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Rehovot to Get Boutique Hotel
In recent years, hardly any new hotels have been built in Israel, and generally for good reasons. The unstable security situation and constant fluctuation in incoming tourist numbers led developers to prefer to invest in residential properties. Anyone still keen on investing in hotels did so primarily overseas.
Yet despite this, something has changed over the past two years. Although developers continue to avoid multimillion dollar investments in large hotels, they are willing to invest more modest sums in what are known as boutique hotels, which over recent years have also become popular in countries which do not face security crises at least once a year.
One such example is that of the Nakash family, owners of the Orchidea Hotel in Eilat, and others, who paid NIS 37 million for the old Israel Police Kishle station on Jaffa’s Clock Tower Square, seven times the suggested minimum bid in the tender. They intend to build a hotel which will capitalize on both the site's unique architectural design, and its location at the entrance of the Jaffa's old city. The Nakash family have based their model on a similar hotel in Istanbul, which was also built on the site of a historic police station, and they will reportedly invest a further NIS 160 million in its construction.
Several months ago, Digal Investment and Holdings Ltd. (TASE: DIGL). and a partner acquired Beit Engel at 84 Rothschild Boulevard in Tel Aviv, with the aim of converting it into a boutique hotel. The building, which became one of the symbols of modern architecture because of its unique shape, and impressive verandas, was designed in 1933 by the architect Zeev Rechter, who was also one of its tenants. Another famous occupant was Edis de Phillippe, founder of the Israel National Opera. During World War Two, the building served as a British Army command post. The developers intend to turn the U-shaped building into a 45-room hotel with spa, bar and restaurant, at an investment of $2,000 per square meter, with room tariffs from $200-300 a night.
Another player on the burgeoning boutique hotel sector is the Sabag family, which is to refurbish the old, run-down property it owns on Ben Yehuda Street. Now functioning as a low-grade hotel offering cut-price room rentals, the Sabag family has been inspired by its own art collection, worth NIS 8 million, to convert the building, which has 60 rooms of 12 square meters each in size, into an art hotel. This will enable them to charge $120 a night for a room
From unsavory hotel to boutique hotel
Originally built in the 1950s, the Center Hotel on Zamenhoff Street off Tel Aviv's Dizengoff Square, has gained a reputation in recent years as a highly unsavory establishment. In 2006 it was taken over by the Atlas Group Hotels Ltd., which decided to convert it into a boutique hotel. As part of the refit, Atlas commissioned eight young artists, who each designed several rooms. Eighteen months after reopening, customers are now willing to pay double the previous rate for a room, and the hotel has doubled its revenue.
Other boutique hotel construction projects now underway in Tel Aviv include the conversion of the French Hospital on Beit HaEshel street in Jaffa into a combined boutique hotel and apartment complex, by a group of American developers, in Jaffa. The owner bought the property from its receiver. In addition, Fattal Hotels acquired the Basel Hotel and intends to convert it into a combined boutique hotel and apartment complex. Also slated for conversion to boutique hotels are the Savoy Hotel on Geula Street, now undergoing renovations, and the 50-room Shalom Hotel, whose conversion will begin in 2008.
But Tel Aviv is the not only city to become popular with boutique hotel developers. Jerusalem will also see the opening in mid-2008 of the 50-room Harmony Hotel on Nahalat Hashiva Street near the Museum of Tolerance. Boutique Hotels are also due to be built in Rishon LeZion, Rehovot, and in Ashdod.
"Building a boutique hotel makes a good deal of sense," says Michael Hai, owner of hotel development and investment consulting firm Vision Hospitality Company. "The hotels do not require an exceptionally large investment so the risk in building is not all that great. What's more these hotels also deliver a fairly good return per room."
Boutique hotels have also broken new ground by virtue of the fact that they made people realize for the first time that a Tel Aviv hotel does not have be right next to the beachfront, and that it can still provide a unique experience from a location further inland. This fact has given developers the impetus to also build hotels like these in areas not considered classic hotel territory, such as Rothschild Blvd.
Boutique Hotels first began appearing in cities worldwide at the beginning of the 1980s. One such establishment was the famous Blacks Hotel in London's South Kingston District. In 1984, Ian Schraeger, one of the founding fathers of the boutique hotel concept, dedicated the Morgans Hotel, whose he design he entrusted to the French interior designer Philippe Starck.
No help from the Ministry of Tourism
So what exactly is it that sets boutique hotels apart from just plain small establishments? According to Hai, to differentiate themselves from one another, boutique hotels compete in terms of originality, design, and comfort. Some are classed as concept hotels that let their guests experience a specific form of art, music or design. Some hotels differentiate themselves by way of an unusual room design and stunning lobby, while others typically boast a bar unmatched anywhere else.
Hai has a grievance against the Ministry of Tourism, which is unwilling to recognize an investment in boutique hotels on the grounds that it only supports new hotels built from scratch, not the refurbishment of existing properties. According to him, developers are willing to take initiatives and commit themselves to projects even if these do not qualify for government benefits. "It is about time that the Tourism Ministry also recognized the boutique hotels sector and gave hotel owners hotelier status. Such a move will give private developers an incentive to invest in projects like these," he says.
Banks are another hurdle that developers have to tackle. According to Hai, they do not know what sort of funding boutique hotels need and as result developers often find themselves having to shoulder most of the finance from their own equity.
A boutique hotel developer seeking finance from a bank will, for instance, submit a business plan stating that the establishment will charge customers $300 a night. As the banks do not have a great many local examples of small hotels that have managed to collect sums of this size, the bank refuses to give the project the funding it deserves and is unwilling to bear the risk. Hai says the developers lose out because of this attitude, but adds that it will almost certainly change, once more boutique hotels open in Israel.
Source: Dalia Tal. Better off in boutiques. Haaretz.com (30 Dec 2007) [FullText]
Yet despite this, something has changed over the past two years. Although developers continue to avoid multimillion dollar investments in large hotels, they are willing to invest more modest sums in what are known as boutique hotels, which over recent years have also become popular in countries which do not face security crises at least once a year.
One such example is that of the Nakash family, owners of the Orchidea Hotel in Eilat, and others, who paid NIS 37 million for the old Israel Police Kishle station on Jaffa’s Clock Tower Square, seven times the suggested minimum bid in the tender. They intend to build a hotel which will capitalize on both the site's unique architectural design, and its location at the entrance of the Jaffa's old city. The Nakash family have based their model on a similar hotel in Istanbul, which was also built on the site of a historic police station, and they will reportedly invest a further NIS 160 million in its construction.
Several months ago, Digal Investment and Holdings Ltd. (TASE: DIGL). and a partner acquired Beit Engel at 84 Rothschild Boulevard in Tel Aviv, with the aim of converting it into a boutique hotel. The building, which became one of the symbols of modern architecture because of its unique shape, and impressive verandas, was designed in 1933 by the architect Zeev Rechter, who was also one of its tenants. Another famous occupant was Edis de Phillippe, founder of the Israel National Opera. During World War Two, the building served as a British Army command post. The developers intend to turn the U-shaped building into a 45-room hotel with spa, bar and restaurant, at an investment of $2,000 per square meter, with room tariffs from $200-300 a night.
Another player on the burgeoning boutique hotel sector is the Sabag family, which is to refurbish the old, run-down property it owns on Ben Yehuda Street. Now functioning as a low-grade hotel offering cut-price room rentals, the Sabag family has been inspired by its own art collection, worth NIS 8 million, to convert the building, which has 60 rooms of 12 square meters each in size, into an art hotel. This will enable them to charge $120 a night for a room
From unsavory hotel to boutique hotel
Originally built in the 1950s, the Center Hotel on Zamenhoff Street off Tel Aviv's Dizengoff Square, has gained a reputation in recent years as a highly unsavory establishment. In 2006 it was taken over by the Atlas Group Hotels Ltd., which decided to convert it into a boutique hotel. As part of the refit, Atlas commissioned eight young artists, who each designed several rooms. Eighteen months after reopening, customers are now willing to pay double the previous rate for a room, and the hotel has doubled its revenue.
Other boutique hotel construction projects now underway in Tel Aviv include the conversion of the French Hospital on Beit HaEshel street in Jaffa into a combined boutique hotel and apartment complex, by a group of American developers, in Jaffa. The owner bought the property from its receiver. In addition, Fattal Hotels acquired the Basel Hotel and intends to convert it into a combined boutique hotel and apartment complex. Also slated for conversion to boutique hotels are the Savoy Hotel on Geula Street, now undergoing renovations, and the 50-room Shalom Hotel, whose conversion will begin in 2008.
But Tel Aviv is the not only city to become popular with boutique hotel developers. Jerusalem will also see the opening in mid-2008 of the 50-room Harmony Hotel on Nahalat Hashiva Street near the Museum of Tolerance. Boutique Hotels are also due to be built in Rishon LeZion, Rehovot, and in Ashdod.
"Building a boutique hotel makes a good deal of sense," says Michael Hai, owner of hotel development and investment consulting firm Vision Hospitality Company. "The hotels do not require an exceptionally large investment so the risk in building is not all that great. What's more these hotels also deliver a fairly good return per room."
Boutique hotels have also broken new ground by virtue of the fact that they made people realize for the first time that a Tel Aviv hotel does not have be right next to the beachfront, and that it can still provide a unique experience from a location further inland. This fact has given developers the impetus to also build hotels like these in areas not considered classic hotel territory, such as Rothschild Blvd.
Boutique Hotels first began appearing in cities worldwide at the beginning of the 1980s. One such establishment was the famous Blacks Hotel in London's South Kingston District. In 1984, Ian Schraeger, one of the founding fathers of the boutique hotel concept, dedicated the Morgans Hotel, whose he design he entrusted to the French interior designer Philippe Starck.
No help from the Ministry of Tourism
So what exactly is it that sets boutique hotels apart from just plain small establishments? According to Hai, to differentiate themselves from one another, boutique hotels compete in terms of originality, design, and comfort. Some are classed as concept hotels that let their guests experience a specific form of art, music or design. Some hotels differentiate themselves by way of an unusual room design and stunning lobby, while others typically boast a bar unmatched anywhere else.
Hai has a grievance against the Ministry of Tourism, which is unwilling to recognize an investment in boutique hotels on the grounds that it only supports new hotels built from scratch, not the refurbishment of existing properties. According to him, developers are willing to take initiatives and commit themselves to projects even if these do not qualify for government benefits. "It is about time that the Tourism Ministry also recognized the boutique hotels sector and gave hotel owners hotelier status. Such a move will give private developers an incentive to invest in projects like these," he says.
Banks are another hurdle that developers have to tackle. According to Hai, they do not know what sort of funding boutique hotels need and as result developers often find themselves having to shoulder most of the finance from their own equity.
A boutique hotel developer seeking finance from a bank will, for instance, submit a business plan stating that the establishment will charge customers $300 a night. As the banks do not have a great many local examples of small hotels that have managed to collect sums of this size, the bank refuses to give the project the funding it deserves and is unwilling to bear the risk. Hai says the developers lose out because of this attitude, but adds that it will almost certainly change, once more boutique hotels open in Israel.
Source: Dalia Tal. Better off in boutiques. Haaretz.com (30 Dec 2007) [FullText]
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