Israel Hotel Performance: 10 Year Overview
In the below article we will undergo a deep-dive analysis of hotel performance across the country and its key markets. STR’s hotel sample in Israel has continued to grow in the past decade, particularly over the last year. STR’s Israel sample now comprises over 100 hotels which represents 24,000 rooms, enabling us to closely and accurately analyse trends within each of Israel’s diverse hotel markets.
Israel across the board
A decade ago, Israel hotels would be at their busiest during the summer months. Today there is a shift in this trend, especially during August where occupancy has dropped 19.7% between 2009 and 2018. Average daily rate (ADR), however, increased 18.0%, although we have to take currency fluctuations over this period into account. This shift in performance, as well as supply and demand, has generated a 3.4% loss in rooms revenue during August since 2009.
On the other hand, the low and shoulder seasons have seen double-digit growth in demand and revenue. March has seen the strongest hotel revenue increase (+74.2% to ILS836,729,848). Higher occupancy levels in January and February helped push RevPAR, +36.1% and +48.6%, while revenue rose 38.6% and 51.1%, respectively. Demand growth also surpassed supply in February (+38.6%) and March (+37.2%), while supply grew by just 1.7% and 1.8%, respectively.
Overall, Israel has seen healthy build up in RevPAR performance, as seen in the graph below. This growth has been driven by occupancy increases between 2009 and 2013, and from 2014 onwards hotels have relied on ADR growth to achieve RevPAR increases.
According to STR’s AM:PM platform, Israel currently has 52 hotel projects in the pipeline that are due to open by 2023. This represents over 11,000 rooms – a 20% increase in the country’s current room supply. For a full report on supply and pipeline, please refer to AM:PM
Tel Aviv has become more focused on corporate business than it was 10 years ago when it was predominantly viewed as a leisure destination. Business months such as March, May, June and October now experience higher occupancy, while the summer months are reporting lower demand. It is remarkable that through the first 6 months of 2018, Tel Aviv saw a demand increase that surpassed 2009 levels by 50%, while supply has grown just over 6%.
Despite demand and occupancy levels decreasing in 2014 and 2015, hotels increased rate and achieved the highest yearly ADR average of the last 10 years – ILS939.00 in 2015.
Growth in demand outpaced supply threefold in 2018. The occurrence of the Jewish High Holidays concentrated during September 2018 led to the year’s highest ADR performance at ILS1,065.61. Occupancy, however, sat at 55.1%, the second-lowest of the year, resulting in a RevPAR of ILS587.16. This led to September having the highest increase in hotel revenue (125.5%) for any month of the year, compared to 10 years ago. March and April performed relatively well across the board, with demand growing by more than 50%, whereas in 2009 these months would have fallen into the low and shoulder seasons.
Populated by resort hotels, Eilat is the one Israeli market where seasonality hasn’t changed between 2009 and 2018. The winter months experience the lowest performance in both occupancy and ADR, which was surprising considering it offers temperatures in the mid-twenties (Celsius) during these months. The city appears to be missing out on foreign visitors seeking a winter beach break.
On the other hand, the summer months produced the highest occupancy levels, although August 2018 was a very slow month with occupancy sitting at 65.7% – a 24% decline year over year. Consequently, both RevPAR and hotel revenue decreased 21.7% in August 2018, despite the absolute RevPAR level being the highest for any month in 2018. Occupancy in September 2018 picked up again, +24.1% compared to 2017, which may have been due to the Jewish High Holidays.
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