Feature: Israel's hotel industry, a departure from a long period of stagnation

Israel is a potential tourism magnet. It holds a unique place in religious history, it has attractive beaches, comfortable weather and other attractions. All these should make it a top destination for international tourism.

And yet, while 2016 saw an increase in the number of incoming tourists, Israel still has not reached it's full potential.

While the small Middle East country battles an image as an unsafe, turmoil-ridden place, it has also struggled with its hotel industry.

"For many years, we have the same number of rooms in the hotels -- about 50,000. This year after the big program that the minister led, we are going to be with more and more hotels in the next couple of years. We have amazing incentives for the investors," says Amir Halevi, the Director General of Israel's Tourism Ministry.

Halevi is referring to the priority the tourism ministry has given to ending the stagnation in which Israeli hotels have been in.

With the growing realization that tourism can be a major driving force behind the local economy, the tourism ministry has made it its goal to improve the situation.

Not only is it trying to kick-start the construction of new hotels, it is also trying to reduce the bureaucracy around maintaining them.

In Israel, where bureaucracy and regulation are a major obstacle behind the high cost of living, plenty of red tape needs to be removed in order for more rooms to be built.

It can often take over a decade to begin building a hotel, with years of waiting for permits required by the different authorities.

"The process is going to be easier. It will be cheaper and that's why we hope the investors and entrepreneurs will come to Israel to build new hotels," says Halevi, adding that hotel construction has now been promoted to a status of a "national project," making it a top priority for the government as a whole.

After constructing new hotels, the challenge is maintaining to make their prices more competitive.

Jerusalem and Israel's economic hub of Tel Aviv regularly rank high on lists of the most expensive hotel rooms in the world.

While an increase in the number of rooms will most certainly help reduce the cost, there are other challenges to face.

Perhaps the most challenging is the image which Israel has. The country is frequently on the headlines due to its political strife and security issues. This is an uphill struggle when coming to market it as a tourist destination.

Eli Gonen is the president of Israel's Hotel Association and himself a hotel owner.

"The challenge is to convince all the world that Israel is a safety place, a safety destination and everybody can come to visit Israel. We have to market Israel and we have to deal with the perception... it is the obstacle for the flow of tourists," Gonen says.

For Halevi, the rise in global terrorism is proof that Israel is not unique. He believes Israel's advantage is that it has experience in dealing with the aftermath of terror attacks, making it safer than other destinations.

"People understand, especially the tourism industry, that no one can know where and when will be the next terror attack," Halevi adds.

The security situation in Israel, which fluctuates between periods of relative calm and periods of escalated violence, makes hotels a risky business.

"The hoteliers in Israel, we are very optimistic. Otherwise you cannot survive such a period," says Eli Gonen.

Tourism is the first industry to take a hit amidst rising tensions.

In addition to the unknown factor of security, the hotel industry in the country is under a large amount of regulation. This contributes to the expensive hotel rates and makes it difficult for hotels to offer more attractive prices.

"There are so many regulations that we should take it out of our business life in order to be able to be competitive," Gonen believes.

One of the major challenges hotels face is the adherence to the Jewish dietary law -- the need to keep Kosher.

Kosher food substantially increases hotel expenditure. This is a unique factor that hotels around the world do not face.

It requires at least one full-time Kosher supervisor present at the hotel at all times. It also requires separate kitchens and utensils as separation between meat and dairy foods is mandated by the religious law. Even the table cloths used for dairy meals must be different than those used for meals in which meat is served.

This is all translated into more cash spent by the hotels.

A non-kosher hotel is immediately less attractive to many Israelis which adhere to the Jewish dietary restrictions. This translates into loss of local business and therefore, less profit for hotels.

Amir Halevi says many of the regulations are not in the authority of the Tourism Ministry, but they are trying to help wherever they can.

"We already succeed to reduce the regulation with the process of planning, building, security issues, kosher issues and so on. So we really think we can be very optimistic and we are going to reduce regulation. That's why its going to be much more feasible to build hotels in Israel," he says.

Israeli hotels are required by law to have a lifeguard in their swimming pools, a requirement that does not exist in most countries. They are also required to have an instructor at their gyms.

Each floor of a hotel in the country must have a public protected area in case of a missile attack on the country -- this means less space for income producing rooms.

Israel's minimum wage has increased in recent years. The welcome move, which is intended to shrink the huge wage gap within Israel, is a bigger burden for hotel owners. Their employees are often those making minimum wages.

In recent years, the budget for Israel's tourism ministry has sharply increased, signaling the government sees the industry as a major priority.

The ministry has recently opened a tender for the creation of a budget hotel chain. In Israel, while there is an abundance of expensive hotels, budget hotels are lacking. This will likely decrease the prices.

There is certainly room for optimism.

"When we have more rooms, we will have more competition. That's what we need and that's what we are working (on). There is a good atmosphere around the tourism industry," Halevi summarizes. Endit