Jerusalem, city of hotels: The capital's hospitality industry, pitfalls

A loud phone conversation conducted on the Ben-Gurion train brought to the surface a concern not often discussed these days – the effect the protests across the country will have on tourism as two major periods approach – Passover and the summer months.

“Maybe it’s better to postpone the visit,” said the woman, in a conversation that later became clear was with her relatives in France. “There is an uneasy atmosphere in the country right now; wait a bit.”

When asked if she really thinks the demonstrations will negatively impact a tourist visit, she replied: “It’s about my sister and her family. I’m not afraid that something will happen to them, but it’s really not a pleasant atmosphere for a vacation in Israel. How can you visit the country when almost every day there is a demonstration, roadblocks and chaos?”

Hospitality history

Jerusalem has always been a favorite tourist destination, mainly for Jews and Christians, but there have also been visits here with important political consequences – such as that of Theodor Herzl or writer Mark Twain.

In Jerusalem, hotels were established quite early – some of them considered luxurious for their time – that hosted these significant visitors. One of them was the Kaminitz Hotel, considered the city’s first modern hotel. Built in the 19th century in the city center, it hosted world leaders.

The two-story building, once one of Jerusalem’s most sophisticated, is now light years away from its heyday as the Jerusalem hotel, established by the Kaminitz family, who immigrated from Lithuania in 1833 and are considered the pioneers of modern hotels in Israel.

In 1842, family patriarch Menachem Mendel Kaminitz, Jr. upgraded the building to what was then considered a deluxe standard, even planting a large garden next to it. Dignitaries and heads of the Zionist movement, including Baron Edmond de Rothschild, were hosted at the hotel. Magnificent weddings were also held there, and the hotel organized tours of Jerusalem and its surroundings for its guests. One of the well-known stories related to the hotel took place on October 28, 1898, when Herzl arrived in Jerusalem to meet with German Kaiser Wilhelm II.

A special carriage was sent to pick up the important guest and drive him to the Kaminitz. However, since Herzl arrived after Shabbat, he had to walk to the hotel. When he arrived, he discovered that his room had already been rented to the German emperor’s attendant, so he had to make do with a narrow room.

YEARS HAVE passed, and hotels in Jerusalem and the rest of the country in general have been upgraded beyond recognition. No less significant are the hotels belonging to international chains that have opened here, most of them offering elegant accommodation.

Tourism in Israel in general and Jerusalem in particular is based mainly on visits by Diaspora Jews and Christian pilgrims. While the former usually look for luxury hotels (five stars), the latter primarily book more modest hotels (two or three stars), which are not in great supply in the capital.

Jerusalem is the city with the largest number of hotel rooms in Israel. Every year, hundreds of new hotels open here. By 2027, approximately 3,500 new rooms are expected to be added. Hotels continued to open in the city even during the COVID period – at least after the first quarantine – and continue to offer tourists a large variety of accommodation options.

Despite the corona crisis, two new hotels were opened in Jerusalem in 2020 and 2021: Brown Mahaneh Yehuda (120 rooms) and Brown Jerusalem (46 rooms).

In Safra Square, tourists can choose among a range of hotels: “The mix of rooms is balanced, including camping, hostels, hotels of various degrees and more,” said officials engaged in tourism in the city. “We believe in the free market, which allows entrepreneurs to establish the level of hotel hospitality they find appropriate; therefore, there is no need for municipal or government intervention in the matter,” added a municipal spokesman when asked if there are plans to increase the supply of small hotels.

AT LEAST on the ground, it seems that municipal officials, backed by the Tourism Ministry, are right. The opening of various international hotel chains (e.g., the Waldorf Astoria; Ibis – under various brands; Orient; Vert), as well as national chains, are popping up in Jerusalem, many of which have gone global. The Braun chain, Fattal Ramada chain and Isrotel chain (which plans to enter Europe in the coming years) all fall into this category. And crucially, they have remained full since their opening.

Yet, while the hotel industry in the city has traditionally been focused on high-end accommodation, today we see more boutique hotels than ever opening to fulfill the growing need for more affordable options for tourists of every pocketbook.

“In east Jerusalem, under the Wadi Joz plan (Silicon Wadi), there are 50,000 meters of hotels planned. This will seriously boost tourism across Jerusalem and bring jobs and prosperity to the Arab community,” said Deputy Mayor Fleur Hassan-Nahum, holder of the tourism portfolio at Safra Square.

“We have needed more hotel rooms in Jerusalem for a while, and I am proud that in this administration under Mayor Moshe Lion we have advanced plans quickly and efficiently. Our city’s economy is very much built on tourism, and so hotels are the lifeblood of the industry.”

What emerges from the data is that tourists with a more modest budget stay at hotels in the Old City, and even in Bethlehem. In other words, in spite of Jerusalem’s continuous hold on the honorable title of a central attraction for tourists and pilgrims, a significant part of the income from accommodation does not reach the city or state coffers but to the Palestinian Authority’s economy.

A YOUNG couple boarding the light rail at the city entrance was checking something on their cellphones, with the guy asking if they were on the train to Nablus Gate. After a response in the affirmative, he explained that they were a young couple from Germany on a tight budget, and that they intended to stay at a small hotel in front of the gate. They had been told that it was “very cheap, and friends who stayed there said it was very clean and friendly.”

Similar situations often occur with groups of tourists from African and South American countries. “These are really not rich people. The cost of living in Israel is beyond their means; they don’t even dream of staying at the prestigious hotels of the international chains,” explained a tour guide who has been working with Christian pilgrims for years.

It is important to note that pilgrims who visit for religious reasons almost never stopped coming to Israel, even in times of unrest. They come, but they will stay either in east Jerusalem in the Nablus Gate area or inside the Muslim or Christian quarters, not going near the big hotels on the west side.

Tour guides told In Jerusalem about this almost automatic division that has been going on for many years: Jewish visitors, who come mainly during Jewish or summer holidays, will under no circumstances go to east Jerusalem’s small hotels; and the many Christian pilgrims do choose those small hotels or find accommodation in Bethlehem or nearby Beit Jala.

“For some of them, Bethlehem is in the planned route anyway because the Church of the Nativity there is an essential point in their journey to the Holy Land, but they also spend time there and find accommodation,” said a tour guide who specializes in South American Christian tourism.

The data

Tourism Ministry studies indicate that we have seen recovery compared to the severe depression of 2021, with the number of tourists who arrived in October 2022 at 333,500 compared to 57,000 the same time the year before. While this is naturally welcome information (also reflected in overnight stays and occupancy rates), the numbers still fall far short of 2019’s record figures. In fact, an in-depth examination reveals that the picture is more complex and raises serious warning signs regarding the future of tourism in Israel and the realization of its tourism potential.

Taking into account the data from previous months, there has been an increase in tourism compared to the fallow period at the peak of the COVID crisis. However, the ministry admits there was a decrease of about 25% in relation to the number of tourists who entered Israel in October 2019, despite it being a year in which a record 4.55 million tourists visited the country.

According to the Central Bureau of Statistics, tourist stays at hotels in Israel for August 2022 – the month in which most annual vacations take place in most of the Western world, particularly in EU countries – there was a plunge of 27% in foreign tourist stays compared to August 2019. The number of overnight stays by foreign tourists decreased by 29% in the Jerusalem region, as tourism from Europe to Jerusalem decreased at even higher rates.

ALTHOUGH THE world of tourism has not yet fully recovered from the pandemic, there is serious concern that the trend of increasing tourism since 2019 has stopped. There is also concern that it will be difficult to meet the Tourism Ministry’s goal of reaching 10 million tourists by 2030, as Israel as a tourist destination – especially for Europeans – is no longer popular.

Apparently, the primary reason for this decline in tourism compared to 2019 is purely economic: the strength of the shekel.

The war in Ukraine that began on February 24, 2022, also contributed to the increase in the cost of plane fuel, thus increasing the cost of flights. This, in turn, leaves tourists with less money for accommodation, which has a knock-on effect on tourism in Israel.

A more in-depth examination of the data on tourism in Israel reveals another fact. A huge proportion of tourists entering Israel is defined by the Ministry of Tourism as VFR (visits from friends and family). According to a study carried out by Deloitte in May 2021 for the ministry, 34% of tourists from the US, 37% from Great Britain, 41% from Russia ,and 57% from France are defined as VFR.

Having taken into account those tourists who came for business purposes, the proportion of “net” tourists – who visited for vacation, recreation or religion and pilgrimage purposes – declines even more. Moreover, it seems that a significant part of the tourism is of relatively older populations, with Israel being less appealing to young people.

The most surprising figure is the very low rate of religious tourism and pilgrimage according to an analysis of 2019 data: 26% of tourists from the US, 12% from Great Britain, 8% from Germany, and 4% of tourists from France.

As a result, the Tourism Ministry concludes that besides the holy sites of Nazareth, the Galilee and Bethlehem, which all require access through Israel, Jerusalem is the holiest city in Christianity – and, as such, its tourism potential is not being fully realized. 

Lion responded to this report by saying: “We do not see any indication of a drop in tourists planning to come to Jerusalem. All the information we have indicates continuous growth compared to 2022, so there is no need to change our tourism policy and plans.” ❖