The Ministry of Tourism believes that the number of tourists visiting Eilat in the framework of its winter campaign this year, which will continue officially until Passover, will reach 130,000, compared with 77,000 in the preceding year. Sources inform "Globes" that the Ministry of Tourism will also allow airlines to continue operating flights and receiving grants in April-June. These grants triggered an increase in the number of winter weekly flights to Eilat from four to 40-50 over the past three years.
The airlines operating direct flights to Eilat include SAS Airlines, Finnair, Ryanair, Wizz Air, Ural Airlines, and Transavia Airlines. 17 of the flights are from Russia, 10 from Germany, and 12 from Poland.
The option of offering a vacation to Europeans in a city in which winter is mild or non-existent is a logical trigger, but there is no doubt that the increase in the number of flights is primarily due to the estimated NIS 40 million in annual monetary incentives and grants that Israel is giving to the airlines. This budget is expected to continue growing in direct proportion to the number of passengers. The grant received by the airlines is €0.60 per passenger, of which the Ministry of Tourism provides €0.45 and the Eilat Hotel Association €0.15, regardless of the price at which the airlines sell tickets to passengers.
The result has been that from the beginning of current campaign until January 20, more than 76,000 tourists reached Eilat on direct flights. The Ministry of Tourism estimates that Eilat's winter tourists have put over NIS 400 million into the Israeli economy since September.
Minister of Tourism Yariv Levin believes that the subsidy is one of his ministry's most effective investments. Levin told "Globes," "We have also reached a record of 53 direct weekly flights to Eilat during the winter season. Each tourist spends an average of $1,500, and this is profit for the town and all those working in the industry. Hotels that would have closed down during the winter remained open for the whole year, some of them for the first time. We will allocate a larger budget than NIS 40 million in 2018-2019. The entire world is working according to these models, and we are at the crest of an excellent wave for Eilat.
"We are holding a dialogue with international travel agencies seeking to rent a hotel in partnership for a 10-year period. These measures already exist with Russian travel agents, which have rented hotels in Cyprus. They can bolster their profits from the tourism packages they offer, and we will profit in the number of tourists. There is a water park under construction, and building a hotel as an island in the sea is under consideration. It's like the chicken and the egg. Before this, I couldn't go to developers with an offer to build in Eilat, but now that the town is waking up, it is bringing the developers on their own initiative; they want to take part in the development of the town."
While foreign airlines operating direct flights to Ben Gurion Airport get grants of up to €250,000 per weekly flight per year, the structure of the grants in Eilat is different - they are determined by the number of tickets actually sold.
"The airlines have an interest in filling the plane and getting the corresponding grant for it," Levin explains. "In Eilat, the airline takes the risk and the reward upon itself, because it receives an incentive according to the number of tickets it sold, and we are seeing high seat occupancy rates."
"Globes": What about tourists who reach Eilat at a subsidized price and go on to other countries?
Levin: "That is entirely marginal. The proportion of Israelis flying on direct flights is low; it averages 8%. The big growth is in the Russian market, following the decline of Turkey and the Polish market as a tourism target for them."
The hoteliers in Eilat, who are subsidizing part of the grant, are also satisfied.
"We felt the effect of the campaign less at the beginning," says Fattal Hotel Management Ltd. CEO Avia Mizrahi-Magen. "This might be because people came looking for cheap overnight solutions. This year, however, we feel a nice improvement in occupancy."
Isrotel Ltd. (TASE: ISRO) CEO Lior Raviv also says that the investment through the Hotel Association was worthwhile for the largest hotel chain in Eilat. "It was worth the money," he says. "Almost all of the Hotel Association's budget in Eilat was spent on this subsidy, and it has proved itself as a strategic measure."
But the people coming are mainly backpackers, who are less interested in four and five-star hotels.
Raviv: "It's mainly cheap tourism, but it goes everywhere. This is a beginning, and I believe that the number will grow more. The outputs are excellent, and the business is starting to go forward. Eilat can't rely just on Israeli tourists. Historically, Eilat was a tourism city in the winter, too, and after 15 years of silent winters, it's coming back."
Were it not for the high overnight prices, the numbers might have been bigger.
"The prices in winter can also 50% lower than in the summer. In the bottom line, the price reflects supply and demand. We live in an expensive country, and hotel prices are a reflection of the cost of living."
According to Raviv, the winter tourists are buying flights or packages combined with a hotel for $700-800 a week from France, for example, and for $500-600 from Russia. "3.6 million tourists a year in Israel is a number that does not reflect the potential," he says. "We are convinced that this number will grow. Isrotel is in the process of building five hotels."
Will the result will be higher hotel prices caused by the demand?
"The prices will not go up. The change is that Eilat will stop being a seasonal town dependent on only the Israeli tourist. The tourism coming to Eilat is price-sensitive tourism with many options for a cheap winter vacation in all sorts of countries. We can't raise prices, even when the demand outstrips the supply."
Published by Globes [online], Israel Business News - www.globes-online.com - on January 23, 2018
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