Eilat Cashes in on Prospects of Peace

Will just-signed peace deal with Jordan help usher in a prosperous new era for Israel’s Red Sea resort city?

By ROBERT SARNER, Canada-Israel Business Review, November 1994

(EILAT) – Last January, shortly after being elected mayor of Eilat, Gabi Kadosh formed a special committee at City Hall to draw up contingency plans in the event that peace was established between Israel and neighboring Jordan. At the time, he argued that normalized relations between the two countries would help transform the region and provide a major economic boost to Eilat.

Little did most Eilatis – including some committee members – realize then the imminence of such a major geopolitical development as constituted by last month’s signing of a peace treaty between Israel and Jordan. This historic new reality is expected to have more direct impact on Eilat due to its location than on any other city in Israel.

Since it was founded 45 years ago as the country’s southernmost military outpost, Eilat has always been strongly influenced by its unique physical position and the intensity of its surroundings. It’s the only Israeli town or city to have common borders with three Arab countries – Jordan, Egypt and Saudi Arabia.

Long before Israel and Jordan agreed to make peace, Eilat was already riding a wave of robust economic growth. Since the 1991 Gulf War ended, many new hotels have been built, property values have shot up and shopping centers and new tourist attractions have opened. In 1993, close to 850,000 visitors came to Eilat, including more than a third from abroad.

“We’re growing at 15 to 18 per cent annually,” says Rina Maor, of the Tourism Ministry’s Eilat office. “But we think the mere fact of peace with Jordan will speed this up even before any joint plans develop.”

Since 1991, hotel stays have increased nearly 50 per cent to about 2.5 million bed nights. Maor estimates that tourism to the town now generates about $1.5 billion annually.

At the root of this growth is Eliat’s preeminence as the country’s leading domestic tourist destination. With 360 days of sunshine a year, fine diving, coral reefs, mountain and desert scenery, and a location far removed from the pressures and tensions endemic to Israel, the Red Sea resort town has benefited from a growth in disposable income among Israelis.

During the 1980s and early 1990s, when Israelis had to pay a hefty travel tax every time they left the country, Eilat became even more alluring. At the same time, tour operators began bringing in charter flights from Europe full of sun-starved Scandinavians, Germans and Brits seeking solace from their damp, grey winters.

Currently, Eilat has about 5,500 hotel rooms, from deluxe 5-star accommodation to low-budget hostels. Next year, several new hotels are set to open, adding another 1,000 rooms. By the end of the decade, it’s expected there’ll be more than 10,000. According to Aharon Dekel, Chairman of the Eilat Hotel Association, the city boasts an impressive 87% occupancy rate year-round.

Despite the relative prosperity, many feel Eilat – and the region – have only scratched the surface of the potential tourist market. City fathers have long felt Eilat’s growth was undermined by the political configuration of the Middle East. All that began to change when negotiations between Jerusalem and Amman took a took a giant leap forward last July with the signing of the Washington Declaration that ended the state of belligerency between Israel and Jordan.

In August, Eilatis – and much of the world – were surprised by the sight of Prime Minister Yitzhak Rabin and Jordan’s King Hussein cruising together in broad daylight through the Gulf of Eilat on the latter’s royal yacht. Local residents hoped it was a harbinger of future cooperation between Eilat and Aqaba, two resorts situated closely together at the northern tip of the Red Sea, but separated by almost half a century of conflict.

For decades, Eilatis have looked across the bay, watching ships dock at Aqaba’s port and lights sparkle at night throughout the town, and wondered what life was like in Jordan, a neighbor at once so close and yet so distant.

Now, the barriers are falling quickly, creating a burst of new challenges and opportunities once considered, at best, highly improbable. This month, with the border due to open for Israelis and Jordanians, a process will begin that both sides hope will enable them to reap the predicted economic dividends from making peace.

The biggest economic benefit will be from tourism. Eilat has a head start on its neighbor in dealing with a massive influx of visitors. It long ago surpassed Aqaba as a tourist mecca offering numerous marine attractions, first-class hotels, modern shopping centers, restaurants and an animated nightlife.

 

Gabi Kadosh, Eilat’s 41-year-old mayor, insists his city has little to fear in the way of competition from Aqaba despite its lower prices.

“Aqaba has only around 1,000 hotel rooms,” says Kadosh. “They don’t even have any 5-star hotels. I’d say they’re at least 15 years behind us in creating the necessary tourist attractions and infrastructure. It’s going to take a long time for them to catch up.”

As a result, tourist professionals, at least those in Israel, concur that if the plan for a Red Sea Riviera ever takes off, Eilat would likely be its center.

“Now, with the peace treaty with Jordan, there’s no reason Eilat doesn’t become the tourist hub of the region,” says Uzi Baram, Israel’s Tourism Minister. “We’re expecting tourism to flourish and Eilat’s infrastructure make it well prepared to play a very strategic role.”

The concept of the Red Sea Riviera isn’t new. Following the Madrid Conference in late 1991 that launched bilateral and multilateral peace negotiations, the notion that cooperation between Israel, Jordan, Egypt and Saudi Arabia could turn the Red Sea Gulf they share into a real Riviera attracting millions of tourists, no longer seemed quite so far-fetched.

In the wake of the peace treaty with Jordan, Kadosh is stepping up efforts to advance the concept of transforming the region into a Red Sea Riviera, with Eilat as its unofficial center. To that end, he’s embarked on a development program aimed at cultivating three main areas – building new tourist installations, attracting new industry, especially hi tech companies, and creating an international university specializing in marine biology, desert research and the hotel industry and, in so doing, fortifying Eilat’s regional pre-eminence.

Dov Sharf, a municipal employee who was a member of the Israeli delegation that negotiated with the Jordanians, says that several years ago, he recognized the limit of Eilat’s unilateral growth.

“Due to physical limitations,” he says, “we couldn’t continue our expansion and development without cooperation with Jordan, Egypt, and eventually Saudi Arabia.”

He now foresees multilateral cooperation in virtually every field, especially in transportation, environment, water resources, sewage, and tourism, considering such collaborative efforts not only desirable but indispensable for Eilat’s future prosperity and comfort.

Although cooperation is expected in a wide range of sectors, the most lucrative – and immediate – projects are envisioned in tourism. Indeed, during bilateral Israeli-Jordanian negotiations, both sides discussed numerous joint projects aimed at boosting tourism, including an international airport to serve both Aqaba, Eilat and the nearby Egyptian resort of Taba, and new tourist attractions.

The most immediate collaboration will be in joint marketing. Tour operators will now promote the two destinations together. The combined draw of Eilat and Jordan (along with Egypt) is expected to greatly increase the overall number of visitors to the region.

With one air ticket, tourists will now be able to visit, for example, Aqaba and the ancient Nabatean rock city of Petra in Jordan, tour the Sinai, including a stop at the ancient monastery of Santa Katarina in Egypt, before spending time in Eilat and the rest of Israel.

 

Tourism professionals admit that hotels in Israel could lose some business because tourists who now include Jordan (and Egypt) in their itineraries might spend a few nights less in Eilat. But the payoff would be through an expected increase in volume. Even if the Red Sea Riviera vision doesn’t fully materialize, tourism officials are convinced the peace treaty will raise awareness of the region abroad and help put it on the international tourist map.

“I’m confident that due to the new relationship with Jordan, the northern Red Sea area will now become known abroad, especially in Europe, as a distinct regional destination and resort, such as the Bahamas, the French Riviera or the Costa des Sol,” says Udi Erell, Manager of Foreshore Development Corporation that works with investors planning new tourist ventures in Eilat.

Erell expects the main change for business people will be the atmosphere.

“Investors will now have a much greater sense of security in what they’re investing,” adds Erell. “In the past, they made investments with a more speculative framework due to the political uncertainty and isolation of Israel. Now, they’ll be more confident.”

Some 550 million dollars are already slated for investment in hotel construction during the next five years. Given that figure pre-dates the peace treaty with Jordan, the amount will now surely increase.

But such rapid growth has a price. Eilat, now home to 35,000 residents, is already having problems keeping pace with such development. The public sector is scrambling to meet the need for a larger municipal infrastructure and expanded services in health care, education, housing and transportation, the result of a growing population drawn to an economy on the move.

Probably no industry thrives more on peace and stability than tourism. Despite its multitude of attractions, favorable climate and holy sites, Israel has never broken the two million tourists a year barrier – a fact largely attributed to its image as a place prone to wars, terrorism and general uncertainty.

Tourism Minister Baram says the opening of the border with Jordan has a significance far beyond the number of tourists who will cross the once forbidden frontier. The peace treaty and open border will cause a seminal change in the world’s perception of Israel from a country at war to a country of peace.

“Far too long, our vision for this region remained just a dream,” says Aharon Dekel, from the Eilat Hotel Association. “Now it’s starting to become reality. Business, especially tourism, will help bring peace to the area. If business is good for all sides, no one will spoil the peace.”