Tourists lost in Jerusalem


During these difficult times of Covid-19, the loss of business and economic activity is devastating.  Expectations of a reductions in national GDP are unavoidable in 2020.  All sectors will be deeply affected.  Some more than others.  It will be a long road until we return to our pre-Covid-19 levels in most sectors.  The tourism sector, however, with its reliance on travelers from abroad will be hit most heavily and felt so painfully in Jerusalem.

The year started so differently.  Israel’s Central Bureau of Statistics reported a record-breaking wave of 4.5 million tourists to Israel in 2019, up from 4.1 million tourists in 2018.  In an indication of good things to come in 2020, we saw a jump of 8.5 percent in tourists in in January alone. With our dependence on international visitors in Israel and in Jerusalem, in particular, to stay in our hotels, dine at our restaurants, visit our historic and cultural sites, and shop in our kiosks and stores, we will need to recalibrate our expectations and design new strategies for the immediate and longer-term future for the sector in Jerusalem.  But first, based on actual tourism from January through March 12, 2020 when the Government gave instructions to tourists and tour operators to turn around and then on March 18 when the Government closed the border completely, and some modest projections of opening of travel again starting in the Fall, let’s summarize the size of what we expect to lose in 2020 in Jerusalem – roughly 70% of the expected record-breaking year from international tourists alone.

Using actual data from 2015 through 2019 reported by the Central Bureau of Statistics and the Jerusalem Institute for Policy Research and projections for 2019 and 2020, we expect to lose about 1.22 million international visitors staying for about 3.34 million hotel nights in the city in 2020.  These visitors were expected to spend about NIS 1.38 billion at 88 hotels this year.  We won’t speculate about the closure of any number of Jerusalem hotels and restaurants, but we expect that with the reductions in tourism, many are at risk of closing, at least temporarily.

These expenditures would have supported about 8,219 hotel workers directly with a payroll of NIS 759.5 million at an average wage of NIS 7,701 per month.  At a proportionate loss of work, this payroll will be reduced by an estimated 5,753 workers with a lost payroll of NIS 531.7 million.  With the shutdown and the slow restart, we expect losses of an estimated NIS 2.024 billion in the local economy on lodging, transportation, food, shopping, and recreation, or about NIS 1,659 per visitor.  These lost expenditures would have supported a total of 65,208 workers in the broader tourism sector, including retail, food, entertainment, tours, and transportation with wages of about NIS 607 million for the year.  And none of these losses include the projected 5,080 AirBnB rentals in Jerusalem which were expected to generate about NIS 81.2 million annual revenues for their owners, but won’t.  This also does not include indirect costs of losses in the tourism cluster, including the tour guides, booking services, transportation services, cultural and recreation site operators, and all of their employees and contractors.

With flights now virtually non-existent, and the continuing quarantine in place in foreign countries likely for several months, including Europe and the US where we welcome most of our visitors, it is fair to say that we won’t see much of this activity recovering significantly any time in 2020.

There is much we don’t know.  Nevertheless, we must act now to preserve the business assets in our tourism sector before they are lost permanently.  Let’s take this opportunity to find a way to support our tourism sector so that they can remain in business until tourists come back, and then begin to grow again.  Let’s find a way to rebuild tourism assets and services that address some of the new constraints posed by social distancing and other health measures that may be with us for a long time.  By alleviating their cashflow burdens now, the city and Government can give immediate tax abatements on real estate taxes for hotels to lower the fixed cost burden of unused hotel spaces such as ballrooms and large area meeting spaces, and payroll support for those out of work and most in need until they can recover their footing in a recovering tourism sector.  Going forward, the Government can allow the carry-forward of operating losses incurred during this period to a period when net income is again positive for the hotel, food, and retail sectors.  This may take some time (say 5 years), but it will be worth the investment.

Steven Zecher
Steven Zecher
Steven Zecher is the project director the Milken Innovation Center at the Jerusalem Institute for Policy Research. His work focuses on financing strategies with an emphasis on public-private-philanthropic capital structures. Zecher has extensive experience in urban and regional development policy,...
Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.