The strong shekel is weighing on them, but Israeli hotel companies will not give up on abroad

The strong shekel has turned the tables, and activity abroad, which was considered a refuge from instability in Israel, has become a burden and hurt the results of companies operating abroad. However, the market estimates that at least as far as Israeli hotel companies are concerned, the negative impact of the shekel's strengthening will remain temporary and will not affect their expansion trend outside of Israel.

Fattal's stock, which published its second-quarter results last week, rose by 6% after the report was released. This is despite the negative effects of the strong shekel on its results, after it deducted 274 million shekels from its quarterly revenue and 107 million shekels from its EBITDAR (operating profit before depreciation, amortization, other expenses, and rent), which even led it to revise its forecasts for the year downward. In practice, and neutralizing exchange rates, Fattal, which operates 285 hotels, recorded an improvement in its operating performance, managing to increase the average daily rate (ADR) by 6% and opening 24 new hotels since last June.

In Europe, Fattal's revenues in the operating currency (Euro) rose by 7% to 232 million Euros, and EBITDAR rose by 9% to 94 million Euros. A similar trend of growth in the operating currency, which turned into a decrease when translated into shekels, was also recorded in its UK and Ireland operations.

Domestic market: "Closed skies" as a growth factor

Unlike Fattal, Dan Hotels and Isrotel are focused mainly in Israel. Compared to the corresponding quarter last year, when companies were forced to close hotels due to the outbreak of the war with Iran, both chains reported improved performance in the second quarter of this year. Isrotel, which operates 26 hotels in Israel, saw an 11% increase in revenue to 603 million shekels, translating into a 28% jump in EBITDAR to 185 million shekels.

Analysts note that due to limited international flight options in the second quarter, Israelis were forced to seek vacations domestically, benefiting Isrotel's resort-heavy portfolio. However, experts warn that if the security situation remains calm, third-quarter results may soften as international travel options for Israelis increase.

Expansion strategy

Despite currency risks, experts do not expect the trend of international expansion to stop. Fattal continues to leverage partnerships with institutional bodies; over the last four years, it has raised over 900 million Euros in investment commitments to acquire 55 hotels. Last month, it launched a third partnership, which it expects to reach a fundraising volume of 1 billion Euros within weeks.

Other players are also expanding. Isrotel is investing in Rome and Greece, Dan Hotels acquired a property in Lower Manhattan, and Israel Canada Hotels announced in June the acquisition of a hotel in Berlin and operating rights for five additional German properties, which will double its foreign room count to 2,400.