Eilat has been pushing the idea of a golf course as a tourist attraction for more than 20 years. Golf is a successful worldwide industry worth billions annually and there are many other golf courses in arid regions like the UAE and Saudi Arabia but Israel has not succeeded in making the desert green, at least in terms of golf. Nationwide Israel has only one golf course – in Caesarea – serving Israelis rather than tourists.
In July 2018, the Israel Land Authority (ILA) published a tender for a golf course and hotel north of Eilat. But the tender was dropped shortly afterwards with no bidders. Now the ILA has published a new version of the tender, hoping that changers to the terms will persuade businesspeople to make bids.
560 hotel rooms and 150 acre golf course
The tender includes leasing rights and the construction of a 560-room hotel, a 600 dunams (150 acres) golf course and housing for employees. The entire tourism complex will cover 850 dunams (212.5 acres) near the planned northern neighborhood for which marketing of land was recently begun.
According to the ILA, the tender winner will sign a six-year development contract for construction of the entire enterprise (hotel and golf course), although the development expenses have yet to be published, although the amount is likely to be similar to the terms of the previous tender – NIS 15.7 million.
Changes in the permit period and usage fees
In the second stage, the tender winner will sign a 49-year lease (including the development period) with an option to extend the lease for a further 49 years. As part of this, the golf course and hotel will be separated into two agreements – a separation that was not part of the 2018 tender. The hotel will be leased for the entire period while the golf course lease will be renewed every seven years, not every 10 years as in the previous tender.
In addition, the usage fees for the golf course will not be set ahead of time, as was the case in the 2018 tender, when the fees were NIS 8.7 million, but will be derived from the bidder’s offer. In other words, the bidder will offer a price for operating and maintaining the project and accordingly the ILA will set the usage fees from the bid for every seven years stage. The relative value percentage will be included in the terms, which have not yet been published in full.
The ILA also emphasizes that the usage fees at the start of every seven year period will be linked to the cost of living index (CPI), “In order to create certainty for the bidders, without the need for a new assessment at the start of every period.”
The ILA explains, “Due to the fact that the previous version of the golf course tender did not have any winners, the outline has been somewhat changed for the current tender being published. In the current tender outline, the ILA has sought to create economic certainty for bidders in the tender and strengthen them. Therefore, it was decided that in contrast to the previous tender, in which the value of the authorization fees for the golf course was determined based on an assessment for a period of 10 years only, and for which the bidders could not know what it would be in advance, in the current outline the bidders will consider both complexes (the hotel and golf course) together in their bid.”
Meanwhile, the new outline has sparked criticism in the industry, and some have argued that it increases uncertainty for entrepreneurs. “Golf tourism in the world is an industry worth billions, but it only succeeded in penetrating Israel in Caesarea – less as a tourist destination and more for the benefit of using the golf facility itself,” Erez Cohen, real estate appraiser, and former chairman of Real Estate Appraisers Association in Israel, told Globes. “As of today, and unlike many places abroad, there is no hotel in Israel that relies on golf tourism, so I find it hard to believe that entrepreneurs will decide to bid for a tender in Eilat.
“The new version of the tender will not be able to help from this point of view, in my opinion, because it actually increases the uncertainty. You have to understand that a seven-year authorization is like a lease: you can’t get financing for it, and you can’t know what will happen at the end of those seven years. What sensible businessperson would invest in a golf course – and we are talking about an investment of millions for construction and maintenance – when they have no rights to the land? If that is not enough, then the ownership separation between the two complexes does not contribute to the matter either, and leaves many question marks.”
Cohen added: “The solution that gives a discount, so to speak, in terms of user fees, creates an even bigger problem. The ILA leaves the developer in their own hands, and expects them to make all the investments themselves. Even a desert golf course will not change the picture: it will still be an investment-intensive project that needs to be built, cared for and maintained. It would have been better to let the developers offer what they would offer, to let the market price the entire complex, without imposing all kinds of restrictions. The changes in the outline may rebound like a boomerang, and actually make the marketing of the tender more difficult.”
This is not the only criticism of the blueprint for establishing the project. Environmental activists also claim that the tender will lead to a waste of water as part of the ongoing maintenance of the golf course.
The ILA responded to the criticism, “This is a desert golf course, where the developer will not be required to plant grass over the entire area but only around the holes, in accordance with the mandatory rules for international golf courses. There are beautiful examples of this in other desert countries.
Published by Globes, Israel business news – en.globes.co.il – on September 29, 2022.
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