War as an engine for short-term rental hospitality

The hospitality landscape and its accommodation options are constantly shifting. While the distinction between hotels and vacation rentals is apparent, consumers who once preferred hotels are becoming more aware of the emerging hospitality industry options. 

The demand for short-term vacation rentals is steadily rising. The COVID-10 pandemic was the biggest accelerator of this trend, with people feeling that transient rentals provided a safer way to travel. With limited contact with others, no crowds, less traffic and less points of contact, a short-term rental property turned into the ideal solution. 

Short-term accommodations allow users to rent out rooms in residents’ homes or larger properties like villas and houses to enjoy a more unique, personalized, and community-oriented travel experience. This trend is gaining momentum from its popularity among younger Millennial travelers and the rise of do-it-yourself mobile tourism. Accommodation such Airbnb raises concern over what the future holds for established hotel brands. 

Rental owners understand the enormous potential in offering a product that can flourish and compete with hotels. With professionally run businesses offering high standards, possessing an ambition to mirror hotel accommodation and those in Israel are no exception. 

Airbnb and short-term rental businesses consider that there’s plenty of room in the hospitality industry for all businesses, yet hotels are concerned that this new sharing economy will reduce their overall share of tomorrow’s travel market. 

Hotels in Jerusalem among the priciest in the world

“Hotel prices in the most in-demand areas in Israel (before the war) have risen to be among the highest in the world, especially in Greater Tel Aviv and Jerusalem. Construction of new hotels in Israel takes about 10 years from the day the entrepreneur has the idea of opening the hotel,” explains Israeli hospitality and tourism expert Joseph Fischer when asked about the local growing demand for apartment rentals. 

“American and Canadian travelers arriving in Israel are looking for accomodation options for stays of approximately 10 days, in a spacious living surrounding with a homely family feeling and sometimes in areas where hotels are not an option,” says Eyal Levanthal, director of Israel Short-term Rentals Association. “

Staying in a hotel in a small guest room for that period of time could cause claustrophobia and can be a major financial expense, he says. “Short-term rentals are 20-30% cheaper compared to hotel facilities.” 

However, in Israel, there has been an ongoing confusion around the legitimacy of this hospitality sector. 

Each country has its own definition of a short-term rental. 

The law in Israel does not clearly define “short-term accommodation,” he says.

 “But with 15% of Israel’s accommodations for travelers being short-term rentals, our contribution just cannot be ignored. With 7,000 units and apartments, we decided in 2021 to form an association to represent the sector. From seven founders we grew to 54 members and today we have over 400 members who own 70% of the relevant apartments. We aim to unite 1,000 members by next year,” says Levanthal. 

An online service chart for the association members sets a relatively high standard of hospitality. Owners are committed to offer furnished, air-conditioned units with bedding and blankets, along with kitchen equipment including a refrigerator, microwave, toaster, and espresso machine. A washing machine, dryer, radiator or heater and wifi are a must as well, aiming to market a real home-from-home atmosphere. 

Rental entrepreneurs have appealed to the government for recognition. Social activist and an activist against government discrimination against self-employed workers, Abir Kara, was elected a Knesset member two years ago, and seved for a short period. He was also deputy minister in the Prime Minister’s office. 

“I pursue free economics and I was doing everything in my power to push forward a market with as little regulation as possible. I was and still am definitely in favor of short-term rentals being officially incorporated into Israel’s tourism industry. I blocked any attempt of the Housing Ministry to interfere – and even today when I am no longer a Knesset member, I am using all my connections to help them to flourish,” he says. 

After mass evacuations, this sector showed up 

BUT WHAT really put this sector on the map was the October 7 Hamas massacre in the South. 

The moment civilians needed to evacuate from settlements and kibbutzim near the Gaza border, owners of short-term rentals all over the country offered them unconditional free housing. 

“Within 48 hours most of the apartments in Israel were full with approximately 15,000 civilians. A multi-million contribution by the entire sector,” says Levanthal. 

A week later, when the Finance Ministry issued a formal agreement to compensate the country’s hotels for hosting the evacuees, the short-term apartment owners were left with nothing. 

“We sought advice and the authorities’ answer was to direct our in-house guests to hotels. However, with hotels overbooked – and with the support of the Sderot municipality – the government quickly understood that the Hospitality Apartment Association truly provides the appropriate solution,” he says. 

For the first time, a formal agreement with a financial compensation scheme was signed with this dynamic young association, indicating de facto recognition of the sector.

Will this blessed and extraordinary volunteering initiative lead to a formal legislation act to officially incorporate short-term rentals to formally blend into Israel’s hospitality landscape? 

“Regulation is needed as business taxation charges of their activities should be transparent. A directive on how many such apartments are in a building is essential. A danger of shortages for civilians who need to rent apartments for the long run should be examined as well,” says Fischer. 

”Safety and security must also be regulated. If a building with an elevator does not undergo annual maintenance inspections it cannot be used for short-term rentals. A smoke detector and a security door with a lock are crucial as well,” he says.

Tourism Ministry spokesperson Anat Shihor-Aronson says that the subject of regulation for short-term rentals “is on the ministry’s agenda” for after the war.

The writer is the Travel Flash Tips publisher.