Israeli Tourism Is on an Upswing While Facing Political, Infrastructure Challenges

The industry bounces back amid turmoil over the government’s judicial reforms, the security situation, and infrastructure woes

Israel’s tourism industry has been coping with some major turbulence in recent years. Accustomed to ebbs and flows, a look at the sector shows a contradicting trend, with room for a cautiously optimistic outlook.

While Israelis may be preoccupied with political developments and security troubles, tourists continue to enter the country, gradually bringing levels back to what they were before the global COVID pandemic struck three years ago.

The tourism sector in Israel has been battered by disruptors repeatedly—wars, violence, political unrest, and the biggest disruptor in recent years—the pandemic. Add to that inflation, sky-rocketing airline fuel prices, and airlines going bankrupt, and it is an uphill battle to keep business afloat.

“Tourism is a fragile industry that is influenced by many trends and circumstances,” said Yael Danieli, general manager of the Israel Hotel Association (IHA). “Now we are seeing a confluence of circumstances that influence each other—the economy, perception of safety and of general instability. This brings many tourists, even those who already made reservations, to recalculate their course and wait for a more stable period.”

In some sectors, tourism has remained largely unaffected.

“Tourism has more than recuperated,” said David Katz, deputy general manager of Sarel Tours and Conferences. “Since all of the COVID-19 restrictions have been lifted, we have been blessed with an outpouring of visitors from around the world.”

David Katz, deputy general manager of Sarel Tours and Conferences. (Courtesy)

Katz and Sarel Tours have been bringing evangelical and Christian tourists to Israel for 30 years. But, while faith-based tourism appears to have bounced back, other sources of tourism appear to be less stable and more vulnerable to current events.

Globally, tourism has suffered some major blows in recent years. In Israel, additional challenges are abundant. They do not only include a simmering political arena and unrest on the borders and within the country. There are major infrastructure deficiencies that cannot be met so quickly. From lack of budget hotels, parking spots for buses, and incessant traffic jams, there is a lot of work to be done.

Yet, the industry is still standing and by the looks of it, and the official numbers, the horizon could be rosy.

According to Israel’s Central Bureau of Statistics, the number of incoming tourists since the beginning of 2023 has almost reached the pre-pandemic level of 2019, a record-breaking year for Israeli tourism. In that year, 4.5 million tourists entered the country.

From January to March 2023, just under 1 million tourists entered the country. In 2019, the number was a little over the 1 million mark in the same period.

“This is undoubtedly a good recovery, better than what we expected in the height of the pandemic when it wasn’t clear how tourism would bounce back,” said Pini Shani, deputy director-general and head of the Tourism Ministry’s marketing administration. According to Shani, not only the pandemic is to blame.

Pini Shani, deputy director-general and head of the Tourism Ministry’s marketing administration. (Courtesy)

“We expected to finish 2023 with above 4 million incoming tourists,” Shani said. “We will probably not pass the 2019 record this year, but we hope to do so in the coming years.”

The coming weeks will be telling.

“May is usually a strong month for incoming tourism,” Danieli explained. “Right now, it is not clear that the coming May will be like that as there is a decrease in reservations.”

Yael Danieli, general manager of the Israel Hotel Association. (Smadar Kafri)

Data from the IHA show that there are almost 60,000 hotel rooms in the country, with the supply not expected to match the increasing demand. Right now, 2023 still has 20% fewer overnight stays than 2019. No one is feeling a shortage just yet.

“If Israel will break the 2019 record, we might see a short supply in high-demand areas,” Danieli said. According to Tourism Ministry projections, by the end of the decade, Israel will be hosting approximately 10 million tourists a year. This will lead to an estimated shortage of 10,000 rooms.

The crisis that has engulfed Israel in recent months is no secret. Massive protests over the government’s plans to overhaul the judicial system, coupled with myriad security threats, have dominated the country’s headlines. They have also made headlines abroad.

Since the beginning of the year, 17 civilians have been killed in terror attacks, after months of escalating tensions.

In one of the incidents at the beginning of April, an Italian tourist visiting Tel Aviv was killed in a car-ramming attack.

“We are not where we thought we would be,” said Alona Kosoi, sales department manager for coming tourism at the Isrotel Hotel chain, who is unsatisfied with the numbers she is seeing now. “We thought we would be back to the pace of 2019, but that is not happening.”

Alona Kosoi, sales department manager for coming tourism at the Isrotel Hotel chain. (Courtesy)

“We were eagerly awaiting 2023, a year without COVID-19 restrictions, but it all stopped,” Kosoi said.

According to Kosoi, the heated debate over the judicial reforms in Israel has caused their business clientele to plummet. Expecting full occupancy during this period in Israel’s financial capital of Tel Aviv, she said the hotels are at a disappointing 70% occupancy.

“Everything has come to a standstill. What people see on TV has damaged us,” she added. The recent attack which resulted in the death of a tourist was another blow to the industry, she said. “It was really bad.”

The continuous talk about the impact of judicial reforms has also risen concerns about the future of the Israeli economy. Experts have warned that the government plans could deter foreign investors and shrink the Israeli economy. In the short term, business people are not coming to explore investment opportunities. In the long term, this could also impact leisure tourism.

“If the geopolitical situation will be stable, we will be able to reach our goals,” said Shani from the Tourism Ministry. “It is clear that such events do not contribute to the incoming traffic of tourists.”

Ahead of Israel’s 75^th anniversary, Kosoi said the Isrotel hotels will be filling up with mostly American delegations in the coming weeks. They are coming to celebrate with Israel as it marks its milestone Independence Day. Yet, according to her, this is not enough to compensate for the latest cancellations.

David Katz, who has accompanied scores of tourists throughout the years, is used to the ups and downs that come with the territory of the tourism business.

“We have seen wars, rumors of wars, and even a pandemic, we have seen it all,” he said, not particularly concerned with the turbulent times Israel has been through in recent months.

“Certainly these are a news item, but it is not a news item like other issues in the world, such as the Russia-Ukraine war,” Katz added.

He hasn’t experienced any cancellations, just a few phone calls of concern. Neither has Itamar Ben David, a tour guide with 16 years of experience.

Itamar Ben David with tourists from Boston, April 2023. (Courtesy)

“Tourists ask about the demonstrations, but cancellations are really rare,” he said. “People also ask about security, but we have been living alongside terrorism for so long, we are used to it.”

Ben David has gone through periods of escalations, terror, and rocket attacks. Accustomed to fluctuations, he said it’s the Israeli domestic tourists who cancel first. It is easier for them, having invested less time and money in planning that particular vacation.

“In the end, when people come here, they see that everything here is routine, people going about their daily lives,” Ben David said. “That’s exactly what terror does, it creates fear.”

Both Katz and Ben David acknowledge that when necessary, they change the course of their tours. But both are happy with the business and flow of tourists they are currently seeing.

The element of faith appears to play a major role in the lack of cancellations among pilgrims.

“Our clientele are people of faith, they come with a confidence that this is something they wanted to do, they are comfortable in their faith that they will be OK,” said Katz.

For Morsi Hija, this period has been slightly different. As head of the forum for Arabic-speaking tour guides in Israel, he works with tourists from all over the world.

In recent months, he estimates around 15% of his work was canceled and some of the groups he guides were downsized significantly.

“Sometimes people refused to leave their hotel,” he said, recalling incidents that happened just a few weeks ago when tensions soared between Israelis and Palestinians. “Tourists feel the instability and the tensions, and they are worried.”

In 2020, after the signing of the Abraham Accords that normalized Israel’s relations with the UAE, Bahrain, and Morocco, there was an expectation of a massive influx of tourism to Israel. But along came the pandemic and stalled those hopes. Now, with restrictions being lifted for many months, the number of tourists from those countries is so small that they are basically not even recorded. The only number recorded by the Tourism Ministry shows 200 Moroccan tourists who entered the country since the beginning of 2023. “It’s just bad timing,” Hija said.

The abolishment of the COVID-19 restrictions was not the only impediment to Arab tourism. With Israel facing one crisis after another, its appeal to the Middle Eastern audience continues to decline.

“Tourism from these countries is very sensitive to developments in the region,” said Hija, who was involved in plans aimed at welcoming tourists from the Gulf. “They watch every development that is on the news. Unlike tourists from other countries, who are often indifferent to the news, these tourists are very aware and in times of instability prefer to travel elsewhere.”

When relations were established, Israelis rushed to visit the UAE and Morocco. The movement has been largely one-sided so far.

“Israel is an expensive tourist destination, and perhaps budget-conscious travelers prefer more affordable Mediterranean options like Greece or Turkey—places Gulf Arabs frequently travel to already,” said Dan Feferman, executive director of Sharaka, an NGO that promotes people-to-people exchanges between Israel and the Arab world, and an analyst of Gulf-Israel relations.

“Sharaska has hosted multiple Arab delegations over the last three years, and all were very warmly received in Israel. But it will take time to change perceptions,” Feferman added.

While it was love at first sight for Israelis traveling to the newly opened region, for citizens of the Gulf it will be a longer labor of acquaintance.

“It is a complex issue and it will be a very gradual process,” said Shani.

Although many countries, including the UAE, are exempt from a visa requirement upon entry to Israel, Shani cites a “less than ideal” visa process that also puts a dent in incoming tourism.

With a large migrant population, many of those working in the UAE are from countries such as India and Morocco, which do require visas to enter Israel. Laborers from places like Pakistan and Malaysia require special permission to enter the country, in addition to the regular visa process. Chinese tourists, a clientele Israel is eager to draw, also require a visa. While they may want to visit Israel, this process can be cumbersome. It includes the submission of all passports, including those expired or canceled, bank statements, and salary slips.

“In the long term, Israel needs to invest in improving its image as a desirable tourist destination,” Danieli said.

Hija puts the main emphasis on stability as a decisive factor for Arab tourists. As long as Israel projects instability, tourists will not be pouring in.

“I had a lot of hope for a reform in tourism,” said Hija, who looked forward to welcoming Arabs from the Gulf. “I imagined a combination of pilgrimages and Muslim tourism. But on the ground, while there is infrastructure in place, the political situation is not favorable.

“The country does not see tourism as a priority and does not invest enough,” he added.

As Israel’s 75^th anniversary arrives, the challenges facing the country’s tourism industry are not derived only from the political turbulence that Israel is currently experiencing. In addition to overcoming its image problems, the infrastructure that needs upgrading requires a comprehensive solution that will take years to implement. The construction of hotels and paving of roads and parking lots are not short-term projects.

“It takes about eight years to build a hotel in Israel, twice the average time than in other countries,” Danieli said. “There is great potential in Israel and entrepreneurs are willing to take the risk, but the road is filled with regulation barriers.”

So, while no one is feeling a shortage just yet, the lengthy process of building hotels needs to be addressed in the present in order to prevent scarcity in the future.

Most experts agree that Israel lacks enough affordable hotels. With a profusion of high-end, expensive five-star hotels, there is less of a selection for the tourist traveling on a smaller budget.

“We need an increase in supply, both in the number of rooms and in their type,” Shani said. “There is no balance in the division of the types of rooms right now.”

Danieli disagrees.

“There is a wide range of hotels in Israel with different levels and prices,” she said. “Each tourist can fulfill their needs accordingly; they just need to look—not everything is right under our noses.”

Noted Kosoi: “The endless bureaucracy deters a lot of people from building hotels.” She also points out the lack of workers in the industry, which is severely understaffed. Lack of manpower in the tourism industry is a global phenomenon; in Israel, it is another item on a very long to-do list.

“It is certainly a challenge to train new staff, but we are meeting this challenge and have run hundreds of successful tours since the reopening and lifting of COVID-19 restrictions,” Katz said.

Looking forward, the Tourism Ministry would like to increase revenue from the industry.

“Our goal is to make the maximum amount of profit by bringing in tourists from countries that pay well,” said Shani. “As a rule, the further away tourists come from, the more money they spend here.”

The Chinese market, which is opening up very slowly, is one that Israel is eyeing carefully. This could be a game-changer for the local tourism industry. Similar to the Arab market, catering to the Chinese clientele also requires adjustments in Israel.

Chinese tourists are considered to be big spenders compared to some of their Eastern European counterparts.

As Israel struggles to find stability, tourism certainly pays a price. However, the continuous flow of tourists, and the great potential the country harbors, leave room for optimism. With a selection of historical and religious sites and a thriving culinary and cultural scene, there is promise.

“The sky is the limit. There is everything in this special country,” Hija emphasized.

But there is also hard work that needs to be done.