Yossi Peer, Head of Intelligence
February, 2023
In normal times, Tel Aviv and Jerusalem are the two main attractions for inbound tourists in Israel. Still, over the past three years, with the pandemic and inbound tourism taking a big hit, both cities relied heavily on increased domestic tourism. Then came 2022 – the first year of recovery for the tourism industry, both globally and locally – and the changing tides were felt throughout the country, but even more so in Tel Aviv and Jerusalem.
Based on OTA Insight data provided exclusively to us, along with additional data collected, we reviewed the changes that have taken place in the local tourism industry in the past three years. We analyzed the data to establish where growth was more significant – in Tel Aviv or Jerusalem – and to pinpoint new trends in tourism so we could answer a very intriguing question: Is Jerusalem going to be the next Tel Aviv?
First Signs of Recovery in the Local Tourism Industry
According to data provided by the Ministry of Tourism, 2.675 million tourists entered Israel in 2022, up 570% compared to only 397,000 tourists in 2021 and an increase of 221% compared to 831,000 tourists in 2020. Admittedly, this is still lower than the 4.6 million tourists entering Israel in 2019, but a major recovery is distinctly clear.
Monthly number of tourists entering Israel (2019-2022, in thousands)
Source: Announcement made by the Ministry of Tourism, last updated Jan 8, 2023
Number of tourists entering Israel (2019-2022, in thousands)
Source: Announcement made by the Ministry of Tourism, last updated Jan 8, 2023
It should be noted that the recovery rate of the Israeli tourism industry is somewhat slower than that of global tourism. While the volume of inbound tourism in Israel was down 41% in 2022 compared to 2019, the overall volume of global tourism was only 36% lower in 2022. It can be assumed that this slight gap between Israel and the world was due to the fact that Israel opened up to tourism later than many other destinations in Europe and other alternative destinations close to Israel.
However, as far as the number of overnight stays is concerned, 2022 was a record-breaking year: based on data collected by the Ministry of Tourism, in the past year, there were more than 20 million overnight stays by Israelis in a variety of accommodation facilities (of all types) throughout the country. This is an exceptionally high figure, especially if we compare it to the 17.4 million overnight stays by Israelis in 2019.
Number of overnight stays – inbound tourists vs. Israelis (2019-2022, in thousands)
Source: Announcement made by the Ministry of Tourism, last updated Jan 8, 2023
Revenues from inbound tourism in 2022 amounted to NIS 13.5 billion – not including the cost of flights booked by tourists with Israeli airlines – compared to approximately NIS 23 billion in 2019 (down by 41.3%). However, due to the significant increase in overnight stays by Israelis, domestic tourism revenues have also shown a major upswing – amounting to more than NIS 17 billion in 2022, compared to approximately NIS 12.7 billion in 2019 (an increase of 33.8%).
Revenues from domestic tourism in Israel (2019-2022, estimate, in NIS millions)*
*Excluding one-day tourism
Source: Announcement made by the Ministry of Tourism, last updated Jan 8, 2023
The Pandemic as a Point of Origin: Tel Aviv is Booming, Jerusalem is Wobbling
In the past three years, there has been a spike in the number of hotels in Tel Aviv, mainly in 2nd and 3rd class* hotels, while the number of hotels in Jerusalem has remained almost unchanged. This trend is also quite evident in the changes in the number of rooms available in both cities in the past three years.
Number of Hotels in Jerusalem and Tel Aviv – by Class (“Stars”)
Source: Tourist Hotels and Rooms, by Level and Type in Selected Localities, Israel Central Bureau of Statistics (CBS), June 2022
* 1st Class signifies luxury hotels, 2nd Class corresponds to 4-star hotels, 3rd Class to 3-star hotels, and 4th Class to 2-star hotels
** The year 2022 refers to the Q1 only
Number of Hotel Rooms in Tel Aviv, 2019-2022
Number of Hotel Rooms in Jerusalem, 2019-2022
Source: Tourist Hotels and Rooms, by Level and Type in Selected Localities, Israel Central Bureau of Statistics (CBS), June 2022
The data in these tables indicate that all hotels in Tel Aviv have fully recovered after being temporarily closed at the height of the COVID-19 crisis, while new hotels have also opened. Jerusalem, on the other hand, has not yet recovered, and the number of hotels in the city is somewhat smaller than in 2019 (before the pandemic).
In terms of the number of overnight stays, it is evident that Jerusalem is also recovering, although the city’s hotel sector has yet to return to the levels recorded in 2019. This is due to a decrease in the volume of inbound tourism, which does not yet show the same significant signs of recovery as domestic tourism, where the overall trend is showing a return to normalcy.
The situation in Tel Aviv is quite similar: the number of overnight stays in Tel Aviv also signals the city’s recovery since the onset of the pandemic in 2020, but the hotel sector has not yet returned to its 2019 levels, mainly due to the decline in inbound tourism.
Interestingly enough, both cities show a recovery in domestic tourism, although, in Tel Aviv, this trend contributes more to the overall recovery of the hospitality industry than in Jerusalem.
However, according to the last five-year plan for the development of tourism in Jerusalem (for 2016-2021), Jerusalem has met and even exceeded its goals (at least in 2019, right before the pandemic), both in terms of tourist stays and the number of hotel rooms. As a result, in 2019, Jerusalem became the leading city in Israel in terms of overnight stays by inbound tourists, with 80.3% of the total number of tourists, compared to Tel Aviv, which ranked second with 74.0% of the total number.
A Glimpse at Jerusalem’s Bright Future – Analysis of OTA Insight Data
A review of the changes in the industry, alongside an analysis of OTA Insight data provided exclusively to Fact Stories, points to some fascinating trends. These strengthen our assessment that Jerusalem is set to enjoy a new and improved status in tourism in the coming years, even though its recovery from the pandemic is more moderate compared to Tel Aviv.
1. Jerusalem was on its way to becoming the next Tel Aviv and maybe even surpassing it, but COVID halted this trend. On the other hand, Tel Aviv came out of the crisis much stronger, mainly thanks to domestic tourism, as the increase in the number of hotels and rooms clearly shows.
2. From an annual point of view, the hotel sector in Tel Aviv and Jerusalem showed signs of recovery, and the trend intensified as the year progressed. To date, price levels in Tel Aviv and Jerusalem are similar to levels in 2019. However, at the beginning of 2022, hotel room rates in Tel Aviv and Jerusalem were lower than in 2019 (the last “normal” tourism year before the outbreak), possibly because there was still no return of major MICE tourism.
Hotel room prices in Tel Aviv / Jerusalem (Nis, 2019-2022)
Source: OTA Insight’s data
Source: OTA Insight’s data
3. In 2022, the average rate at a Jerusalem hotel was higher in June (7%), July (22%), and August (15%), compared to the corresponding period in 2019. Some possible explanations are high demand against a relatively low supply of hotels that are again fully operational as well as “revenge spending” by Israeli tourists, which has sent prices upward.
In Tel Aviv as well, the average hotel room rate was higher in June (4%), July (10%), and August (5%) than in the corresponding period in 2019. At the same time, the rate of the average price increase in Tel Aviv was lower than in Jerusalem.
Price recovery by percentages (2022 vs. 2019)
Source: OTA Insight’s data
4. If this recovery trend in tourism in both cities continues, we now predict that prices in 2023 will be even higher than in 2022 and 2019. Moreover, price levels may even receive another ‘boost’ with the return of the MICE industry, as well as Asian tourism, especially from China.
5. As for forecasting hotel room rates in 2023, compared to 2022, an upward price trend can already be detected both in Tel Aviv and Jerusalem. However, in the coming six months, Jerusalem will be the one to benefit the most from this trend. This might be due to the prediction that Jerusalem will be a more attractive alternative for tourists during these months than Tel Aviv, which mainly attracts tourists in the summer.
In June and July 2023, the upward trend is expected to stop and even reverse in both cities: room rates in Jerusalem are expected to decrease by 10% in July, compared to 2022, while in Tel Aviv, they are expected to decline by only 2%. As of August, hotel room rates in Tel Aviv are expected to rise again, while in Jerusalem, the downturn in prices will continue.
Pricing recovery outlook by percentages (2023 vs. 2022)
Source: OTA Insight’s data
6. Comparing the forecast for hotel room rates in 2023 with data from 2019 shows that an increase in hotel prices in Jerusalem can be expected only from May to August (5-10%). Moreover, although these months show a rise in Tel Aviv as well, on average, the increase there is lower than in Jerusalem. In other words, even according to this forecast, Jerusalem will benefit the most. As for the remaining months, hotel room rates are expected to decrease in both cities, except for a localized increase in October and December, as far as hotel prices in Tel Aviv are concerned.
Pricing recovery outlook by percentages (2023 vs. 2019)
Source: OTA Insight’s data
7. Generally speaking, 2023 will be a “year of compensation” in terms of hotel prices: those rates currently advertised for 2023 are indeed higher on average than prices between 2019-2022. This is consistent with the rising price trend that started in 2022 in Tel Aviv and Jerusalem hotels.
Actualized and advertised prices (2019-2023)
Source: OTA Insight’s data
8. It is also worth mentioning that room prices in 5-star hotels in Tel Aviv are expected to be notably higher than in the past three years. This trend is completely aligned with the reality on the ground – most of Tel Aviv’s newest hotels (or those under construction) are luxury 5-star hotels.
9. Demand for hotels in 2023: the two most prominent ‘peak’ months, both in Tel Aviv and Jerusalem, are January and the end of April – and in both, demand is even higher in Jerusalem. Weekend demand in February-March is also expected to be higher in Jerusalem than in Tel Aviv (possibly due to future growth in domestic tourism).
Both cities see a strong demand during Passover and the summer, while the market “cools off” a little from September to December.
According to the above analysis, Jerusalem has undoubtedly caught the wave of domestic and inbound tourism, with its position expected to become more robust than that of Tel Aviv in 2023. Therefore, the Jerusalem Development Authority (JDA) would do well to encourage opening more hotels to prepare for a rise in demand. And what does the future hold? We must keep following the data to determine whether it is a passing trend or a true change that will stay with us for the long run. Rest assured we’re on it.
Market demand level forecast (2023)
Source: OTA Insight’s data
Upper Graph – Tel Aviv
Bottom Graph – Jerusalem
Sources:
OTA Insight’s data provided exclusively to Fact Stories
Tourist Hotels and Rooms, by Level and Type in Selected Localities, the CBS, June 2022
Tourist stays in Tel Aviv-Yafo, the CBS, June 2022
Tourist stays in Jerusalem, the CBS, June 2022
Tourism in Tel Aviv-Yafo 2030, Vision and Master Plan
Tourism in Jerusalem: Situation Report Towards the End of the Jubilee Plan
An announcement made by the Ministry of Tourism, last updated Jan 8, 2023
Jerusalem – A City of Tourism, The Jerusalem Development Authority