In recent years, Israel’s tourism industry has faced an almost unimaginable sequence of upheavals: Covid, lockdowns, social distancing, and war, with some hotels opening their doors to masses of evacuees from the northern and southern borders.
Hotel chain Isrotel (TASE: ISRO), which has 23 hotels, took in 15,000 evacuees. How does one manage thousands of employees and dozens of hotels when the world is in turmoil, and the entire business is in upheaval? Fortunately for Isrotel, CEO Lior Raviv says, the crisis has given rise to a new generation of young, flexible managers, who have been leading from the bottom up, establishing teams, and demonstrating creativity - making it possible to better cope with the mad upheavals - and from whom we can all learn.
About himself, he says frankly, were he to actually manage one of his chain's hotels, he would probably be very bad at it.
Lior, tell me a little about the chain.
"Isrotel is a kind of nature reserve within the Israeli business landscape. It was founded as a Zionist enterprise by the late owner David Lewis, who had immigrated to Israel. Today it has 6,000 employees at 23 operational hotels. As we speak, we have 11 hotels under construction. The company seeks to attract tourists from around the world and is publicly traded. The owners still own 80%. They sold 4% last week, and because of that, we have been listed on the index and to my delight, the market cap has also increased significantly, and the stock rose significantly."
More than NIS 5 billion at the moment.
"Yes, the share went up by almost 20% recently."
March marks a month since the death of Moshe Bublil, a chief competitor of yours [owner of the Club Hotel chain, and among the pioneers of the Israeli hotel industry].
"Moshe Bublil was a dear man and, in my opinion, he was a marketing genius. He is the one who invented the story of Club Hotel and turned it into a amazing success. Moshe and I were competitors and friends.
"Many years ago, before I was CEO of Royal Beach [of the Isrotel chain], I lived in Eilat and went to a motorcycle rally in Morocco. Moshe gave me sponsorship to go on this rally, and I rode a motorcycle that had ‘Club Hotel’ written on it in large letters."
"A hotel that became a home "
Being a hotelier is not easy, certainly not in Israel. How do you manage in this reality?
"Look at the timeline and see how we got through the Covid crisis, through the most difficult economic crises in general, and our industry in particular, how we got through the last war. Look at how our financial reports have developed in recent years, and you'll see that through some extraordinary miracle, we always manage to make it through these crises".
I'm sure you've had situations in recent years where you said to yourself: ‘Hold on a minute. I'm a business manager. I can't believe I'm dealing with this thing.
"It's crazy. Now we're dealing with the matter of evacuees. What company manager in the world dialoguing with people living in limbo? They were evacuated from their homes under crazy circumstances, and we became their home for six months. We turned 23 hotels into hotels for evacuees within a few days. At the peak, we had 15,000 evacuees. We’re handling things you would not believe."
What's the weirdest thing that’s come across your desk?
"There are endless examples. This is the first time in the company's history that we’ve hosted hundreds of dogs. Suddenly we have a new type of guest that we weren’t familiar with, and we opened a kind of dog care department.
"On October 7, we made a decision not to close the hotels. I had a feeling that something big was going to happen here. And we had no staff at all. 90% of our employees in Eilat are Jordanians, and they didn't come in.
"During the [Sukkot] holiday, the hotels were full, and at the end of the holiday, the workers cleaned the rooms so that on Sunday morning we could receive Kibbutz Nir Oz, a kibbutz with 100 dead and 70 kidnapped, at the Isrotel Red Sea Hotel. People arrived in burnt clothes. People arrived not comprehending at all what was happening with them. The hotel employees received them, and cried with them. This is a crazy event. Where in the world do you get a situation like this, where the CEO of a hotel becomes part of a community?"
At that moment you didn't know who was funding it, did you?
"You don't know who is funding it, you don't know how much it will cost, you don't know anything. As a company operating in Israel, Zionism is rooted deep in our DNA, so we opened up.
"At a later stage, we added all our luxury hotels. We opened Beresheet, Kramim, Mitzpe Hayamim, and the Orient to the evacuees. This is no small matter. When Minister of Tourism Haim Katz, who managed the evacuation issue, started talking about tent camps and schools for the evacuees, we said: There will be no such thing. People came to us with tears in their eyes. It's very emotional. And it’s dealing with something we weren’t familiar with previously.
"As quickly as we turned the hotels into places of refuge for those evacuees, we’re now in the process of getting the hotels back to work. We’re currently negotiating with them to concentrate them in specific hotels. We now have guests coming who want a vacation, and demand is huge now. There’s no occupancy left for the Passover holiday, I think, or just a few last places left. This is a very complex situation, and we’re dealing with it. I am happy that the State is now encouraging them to go back, at least to the south. For the north, it’s not on the agenda at all. But, I say, these are very administrative events, complex beyond words, which have made us stronger as a society."
No Harvard course could ever prepare a manager for the sudden transformation of their business from a hotel to a refugee center in a single day.
"There is no such course. The only relevant course, in this case, is a course in being human. The managers and staff proved to be human, they proved to be insanely flexible. I take my hat off to the staff for what they did. The evacuated communities appreciate it very much.
"Now, we’re learning from this event, what we did or what we didn't do, that made guests connect with the hotels. We’re processing it now, it’s part of our learning process."
"At Beresheet, which is the most prestigious hotel in Israel, we hosted Kibbutz Tze’elim. I went there and went crazy. The hotel that we’d taken such care in developing, was a kibbutz. Kids… backpacks… it already smelled like a kibbutz. The hotel turned into a kind of hostel.
"At the beginning of this month, Kibbutz Tze’elim decided to go back, and our team turned it back into a hotel within two days. I was stunned."
"A new world for the industry"
We see that the world is becoming more and more chaotic. What are the main lessons we can learn about management that may not have been relevant ten years ago, but are today?
"I think the most relevant phrase for the world we’re in now, and heading towards, is ‘managerial flexibility.’ A manager who is inflexible and doesn’t know how to adapt to changing situations, is a dinosaur who will not survive. Managers who are flexible, know how to identify trends, adapt their business to these trends, and generate a return - those are the managers who will actually be able to move their business forward.
"In our sector, this is critical because leaving aside the Covid moment and the war, the world is also changing in terms of guests' needs. The world will change in a generation. Our children, for example, no longer want what we wanted from hotels, they want completely different things. Not to mention all the digitization, distribution channels, marketing channels - it’s a completely different domain. Traditional marketing is over, there’s no more marketing like that.
"It's a different world of marketing and we're adapting to it. So, the ability to change, and not to get stuck on the things already done, not fight the wars of the past, and look ahead constantly, is the new world of the hotel industry, even though it's a very traditional industry."
Even the operational aspect, like the Jordanians who suddenly didn’t come. Nothing is stable. One day you have no staff.
"Nothing is stable, so we pivoted. There were no Jordanians, so we managed to convince the government to allow us to bring in Filipino workers from Tel Aviv. Normally, they are not permitted to work in Eilat because there are Jordanians. There was a very quick decision, we moved them to Eilat and the Dead Sea, and that solved the problem. Otherwise, we wouldn’t have been able to manage the hotels."
Okay, there’s management flexibility. Suppose there’s a course at Harvard where [Apple CEO] Tim Cook is a student, and you say to him: Here’s what’s going to happen to you at Apple. One day you have no employees, the next day Apple becomes a quasi-governmental company supporting the entire country, as if it were nationalized.
"No one would sign up for this course, because they’d say, there’s nothing like that anywhere in the world."
Okay, here’s my problem with your course. You can write 'management flexibility' in the presentation, okay. But what does that mean? Where does it connect with the reality where a person has to realize they’re inflexible?
"The manager's flexibility will be measured by their first real-life crisis."
Give me an example of an event happening for two hypothetical managers - one flexible, the other not.
"I say this, I don't know if with regret, but as a fact. Younger managers are more flexible. Their ability to pivot and be open is greater than that of older, experienced managers. Veteran managers manage the present with a rulebook from the past. Hotels are buildings, you know, that I can renovate, and invest, and put money in, and so on, but the staff creates the experience.
"Young managers treat their employees differently. The whole matter of social action, how they treat employees, how they essentially make them part of the team. They manage from the bottom up. They’re part of workforce, and let other managers lead processes. Older managers don't do that. It's kind of fearless and ego-less self-confidence that younger people have. Ego is the biggest enemy in management."
"The crisis provides a new opportunity "
Every successful organization works according to a rulebook based on hierarchy, method, and logic. When reality becomes chaotic, the method becomes irrelevant. Most individuals, if they don’t have the entrepreneurial spirit, don’t know how to cope because they’re used to being given instructions. If you have an organization built on small organizations that, in turn, are built ideas, then even if reality changes, people will be proactive, and respond to the reality.
"This is an accurate analysis. Isrotel is a large organization that is built on procedures. When we do workshops with managers, people talk about wanting more independence, more freedom of action, more entrepreneurship, more process-leading, and so on. They want more autonomy, and they deserve it. We’ve got to believe they can do it."
There’s no other way. There was no rule book for what happened, no procedure for handling evacuees.
"This is a double-edged sword. As your organization grows, you deal less in details, and you must let go more, trust your managers, and give them more freedom of action. It’s not easy to let go. Especially for those of us whose strength is in the ability to go into the tiniest details, be involved in deciding everything from hotel construction to toothpick color. That's where we are at. It's hard to break free, but you have to be open-minded."
"Our managers’ capabilities are simply tremendous. You just have to let them lead, and things work out miraculously. For example, during the war, we drastically reduced food costs, we never dreamed it was possible, and the general managers did it. We’re talking tens of millions of shekels a year and we cut costs because of the creativity of our managers, because they lost their fear, to some extent."
Yes, it sounds like chaos gives people a chance to lead. You gave your managers a chance to surprise you, to lead you.
"I suddenly discovered the managers are working with far fewer personnel, and even when they return to normal activity, they don't want to go back to what they had before, which is amazing. Suddenly, people are giving up things that were so trivial, were part of our everyday life, our DNA, and management culture.
"Isrotel will not go back to what it was before in all aspects. In terms of service, we will be better than we were in the past, in efficiency, we will be better than we were in the past, as in the ability of our managers to lead processes, manage hotels, and manage teams.
"I managed the Sport Hotel, the Royal Beach. I was raised in this business. I know every detail, every process, at Isrotel. And yet, I’m a much worse hotel manager than our general managers today. I can sit on the sidelines and see how my hotels are run better than how I would run them."
You’ve been in Israel for 30 years. Aren't you sorry you didn't do something in another area?
"No, because our society is changing, and good things are happening here, and I am part of them, and I’m actually leading these processes. When David Lewis passed away and his son, Julian Lewis, replaced him as chairman of the board, we made a very significant breakthrough together. And when he switched places with his brother, before Covid, we started the process of development outside Israel, although time after time, something happens that keeps me in Israel. Opening up outside Israel offers some incredible horizons for us, and it makes things very interesting, for me personally and for the whole company."
What can other CEOs learn from your industry?
"First of all, I believe that management is management is management. I say this with the utmost modesty, but what I did at Isrotel, I believe that I could do the same if I were put in a car company. Because this in is my DNA: succeed, push forward, work with the people, and generate returns, and profit for the owners. When I came to Isrotel, the operating profit was about NIS 100 million. In 2022, the company hit an operating profit of NIS 530 million. That’s three-fold."
A final question, if you were to become a hotel manager again today, what would you do differently?
"I would do everything differently. I was a very centralized manager. I was very aggressive in my management style. Let's put it this way: if I were given a hotel to manage today, given the current generation, current needs, and the current world, believe me, that hotel would not last a week."
Eran Gefen is the founder of strategic consultancy G^Team, which helps companies develop new growth engines. He has experience working with CEOs and management of leading companies in Israel and globally, including Coca Cola, Wolt, Microsoft, Strauss, and Kimberly Clark. A company he founded was acquired by Wix.
Published by Globes, Israel business news - en.globes.co.il - on April 8, 2024.
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