Russia Ruble Crisis Deals New Blow to War-Pounded Israel Tourism

Russian Christmas visitors usually fill 150 rooms at the Crowne Plaza Hotel in Ein Boqeq, Israel’s holiday resort on the Dead Sea. The sinking ruble sent that number plunging to 15 this year.

Israeli tourism officials expect traffic from Russia, the country’s second-largest market after the U.S., to fall by a fifth next year, making it even tougher for the industry to recover from the summer war in the Gaza Strip.

“Every year we have about 600,000 visitors from Russia,” said Amir Halevy, director general of Israel’s Ministry of Tourism. “We expect a decrease of about 20 percent of tourists from Russia in 2015 compared to 2014.” Halevy estimated the falloff would cost Israel about 600 million shekels ($150 million) in lost revenue.

Incoming tourism contributes 7 percent to Israel’s gross domestic product, and the industry employs 6 percent of all Israeli workers, according to Tourism Ministry figures for 2013. Government efforts to make up for the Gaza-related shortfall this year have only partially offset the losses.

The Russian no-shows will only make matters worse. In 2013, every fifth foreign visitor was Russian, according to Tourism Ministry data. Some come to visit family and friends among the more than 1 million Russian-speaking immigrants who moved to Israel after the Soviet Union collapsed.

Shai Asia, executive vice president of Crowne Plaza Hotels, whose Israeli properties are operated by Africa Israel Hotels Ltd., said the Russian tourist Christmas season was a washout this year, with reservations down at least 80 percent.

‘Big Decline’

“That’s a very big decline, and it’s the Russians,” Asia said. “They usually come on December 25 for two weeks. There are no reservations. It’s empty.”

The number of Russian charter flights landing at the Red Sea resort of Eilat has also plummeted this season, and capacity is down 50 percent compared to last year, Halevy said.

Israel’s tourism industry appeared headed for a record number of visitors before fighting in Gaza broke out in July. Thousands immediately canceled trips, and government officials estimate tourism revenue will drop 25 percent this year as a result.

Four publicly traded Israeli hotel companies forecast lower profits in Q3 because of war-related cancellations. Rafi Baeri, the vice president for sales and marketing at one of those chains, Dan Hotels Corp., said recovery from the Gaza war was slow.

“Our estimation is that by the end of Q1 2015 we will see a return to normality,” Baeri said. “We are still experiencing now some groups that have been smaller in size, some have not materialized at all, and some have postponed their arrival to a later date.”

Double Blow

The number of Russian visitors to Dan Hotels has fallen 25 percent from last year, a “gradual phenomenon that happened in the last few months,” he said.

The decline in Russian tourism deals a double blow because Russia had proved a more resilient market after the Gaza fighting, Halevy said. Tourist arrivals from Russia between January and November rose by 4 percent compared to 2013, while the total number of overnight tourists remained static at 2.7 million.

A government campaign encouraging Israelis to vacation at home this year has plugged two-fifths of the war-related losses, and a half-billion-shekel compensation fund has encouraged hotels and tour operators to keep operating.

When they know “they have support from the government, this means they are not firing employees and they can go for renovation,” Halevy said. “It is very good for the industry and for the Israeli economy.”

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