According to data collected by the Ministry of Tourism, the rural lodging industry currently consists of approximately 7,000 guest rooms. Direct revenue in the industry adds up to approximately 254 million NIS each year, meaning 36 thousand NIS per room per year in average.
The industry includes guest rooms in rural areas (Kibbutzim, Moshavim, and congregational settlements) and is targeted for vacationers interested in serene, rural atmosphere accommodation.
- Most rural lodging guest rooms are located in Moshavim and Kibbutzim.
- Israel’s northern part is preferred for rural lodging facility development, with an advantage to afforested mountain areas. In addition, there has recently been growing development in the western Negev (Eshkol, Arava, Eilot region, etc).
- Strong seasonality- the industry is only active an average of 80 days each year. High season tends to be in the summer and on holidays.
- Rates are usually cheaper than hotels.
- The industry is based mainly on internal tourism.
Customers: Defining the Target Market and its Size, Market segmenting
The industry is currently mainly based on internal tourism. Among specific market sectors identified are families or young couples, people over the age of 50, and those seeking unique hospitality styles and incoming tourism.
Potential competitors can be separated into two groups according to the similarity in services rendered:
- Direct competitors include guest rooms located in the same geographical vicinity, price range, or similar service.
- At settlements located near urban areas, low ranking hotels and boarding houses will present moderate competition.
- Indirect competitors include all lodging alternatives located in the same geographic vicinity or desired price range.
The acquired equipment can be separated into permanent equipment and expendable equipment. Equipment is not exclusive and a large array of vendors is able to supply it. In addition, supplementary services such as kitchen, dining room, laundry, etc. are required.
There are a number of typical methods for marketing rural lodging guest rooms:
Cooperation with local tourism associations, marketing through travel agencies/resort companies or by using private offices, billboards, newspaper and specialty magazine advertisement, specialty internet sites, promotional products and PR.
Factors that Affect Success:
Location, quality of rooms and services. Successful creation of a unique rural atmosphere, imparting customers with personal attention.
Limitations on Entering the Industry:
Industry entrance threshold is high, as it requires a high initial investment. In addition to the investment threshold, there are issues of bureaucracy and certifications.
The number of employees varies in relation to the scope and level of service, for instance: type of food served and dining are (meals may be served at a separate dining hall or in the kibbutz’s dining room). In order to operate two to three rooms, one employee holding a part of full time position will suffice.
The main components of a rural lodging guest room’s investment plan involve construction and/or remodeling and fitting, furniture, electricity and kitchen supplies, expandable equipment and various payments.
Ministry of tourism aid: contrary to the past, the Ministry of Tourism no longer provides financial aid for the establishment of guest rooms. Nonetheless, the issue of resuming financial aid plans is in deliberation.
Industry revenue and profitability
Revenue per room depends on season, day of the week (midweek, weekend, or holiday), and location.
Average yearly occupancy is 30%
Direct expenses constitute 40% of the income if breakfast is served or 25-35% of the revenue if breakfast is not served.
Typical Terms of Payment
Customer payment is received upon the guest’s departure by check or credit card. An advance is normally required at reservation time, especially during high season.
Licenses and Certifications:
Local/regional urban building committee approval, Israel land administration approval for irregular use of land for the purpose of accommodation, Ministry of Tourism approval, and local authorities’ licensing and business license, all conditioned upon Ministry of Health approval. Business license should be renewed each year.
Business insurance (for content and inventory), third party insurance, employer’s liability insurance, and loss of income insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.
Ministry of Tourism, Rural Tourism Department. Phone: 02-6664386/7/8
Internet website address: www.tourism.gov.il
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