The Knesset last Monday night the eve of 14 Adar-I approved the initiative of the Tourism Minister Yariv Levin to reduce vacationing costs in Israel, in which hotels will be defined as national infrastructure and be approved in a fast and simple procedure in the National Infrastructure Committee. In addition, an independent local committee can approve an addition of up to 20% of the hotel rights for residential purposes – this will reduce the risk of the entrepreneur in the project, increase the source of financing and shorten the return on his initial investment by about 5 years.

The program will lead to significant shortening and simplification of the procedures for planning and constructing hotels in Israel, a dramatic increase in the number of hotel rooms, a significant addition to the number of residential units and, at the end of the process, a reduction of about 20% in the cost of vacationing in Israel. According to estimates by the professional staff in the Tourism Ministry, some 15,000 hotel rooms will be added within 5 years and about 27,000 in 10 years – which will increase competition between the hotels and reduce the cost to the consumer.

Background: Bureaucratic hurdles and serious shortfall of hotel rooms

Today there is a serious shortfall in the number of hotel rooms in Israel and many entrepreneurs are prevented from starting new builds because of long and arduous planning processes and high financial risk. During the last decade in Israel, about 3000 new hotel rooms were built in Israel (a slight increase of 6%). The low levels of supply for hotel rooms in Israel is the prime factor in the increased cost of overnight accommodation in Israel over the last ten years (2004-2015) of about 70%.

Persistent and cumbersome planning procedures and obtaining permits represent the main obstacle in building new hotels in Israel, when it takes more than a decade to receive permission to build. An additional obstacle is the difference between the average return in the industry and the high risk level, which leads to difficulties in receiving finance from financial bodies and increases the investment cost in the project.

As a result of the project, an increase in supply and cheaper prices

The objective of the program is to provide a genuine and immediate response to these obstacles, to increase the supply of hotel rooms in Israel, to advance competition in the market and thereby lead to a reduction in prices. In addition, the program will lead to an increase in residential units, which integrates with government efforts to expand the supply of residential housing.

Tourism Minister Yariv Levin states “This is a process that will have an effect on the pockets of each and every one of us. According to professional estimates, this will reduce the cost of vacationing in Israel by 20% within five years. The program will mean that entrepreneurs will not have to endure bureaucratic ordeals and building a hotel will no longer border on a dream. We are giving an answer and a solution to entrepreneurs from Israel and overseas who have been dissuaded until now from investing in hotels in Israel and we are reducing economic risk for investment.”

The program has been sent to the Knesset Internal Affairs and Environment Committee for discussion.

(YWN – Israel Desk, Jerusalem)