The State of Israel spends hundreds of millions of shekels on aid for the hotel industry yet continues to fight the vacation rental phenomenon that benefits the middle class, this is the conclusion of a research study by the Kohelet Policy Forum, an Israeli nonprofit think tank.
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According to Kohelet's findings, the Tourism Ministry allocated 110 million shekels (around $35 million) to the sector in 2019. In 2020, the government approved an additional 300 million shekels (around $95 million) in aid for the hotel industry. In addition, the state allocates land for hotels and tourist initiatives without tenders.
A new government plan aims to fight the growing vacation rental field, banning the conversion of residential apartments into guest units.
Kohelet senior researcher Shlomit Kaplan wrote that: "The micro hospitality field is considered one of the most successful applications of cooperative consumerism and has led a real revolution in the world.
"The platform offers a mechanism that provides information on the quality of service and hospitality safety without imposing rigid and uniform standards on the host. The renting out of residential apartments for short periods increases the availability of accommodations without requiring the allocation of lands or the investment of government resources to that end, through the correlation between demand and the offered resource."
As of 2019, before the outbreak of the coronavirus pandemic, the number of guestrooms in Tel Aviv was nearly identical to that of the number of hotel rooms in the city. In Jerusalem, short-term rentals made up around 27% of tourist accommodations. According to the study, between 2019 and 2020, the average cost of a one-night stay at a micro guest apartment remained under 600 shekels (around $190).
"In Israel, there is no correlation between the legal situation and the nature of this industry, and the vague legal situation makes it difficult to comply with the rules, encourages a black-market economy, and prevents long-term economic planning," Kaplan wrote.
As for negative effects of the micro hospitality industry, such as the increase in housing prices, changes to the character of a neighborhood, and unfair competition in the hotel field, the Kokelet researchers wrote that "it is difficult to point to a necessary connection between the growth and development of the field and the alleged negative results."
The research pointed to a need for minimal, clear, and easy to implement regulation through a flat tax on income from the micro hospitality field, a permit for the mixed-use of land for both residential and vacation purposes, and exemptions for accommodation facilities that do not constitute a danger to the public.
"One might have expected the state to encourage the home-sharing industry instead of suppressing it," Kaplain said. "The micro hospitality industry offers a wide, economical, inexpensive, and flexible variety of accommodations, which, unlike the traditional hotel industry, operates without a need for financial assistance or subsidies from the state.
"The attempts to impose rigid regulation on the sector around the world have failed and created black markets that harmed public interest without meeting the goal they sought to achieve," she said.
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