Israeli hotel brand Fattal Group set to offer Airbnb rental apartments

Israel: Israel’s biggest hotel chain, Fattal Group, has reportedly leased two buildings in the Tel Aviv neighbourhoods of Kerem Hateimanim and Neve Tzedek to be used as short-term rental apartments.

The buildings are being listed on Airbnb and other booking sites under the “Master” brand of Fattal’s Leonardo Hotels unit.

Fattal said in a statement: “For some time we have been observing the changes occurring in the hotel sector globally where the biggest chain entered the short-term apartment rentals segment. We intend to continue examining closely those changes and update the services of the chain as all the world is changing.”

Many Israeli hotels have said how they had lost business to Airbnb, which often offers lower prices even though the site has become increasingly taken over by professional renters in recent years.

It is estimated that Airbnb offers about 9,000 properties in Tel Aviv alone. However, despite hosting record numbers of incoming tourists, the number of hotel overnight stays in Israel has declined in recent months, and by three per cent year on year in September.

The Israel Hotel Association has attempted to force municipal authorities and the central government to crack down on the phenomenon. Ayala Tsoref, a shared economy expert, told the Marker that Airbnb renters would “undercut hotels as they often do not pay taxes or adhere to tower regulations.”

She added: “After they failed in the war against Airbnb, they really had no choice but to adopt the model and play by the same rules of the game that apply to Airbnb. Now that it’s become clear that Israel, through the ministry of tourism, the tax authority and other regulatory bodies, is encouraging the Airbnb model, the hotels that choose to integrate into this model are making the right choice.”

Eli Ziv, the CEO of Fattal’s Tel Aviv office, said the IHA was not opposed to competition from Airbnb but to the unequal playing field.

He said: “Unlike other cities in the world, Israel’s cities still haven’t regularised the matter. The minute they operate lawfully, we’ll have no problem. It doesn’t make any difference who the operator is, only that the competition is fair.”

One anonymous hotel source criticised the new initiative by Fattal.

The source said: “It’s a real surprise to see a major chain like that, which has been opposing short-term rentals, going ahead and doing that itself, even before the sector has been regularised. At the end of the day, it will only create cannibalisation because they are competing with themselves.”

The Master operation is being managed Yuval Fattal, the son of David Fattal, the hotel chain’s founder and controlling shareholder.

The apartments in the two Fattal buildings are listed on Tel Aviv municipal tax records as residential units, not as a business which would be subject to a higher rate.

Fattal said: “Needless to say, the company’s short-term rental activity is carried out according to regulations and tax rules, including value-added tax, in contrast to thousands of independent rooms, which in the absence of regulations over the sector, operate under the radar of the authorities.”

The spokesman for Tel Aviv said the city would send inspectors to check the two buildings and “to coordinate municipal tax classification”.