Tunnel Uproar Shakes Israeli Tourist Industry

The completion of an archeological tunnel in Jerusalem’s Old City was meant to boost tourism, Israeli officials said.

Instead, it set off deadly rioting that has frightened potential travelers and sent shock waves through a tourist industry still recovering from a series of deadly bombings last spring.

“It’s a real crisis,” said Avi Rosenthal, director-general of Israel’s hotel association. “It’s not a collapse--it’s manageable still--but it’s a crisis for everyone who depends on tourism.”

With the current Israeli-Palestinian tensions little more than a week old, Rosenthal and others interviewed Thursday said it was too early to gauge the long-range effects of the violence on Israel’s $3.3-billion tourism industry. It also was difficult, they said, to separate the impact of the latest fighting, which claimed at least 75 lives, from other trouble, such as the bus bombings in February and March.

Still, most hotels experienced a drop in occupancy of 10% to 15% this week, compared with the same period last year, and they are likely to show similar reductions when September figures are tallied, Rosenthal said.

Moshe Sand, manager of Jerusalem’s Hyatt Regency Hotel, said he also expects the October occupancy rate to fall below expectations by 10% to 15%. “We are looking now to next year,” he said.

Others said the situation was even worse.

Iris Jaffe, the supervisor of the Reliable Rent-a-Car outlet at Tel Aviv’s Ben Gurion Airport, said the branch has been hit by a 30% drop in reservations in recent days, measured against the same period last year. And even those tourists and business travelers who keep their reservations often make their worries clear soon after they arrive, she said.

“You can feel the tension in the people,” Jaffe said. “They ask for advice about what is the safest [area], about the roads they should take to stay as far from problems as they can.”

Enough people are expected to stay away that the Ministry of Tourism opted this week to postpone a $6-million tourism campaign in Europe, a ministry official confirmed.

“It’s frozen, because we don’t know yet what will happen here,” said a ministry spokeswoman, who asked not to be identified. “It’s better to wait, so we don’t waste the money.”

The advent of Middle East peace in 1993 did wonders for Israel’s tourism industry, which has grown at an average of about 10% a year since then. The industry represents about a fourth of the Israeli economy.

But 1996 has been a “peculiar and difficult year” for those who make their living from tourism, Rosenthal said. He said the year began very strongly, with hotel occupancy up 20%, but then deteriorated after the suicide bombings in February and March. Tourism-related businesses struggled again in May, feeling the psychological effects at home of Israel’s aggressive “Grapes of Wrath” campaign against Hezbollah guerrillas in southern Lebanon.

Now, the major question is whether the political situation will stabilize quickly enough to entice those planning vacations for next year to come to Israel, according to Daniel Chrust, head of the Israel Tourist and Travel Agents Assn.

“The problem is not the present but the future,” said Chrust, who said the effects of a bombing or other tension on the tourism industry generally are not felt for three to six months. “People do not go on holiday to a place that they feel is unstable.” Already, however, some in the industry see a dramatic slowdown in new reservations.

Another volatile economic indicator, the Tel Aviv Stock Exchange, also showed signs of investor worry Thursday, one day after Israeli and Arab leaders held an inconclusive meeting in Washington to try to resolve their differences. Though the market closing has been moved up two hours in observance of the Sukkot holiday, which lasts about a week, trading volumes are less than half normal levels.

Finance Minister Dan Meridor, in the United States this week for a series of meetings with, among others, investment bankers, has tried to calm financial fears, vowing that the peace process and foreign investment in Israel will continue.

“Businessmen don’t conduct short-term business,” Meridor told Israel Radio. “They look to the long range.”

Benjamin Gaon, head of Koor Industries, Israel’s largest industrial conglomerate, said he has faith in the peace process and the Israeli economy.

When the peace talks began three years ago, he said, “we felt for the first time that being an Israeli businessman was not a liability anymore. And we’re not going to go back now.”