Hoteliers to Bank: High Shekel vs Dollar Value Hurts Us Too

The dollar continues to struggle against the shekel, with Israeli currency remaining stronger than it has been in years – and that’s bad for the tourism business, according to the Israel Hoteliers Union. In a letter to Bank of Israel chair Karnit Flug, the hoteliers urged her to do something about the shekel’s high value, before their business was ruined. According to Amir Hayek, chairman of the Union, the high dollar has cost hoteliers NS 300 million, and they can no longer compete against alternative destinations without raising their prices in dollars and euros.

But they cannot do that; for if they do, he said, tour groups who have chosen Israel in recent years will pick other, cheaper destinations. While a strong shekel is usually seen as a problem for exporters, who cannot raise prices abroad beyond what their competition does – even though they have to pay their bills in Israel in shekels, which they get fewer of because of their foreign price constraints – the same situation holds true for the Israeli tourism industry, said Hayek.

Hotel prices in Israel are already considered high by international standards, but when visitors pay in foreign currency – especially tour groups, which hotels have to negotiate special deals with – the hotels get less when that money is converted into shekels, which they need to pay salaries and bills.

“The hotel industry employs 40,000 people directly and 150,000 indirectly,” Hayek wrote to Flug in the name of hoteliers. “40 percent of our income comes from abroad on average, while in places like Yerushalayim and Tel Aviv that figure could be as much as 70 percent.” The slide in the dollar/shekel exchange rate “is a plague for us, we are left flailing about in a storm, with a shrinking income. We cannot continue absorbing losses of this kind, and unfortunately there does not seem to be any change on the horizon on the exchange rate,” he added.

Economists quoted by TheMarker said that the dollar was likely to strengthen against European and Asian currencies in the near term, as the U.S. increases interest rates. However, that does not necessarily mean that the shekel will weaken. According to the economists, the strength of the shekel is due to three factors: The increased supply of foreign currency due to increased sales of natural gas, exits of high-tech companies that bring in foreign currency, and the significant growth of the Israeli economy.