All measures of the airline's business improved in 2016, and it added revenue from incoming tourism.
The Israeli carrier's 2016 net profit was $81 million down from $107 million in 2015.
Boeing 787 Dreamliners will be used for the Tel Aviv - Madrid flights.
Cathay Pacific is introducing competition on the Tel Aviv-Hong Kong route for the first time.
The new hotels will open in Hadera, Jerusalem, and Nazareth.
The city gained 1,700 hotel rooms in 2015-2016, and 5,000 more will be added over the next five years.
Air fares to Western Europe have fallen 15% since the Open Skies agreement with the EU was signed.