders in music and sports this year, with a concrete value in advertising on the social networks."
In the end, one terrorist attack chases all the tourists away.
Terrorism is everywhere. It doesn't help, of course. In the past, they used to stop advertising Israel as a tourist destination when terrorist attacks took place. I gave the opposite order - enhance the campaigns, and show the world stability, continuity, and security, and that's what we did when the stabbing events began. Israel is one of the safest places for a tourist."
Only recently, a terrorist caught in Belgium admitted that he planned to attack a flight to Israel. All the plans would have gone to waste."
"The world's terrorists have always wanted to attack Israel, but the ability of the security services and our security systems have fortunately made this task very difficult to accomplish. There's always anxiety that something will happen, but if we let this fear control us, we won't get anywhere. In the past, security events caused incoming tourism to collapse, and now, with the stabbings intifada, when we haven't stopped our marketing efforts around the world, we have had the same traffic for the past three months."
One of the ideas Levin making a big effort to promote is the construction of a casino in Eilat. "Eilat needs hundreds of thousands of tourists a year. We have to build hotels and tourist attractions there, and the only way is through a casino that will be part of a conference center and a compound that includes a 750-room hotel," he says.
Many people from all over the political spectrum oppose a casino.
"The opponents' arguments are demagogic and unserious. There's gambling in every corner. Kids study in a school with a sign about the state lottery, with a lottery ticket stand on the other side of the street. In the evening, they watch soccer, and the advertisements encourage him to gamble on the results of the game. I'm talking about regulated gambling and supervised entry that includes many restrictions, such as the age of entry and the amount gambled. The prime minister supports the idea, and he also thinks that not only will a casino not increase gambling, but that it will eventually regulate it. In Las Vegas, the casinos account for 17% of the city's revenue. Eilat can't rely solely on Israeli tourism in the long run, so even the opponents will eventually realize that this will happen. There isn't any plan now; it needs legislation and a Knesset majority. It won't be easy to pass it, but we'll succeed, just like many other things for which we didn't believe we could generate support."
Published by Globes [online], Israel business news - www.globes-online.com - on May 1, 2016
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