|By Dalia Tal, Globes, Tel Aviv,
IsraelMcClatchy-Tribune Regional News
Jun. 24, 2008 - Hoteliers are complaining of low profits and worried about the future, despite encouraging figures showing an increase in incoming tourists since the beginning of the year. The Israel Hotel Association says that the annual return of hotels was just 3.9 percent in 1998-2007, well below the returns of 14-18 percent in other countries, and the return of 8 percent for real estate developers.
This low return may be the main reason why developers have avoided building hotels in the past decade, investing instead in real estate or in foreign hotels. Although the hotels' average return has risen to 6.8 percent in 2008, the Hotel Association says that this was unquestionably an exception, due in part to the relative calm of the year to date.
The Hotel Association states that a tourist pays an average of NIS 348 per night at a hotel, and that the profit accruing to the hotel is NIS 44, or 13 percent. An Israeli pays the same amount, and the hotel's profit is NIS 32, or 8 percent. An Eilat hotel's profit is NIS 20, or 8 percent, the profit of a hotel at the Dead Sea is NIS 15, or 4 percent, and the profit of a hotel at Tiberias is NIS 29, or 10 percent.
Hotel Association president Eli Gonen says that the figures demonstrate that Israeli hotels charge realistic rates, and even low rates compared with other places in the world. He added that the low returns were driving investment away from the industry.
The Hotel Association attributes the low returns to the high cost of energy, water, and salaries, and most of all to the heavy taxes levied on the industry. Energy and water costs amount to 6 percent of a hotel's room rate, fees and local property taxes account for 5 percent, and salaries for 31 percent.
Hotel Association director general Shmuel Zurel claims that, in recent months, hoteliers have also had to cope with an extraordinary rise in prices for food, water, and energy, as well as the shekel's appreciation against the dollar, all of which further cut into the industry's profits and worthwhileness. He says that only one conclusion can be drawn -- the government must provide incentives for the industry and foster tourism as a preferential industry.
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