Hey everyone, welcome back to My Weird Prompts. I am Corn, and I am joined as always by my brother, Herman Poppleberry.
Great to be here, Corn. We have a topic today that I think every single person living in this country has complained about at least once in the last month. Our housemate Daniel sent us this one, and it really hits on that weird economic friction we feel every time we try to plan a vacation.
It is the great Israeli travel paradox, right? Daniel was asking about why it feels like the entire country is currently designed to push us out of the borders if we want to relax. You look at the prices, and it is literally cheaper to book a flight to Athens, stay in a nice hotel, eat like royalty, and fly back than it is to just drive two hours north to the Galilee and stay in a little cottage for a weekend.
It is not just a feeling, Corn. The numbers actually bear that out. We are living through a fascinating split-screen economy. On one side, you have the international aviation market which has become hyper-competitive and remarkably efficient thanks to policy changes over the last decade. On the other side, you have the domestic hospitality sector which is essentially a stagnant, high-cost island.
And that is exactly what we are going to tear apart today. We want to look at the structural forces here. We are talking about the legacy of the Open Skies agreement, the high-stakes game of airport slot management at Ben Gurion, and why the domestic tourism market seems to be stuck in this high-price, low-supply trap.
It is a classic case of how regulation and market entry can either bloom into a consumer paradise or wither into a protectionist bottleneck. Daniel wanted us to dig into why this is happening and if there is any way out of it.
So let us start with the sky. The Open Skies agreement is really the starting point for all of this. For those who do not remember the pre-two thousand thirteen era, flying out of Israel was a massive expense. It was basically a luxury. Then the government signed this agreement with the European Union. Herman, you have looked at the history of this. Why was it such a fight to get this through?
Oh, it was a massive political battle. You have to remember that before Open Skies, the Israeli aviation market was heavily protected. El Al, our national carrier, basically had a comfortable arrangement. They argued that as a national security asset, they could not compete on a level playing field with European giants or low-cost carriers because of their unique costs.
Right, and we have talked about this in episode one thousand one hundred thirty-eight, when we looked at El Al’s security model. They have to pay for onboard security, missile defense systems on the planes, and they cannot fly on Shabbat. Those are real costs that a company like Ryanair or Lufthansa does not have to deal with.
When we recorded episode one thousand one hundred thirty-eight, we went deep into the C-Music system, that laser-based missile defense. That costs millions per aircraft to install and maintain. Plus, El Al has to pay for security personnel at every foreign outstation, which is a massive overhead. Their argument was that if you open the floodgates, the low-cost carriers will cherry-pick the most profitable routes, drive El Al out of business, and then if there is a security crisis or a war, Israel will be left with no way to get people in or out because the foreign carriers will just stop flying. It is the sovereignty argument.
It is a compelling argument on the surface, especially given our neighborhood. We saw it happen during various escalations where foreign airlines just vanished overnight. But the government eventually pushed through anyway in two thousand thirteen. And the results for the consumer were, frankly, incredible.
They were transformative. Between two thousand thirteen and the start of the current decade, the number of passengers passing through Ben Gurion Airport basically doubled. We went from around twelve million to over twenty-four million at the peak. You saw the rise of the low-cost carrier model here. Wizz Air, EasyJet, and for a while, Ryanair, completely changed the math of what a vacation costs. Suddenly, a flight to Budapest was cheaper than a taxi ride to the airport.
But it is not just about more planes. It is about how the airport itself functions. I was reading about the mechanics of slot allocation because that seems to be the hidden battlefield where these airlines fight. If you want to fly into Israel, you cannot just show up. You need a slot.
Right. And this is where the technical side gets really interesting. Ben Gurion is what the International Air Transport Association, or I-A-T-A, calls a Level Three airport. That means it is fully coordinated because the demand for infrastructure exceeds the supply. We only have so many runways and so much terminal capacity. The Israel Airports Authority, or the I-A-A, manages these slots based on those international I-A-T-A guidelines.
And the I-A-T-A rules generally favor the incumbents, do they not? They have this thing called grandfather rights.
They do. It is essentially a use-it-or-lose-it system. If an airline held a series of slots in the previous summer season and used them at least eighty percent of the time, they have the right to keep those exact same slots for the next summer season. This makes it very hard for a new player to come in and grab the prime morning departure times or the evening arrivals that business travelers want.
So even with Open Skies, the legacy carriers like El Al, United, or Lufthansa still have a massive advantage because they own the best real estate in the schedule. They have the seven A-M departures that let you get to London in time for a lunch meeting.
They do. But the low-cost carriers found a workaround. They are willing to fly at weird hours. They will land at eleven at night and take off at six in the morning because their whole model is built on high-frequency, low-turnaround. They do not care about the business lounge or the prime mid-day slot as much as they care about keeping that plane in the air for twenty hours a day. The problem we are seeing now, in March of twenty-six, is that as Ben Gurion nears its physical limit, even those weird-hour slots are becoming scarce.
That brings us to Wizz Air. There has been a lot of talk lately about them establishing a permanent base here. Why is a base such a big deal compared to just flying in and out?
A base is a game-changer for pricing and reliability. When an airline bases aircraft at Ben Gurion, it means the planes stay here overnight. They hire local crews, they do their maintenance here, and they can start their first flights of the day much earlier. For the consumer, it means more routes to secondary cities. Instead of just flying to London or Paris, a Wizz Air base might give you direct flights to ten different cities in Poland, Romania, or Italy that you could never reach before without a connection. It also means that if there is a delay in Europe, it does not necessarily cancel the morning flight out of Tel Aviv because the plane is already here.
It also creates a massive downward pressure on prices because their cost per seat-mile drops when they have that local infrastructure. It forces everyone else to compete. But on the flip side, we saw Ryanair exit the market recently. And I have to say, Herman, I am not mourning that one.
I know you have a bit of a vendetta against their customer service, Corn.
It is not a vendetta, it is an observation of a broken model! Look, I am all for competition, but Ryanair’s approach to the Israeli market always felt exploitative. They would lure you in with a ten-euro fare and then charge you fifty euros for a backpack and another twenty to print a boarding pass. And the moment there was a slight regulatory hiccup or a dispute over terminal fees, they would just pull out and leave passengers stranded. From an economic perspective, their exit might actually be a net positive if it allows more stable carriers like Wizz Air or Transavia to take those slots.
Well, their exit was actually a very specific dispute with the Israel Airports Authority over Terminal One. For our listeners who do not know, Terminal One is the older, low-cost terminal. It has lower passenger fees for the airlines—about eleven dollars per person compared to nearly thirty dollars in Terminal Three. During the recent security escalations, the I-A-A closed Terminal One for a while and moved everything to Terminal Three, which is the main, fancy terminal.
And Terminal Three has much higher operating costs for the airport, so they wanted the airlines to pay the higher fee.
Ryanair refused to pay the Terminal Three fees. They wanted the I-A-A to charge them Terminal One rates while using the premium terminal. When the I-A-A said no, Ryanair just cancelled their entire flight schedule. It highlights the fragility of the low-cost model. They have zero loyalty to a market. If the margins drop by five percent, they are gone. This is why I think your point about Wizz Air’s base is so important. A base is a commitment. You do not just pack up three based aircraft and two hundred employees overnight because of a fee dispute.
Which actually reinforces why having a base is so much better for the country’s economic stability. But the slot constraint remains the biggest hurdle. If we want more competition, we need more capacity. And building a new airport or even a new terminal in Israel takes decades because of the land-use issues and the environmental concerns. We are an island economy, as we discussed back in episode four hundred seventy-two when we looked at why computer hardware is so expensive here. We have limited entry points.
That island economy concept is the perfect bridge to the second half of Daniel’s prompt. We have managed to make the bridges off the island relatively cheap through the Open Skies agreement. But once you are on the island, if you want to travel internally, the prices are absolutely insane.
It is the tzimmer trap. A tzimmer, for those listening outside of Israel, is basically a bed and breakfast or a guest cottage, usually in the north, in the Galilee or the Golan Heights. These are often family-run or small-scale operations. And yet, you will see a basic wooden cabin charging two thousand five hundred shekels a night. That is nearly seven hundred dollars.
For a cabin! You can stay in a five-star hotel in Berlin or a villa in Tuscany for half of that. I was looking at the data, and the price-per-night in a mid-range Galilee tzimmer has actually outpaced the inflation rate of almost every other consumer good in the country over the last five years. Why is the supply so inelastic? Why aren't more people building these things if the prices are so high?
This is where we get into the structural rot of the domestic market. It is a combination of three things: land costs, zoning insanity, and a lack of institutional investment.
Let us break those down. Land costs first. Most of the land in Israel is owned by the state through the Israel Land Authority, or Rami.
Right. And the state treats land as a primary source of revenue. When they tender land for tourism, they are often looking for the highest bidder. That means the baseline cost for a developer is already astronomical. If you pay millions of shekels just for the dirt, you cannot afford to build a mid-tier, affordable hotel. You have to build a luxury boutique resort just to break even on your capital investment.
So the government is essentially taxing the vacationer before the first brick is even laid. And then you hit the zoning. If you own a piece of agricultural land in the north and you want to put up five guest cabins, you have to go through a bureaucratic nightmare that can take a decade. You need approval from the local council, the regional planning committee, the Ministry of Tourism, and sometimes the Ministry of Defense if it is near a border.
It is that headache tax we talked about in episode six hundred fifty-five. The regulatory burden is so high that only the very wealthy or the very patient can navigate it. This creates a massive supply bottleneck. We have a growing population with more disposable income, but the number of hotel rooms and guest beds is barely budging. In fact, per capita, Israel has one of the lowest hotel room counts in the O-E-C-D.
And because the supply is fixed, the owners of the existing tzimmers have zero incentive to compete on price. They know that during Passover or Sukkot or the summer months, they will be at one hundred percent occupancy regardless of what they charge. There is no downward pressure. It is a classic seller's market where the seller has all the leverage and the buyer has no alternatives within the borders.
But what about the lack of mid-tier hotels? In Europe, you have these brands like Ibis or Motel One. They are clean, they are predictable, and they are affordable. Why don't we see those in the Galilee or in Eilat?
Because the math does not work here. To build a three-star hotel in Israel, you face the same labor costs, the same land costs, and the same security requirements as a five-star hotel. In Israel, the cost of labor is very high, and the service culture, as we have noted before, is... let us call it unique.
That is a very polite way of saying it is often terrible.
Well, it is expensive and often unpolished. When a hotel owner has to pay a high minimum wage plus all the social benefits, and they have to hire a full-time kashrut supervisor—which can cost a medium-sized hotel tens of thousands of shekels a month—and they have to meet stringent fire and safety codes that are often more intense than in Europe, their operating costs are through the roof.
So if your operating costs are high, you cannot sell a room for four hundred shekels and make a profit. You have to sell it for one thousand two hundred.
Precisely. This has led to what I call the hollowing out of the middle. We have ultra-luxury hotels that the tech elite and foreign tourists stay in, and we have very basic hostels, but the middle-class Israeli family is completely priced out of their own country. This is why the flight to Paphos or Rhodes is the only logical choice for a family of five. You can pay for five flights and a week in a four-star resort in Cyprus for less than the cost of three nights in a tzimmer in Rosh Pina.
This is where the conservative perspective on deregulation really becomes the only logical path forward. If you want lower prices, you have to flood the market with supply. You have to make it as easy to build a hotel as it is to build a storage shed.
I agree, but it is also a land-use policy issue. The government needs to stop treating tourism land as a cash cow. They should be offering long-term leases at nominal costs to developers who commit to building mid-range, high-density hospitality projects. Instead of one tzimmer on an acre of land, we need twenty-room lodges that share infrastructure and staff.
It is about economies of scale. The tzimmer model is fundamentally inefficient. One family managing two cabins is never going to be as price-efficient as a professional management company running fifty rooms. But the current zoning laws in the Galilee often forbid that kind of density because they want to preserve the rural character of the villages.
Right, so we preserve the rural character, but we make the countryside a playground only for the rich. It is a classic trade-off where the unintended consequence is social exclusion. And let us talk about the service crisis again. If I am paying seven hundred dollars a night, I expect a certain level of service. But in Israel, because there is no competition, the owners do not feel the need to invest in training or facilities. You get a dusty room, a broken air conditioner, and a shrug when you complain.
That is the headache tax in action. When the consumer has no alternatives, the provider has no incentive to improve. This is why the Open Skies agreement was so successful—it gave Israelis an alternative. The moment it became cheaper to fly to Cyprus, the hotels in Eilat actually had to start trying.
Did they, though? It feels like their response has mostly been to lobby the government for subsidies or to try and limit Airbnb rather than actually cutting prices.
There is some of that, for sure. But you do see a shift in the younger generation. They are much more likely to use digital platforms to find alternative arrangements. However, even Airbnb is getting squeezed by local regulations in Tel Aviv and Jerusalem. The city councils are trying to ban short-term rentals to lower housing costs, which is a noble goal, but it also removes the only affordable accommodation option for many travelers.
So we have this situation where the international market is a success story of deregulation and competition, and the domestic market is a cautionary tale of protectionism and bureaucratic strangulation. Daniel asked what the policy solutions are. Beyond just saying deregulate, what are the specific levers?
First, we need a massive reform of the Israel Land Authority’s tender process for tourism. We need to move away from the highest-bidder model to a model that prioritizes the number of units and the price point for the end consumer.
Like a price-capped tender?
You get the land for cheap, but you have to guarantee that sixty percent of your rooms will be priced below a certain threshold for the first ten years. That would attract institutional investors—the big hotel chains—who are looking for stable, long-term returns rather than quick flips.
Second, we need to bypass the local planning committees for small-scale tourism projects. If a project meets a certain set of national criteria for density and environmental impact, it should get an automatic permit. We need to take the power away from the local N-I-M-B-Y-s—the Not In My Backyard crowd—who want to keep their villages exclusive.
And third, we need to address the labor issue. We need to make it easier for the hospitality sector to bring in seasonal foreign labor or provide tax incentives for young Israelis to work in the industry. Right now, the labor shortage is driving costs up even further because hotels are fighting over a tiny pool of workers.
It is funny, we often talk about Israel as this high-tech powerhouse, this start-up nation. But when it comes to the basic economics of hospitality and land use, we are acting like a closed socialist economy from the nineteen-seventies.
It is a legacy of the way the country was built. The land was seen as a national trust, not a market commodity. But as we grow and become more integrated into the global economy, that old model is breaking down. It is creating this weird tension where we can fly across the world for the price of a dinner, but we cannot afford a weekend in our own backyard.
It also has a geopolitical implication. If Israelis stop vacationing in the Galilee and the Golan, those areas become less economically viable. We lose that internal connection to the land because it becomes a luxury product rather than a shared heritage.
That is a great point, Herman. Domestic tourism is a form of national cohesion. When you make it inaccessible, you are fraying the social fabric. People start to feel like tourists in their own country. If the only people who can afford to visit the Sea of Galilee are tech millionaires and American tourists, we have a problem.
So, looking forward, what should our listeners be watching for? You mentioned the I-A-A slot auctions.
Yes. Keep an eye on the upcoming slot allocations at Ben Gurion for the twenty-twenty-seven season. If the I-A-A starts to implement more aggressive use-it-or-lose-it rules, it could open the door for more low-cost carriers to fill the gaps left by legacy airlines. And on the domestic front, look at the Ministry of Tourism’s new master plan for the north. There is talk of creating special tourism zones that bypass some of the zoning hurdles we discussed.
I will believe it when I see the cranes. But in the meantime, I think the takeaway for our listeners is that the high prices they are seeing aren't just greed. They are the logical outcome of a broken system. If you want to change it, you have to change the rules of the game, not just complain to the tzimmer owner.
Precisely. It is a supply-side problem that requires a supply-side solution. Until we fix the land and the regulation, the flight to Athens will always be the smarter economic choice.
Which is a tragedy, really. We have one of the most beautiful countries in the world, and we are being priced out of it by our own red tape.
It is the ultimate irony. We built a state to have a home, and now we can’t afford to stay in the guest room.
Well on that cheerful note, I think we have covered the ground and the sky for today. This was a deep one, and I hope it gives everyone some context the next time they are looking at a three-thousand-shekel bill for a weekend in the Golan.
Definitely. It is all about the incentives. If you change the incentives, you change the world. Or at least the price of a hotel room.
If you are enjoying these deep dives into the weird mechanics of our economy, please take a second to leave us a review on Spotify or Apple Podcasts. It really does help the show reach more people who are just as curious as we are.
It really does. And if you have a prompt like Daniel’s, or just a question about something we discussed, you can get in touch with us through the website at myweirdprompts dot com. You can find our full archive there, plus all the links to subscribe via R-S-S.
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Thanks for listening, everyone. This has been My Weird Prompts.
See you in the next one.
Or maybe we will see you in Athens!
Sadly, you are probably right. Take care, everyone.
One last thing before we go, Herman. We should probably mention that while we’ve been focusing on the costs, there is a certain value to the sovereignty of El Al that we shouldn't totally dismiss. We saw it during the disruptions over the last couple of years. When everyone else pulled out, they were the only ones flying.
That is the trade-off, isn't it? You pay a premium for a guarantee. It is like an insurance policy. The problem is when the insurance policy starts to feel like a monopoly.
Finding that balance between national security and consumer freedom is the great challenge of the Israeli aviation sector. And so far, I think the Open Skies agreement has proven that more freedom is generally the right answer, even if it comes with some risks.
I think the domestic market could learn a lot from that. A little more freedom to build, a little more competition, and maybe we could actually afford to spend a weekend in the Galilee without taking out a second mortgage.
We can dream, Herman. We can dream.
Alright, for real this time, thanks for joining us. We will be back soon with another prompt.
Goodbye everyone.
So, Corn, if you had to pick, would you rather have a perfect, high-speed rail link to the north or a second international airport in the south?
Oh, that is a tough one. A second airport at Nevatim would solve so many of the slot constraints we talked about. It would give us a massive release valve for Ben Gurion. But a high-speed rail would change the geography of the country overnight. Imagine being in the Galilee in forty-five minutes from Tel Aviv.
That would solve the supply issue too, because you could stay further out and still feel connected. You could live in a cheaper area and still work in the center, or vacation in a remote area without it being a four-hour trek.
That is a whole other episode on infrastructure. Episode one thousand three hundred and nine, maybe?
We will see what Daniel sends us.
Fair enough. Alright, signing off.
Talk soon.
You know, it is funny we mentioned the high-speed rail. I remember we touched on that briefly in episode four hundred seventy-four when we were talking about national autonomy. The idea that you can only be truly autonomous if your internal logistics are as good as your external ones.
That is exactly right. If you are dependent on foreign carriers to move your people, you are vulnerable. But if you are dependent on a tiny, overpriced domestic market for your own people's well-being, you are also vulnerable in a different way. You are vulnerable to social stagnation.
It all comes back to that island economy. We are a small space with a lot of people and a lot of history, and managing that space is the most important economic task we have.
And we are not doing a great job of it in the tourism sector right now. But the beauty of a market economy is that the pressure builds until something has to give. The current prices are unsustainable. Either the demand will collapse or the supply will finally be forced open.
I am betting on the supply. There is too much money on the sidelines waiting to be invested in Israeli hospitality if the government would just get out of the way.
I hope you are right. For the sake of my next vacation, I really hope you are right.
Me too, Herman. Me too. Alright, we are definitely over time now. Thanks again, everyone.
Bye!
Bye!
Actually, Corn, one more thought on the Ryanair thing. Do you think their exit actually helps Wizz Air negotiate better?
Probably. It shows the I-A-A that these guys aren't bluffing. But it also shows that if you want the low-cost benefits, you have to provide the low-cost infrastructure. You can't have your cake and eat it too. You can't charge Terminal Three fees and expect Terminal One prices.
It is a lesson in honesty. If the government wants low-cost travel, they have to be honest about the costs of providing it.
Honesty in government? Now you really are dreaming.
Guilty as charged.
Okay, now we are really leaving. See ya!
Herman Poppleberry, signing off.
And Corn, the sloth, out.
You said you weren't going to mention the sloth thing!
It slipped! It’s the end of the show, no one is listening anymore.
I bet they are.
Well, if you are still listening, you are a real one. Thanks for sticking with us.
Truly. Goodbye!
