By Irit Rosenblum, Ha'aretz, and Eli Daniel, TheMarker.com

Reeling from the crunch in the tourism industry, Jerusalem's hotels are initiating a tax revolt. Meanwhile, today Africa Israel Hotels today reported that low occupancy dragged down its first quarter revenues by 18%.

Hotels in Jerusalem have initiated a campaign against the high municipal property taxes in the city. Some 38 members of the Jerusalem Hotels Association are holding back a total of NIS 40 million in tax payments.

The association's chairman, Yoram Gordon, pointed out that although many municipalities - among them Tiberias, Nazareth, Acre, Arad and Haifa - had reduced their tax rates for hotels, this was done only in conjunction with the Finance Ministry forgoing its tax bite.

According to Gordon, municipal tax is only one part of the increasing fixed costs faced by the struggling tourist industry.

Hotels also have to pay municipal charges for garbage disposal and fire-fighting services, as well as business and kashrut licenses. These can add several thousand shekels to the billion-monthly municipal tax bill. "City tax in Jerusalem is one of the highest in Israel," Gordon pointed out.

The hoteliers claim that Jerusalem is hurting the worst from the tourism crisis, which affects not only hotels but also workers, taxi drivers, tourist agencies, shops (particularly Judaica stores) and tourist guides.

In Jerusalem, around 27,000 people worked in the tourist industry in 2000. The industry employs only 14,000 today.

In March and April 2001, the number of nights spent in hotels in Jerusalem fell 71% in relation to the corresponding period last year.

According to the association, hotels in Jerusalem have to spend $100,000-150,000 each month on operating costs. Some hotels have converted to absorption centers for new immigrants.

The association claims that this crisis is more severe than ever before, as even Israelis have stopped coming to the city for vacations. The ultra-Orthodox continue to come for the weekends, the association says, but then the wages for staff are at a 200% premium.

The Tower of David Museum, for example, attracted 10,000 visitors a day during the glass exhibition by Chihuly; today, the site draws only five visitors a day.

A spokesman for the Jerusalem municipality said that the city's leaders were well aware of the crisis facing all businesses in general and the hotels in particular and were searching for a comprehensive solution for all those affected by the situation. The municipality, the spokesman said, had also approached the prime minister for assistance.

The spokesman pointed out that although the hotels have not paid their tax dues this year, the municipality had not taken any action against them.

Diving revenues and mounting losses

Africa Israel Hotels, controlled by the Africa Israel group, reported an 18% dive in first quarter revenues against the comparable quarter of 2000 to NIS 51.4 million.

Its results would have been worse without consolidation of the group's new hotel in Eilat, Express, and a hotel it bought in Haifa in late 2000.

The company posted an operating loss (before financing costs) of NIS 4.7 million, compared with an operating profit of NIS 3.4 million in the comparable quarter of 2000.

It lost a net NIS 4.2 million, compared with netting a positive NIS 1.8 million in the parallel quarter of 2000.

Africa Israel Hotels reported that tourist occupancy declined by 55% in all nine of its hotels. But a 14% hop in occupancy by domestic tourists helped somewhat. Average occupancy ultimately dropped from 57% in the fourth quarter of 2000 to 54.8% in the first quarter of 2001.

For the first three quarters of 2000, average occupancy stood at 77.2%.

The group's hotel in Jerusalem suffered the most, seeing income drop 50% in the first quarter.

Africa Israel Hotels is cutting costs and staffing throughout its whole chain of nine hotels.