What is in Israel’s backpack? A Case for Budget Travelers' Value to Destinations

7 June 2012

The article by Nicole Rae Baerg & Maoz Inon  was originally published on the Fauzi Azar Inn blog and is posted here with permission. 

Nicole Rae Baerg is a political economist and Ph.D. student at Emory University in the United States. She is also a visiting scholar at Hebrew University in Jerusalem.

Maoz Inon is a self-made tourism entrepreneur, whose successful projects include the Fauzi Azar Inn, Israel Hostels Network, Jesus Trail and Abraham Hostel in Jerusalem, Israel. Maoz is a Responsible Tourism Awards 2011 Winner.

Many governments, including Israel’s, are interested in attracting tourists from abroad in order to make money. Traditionally, it was thought that luxury tourism, tourists who could afford to pay for expensive goods and services such as hotel stays, spas, and tour groups, generate the most tourist dollars. The proposition was that money spent on luxury tourism “trickles-down,” yielding a virtuous cycle of economic growth and prosperity for the country.

Researcher Regina Scheyvens, however, finds that despite the optimism of trickle-down luxury-tourism, the reality of luxury-tourism is more pessimistic. In her book Tourism for Development, Scheyvens argues that luxury tourism often depends on purchasing expensive foreign products, requires a substantial amount of foreign investment capital, and utilizes foreign skills over local skills and knowledge. In other words, luxury tourism provided foreign things to foreigners and does little but repatriate the benefits of tourism back to the foreign country. Additionally, research also suggests that any benefits from luxury tourism are unlikely to “trickle-down” to peripheral and/or rural areas. This is because most luxury tourism is concentrated in main cities or already developed locales; this leaves those areas off the beaten path with limited access to the spoils of luxury tourism.

Instead of luxury tourism, countries might actually benefit more from budget tourism. As a consequence, many governments are turning to backpackers, budget travellers on an extended and/or work holiday, as an important engine of economic growth and pro-poor economic development (Hampton 1998; Dudding and Ryan, 2000). Although most of the research considering the economic benefits of backpacking and budget tourism is on Australia, New Zealand, Ireland, and South Africa, the research also highlights some important facts for Israel.

First, budget tourists actually spend more money than other tourists and in more locations. According to an Australia survey in 1992, the average Australian backpacker spends $2,667 compared with the average tourist who spends $1,272. This means that backpackers spend more than two dollars for every one dollar spent by an average tourist. In Israel, the average tourist spent $1,091 in 2010 (Tourism 2010, 2012). Assuming that the numbers for Australia are comparable for Israel today, this means that Israeli tourism can expect to gain an extra $1,000 for every budget tourist that comes to Israel. Furthermore, because backpackers are more likely to travel to multiple destinations around the country, this $1,000 is more likely to be spent around the country.

Second, budget tourists are much more likely to use local transportation facilities and infrastructure. This means that instead of using luxury transportation facilities, which are often more expensive to build and maintain, budget tourists demand similar transport and infrastructure services as locals. The use of public transport lowers the amount of overhead costs, reduces the need for imported goods, and reduces the need for special services, many of which are supplied through the government budget through grants and investment loans. In 2010 alone, the Israeli government spent over $1,300 million USD in tourist related investments (Tourism 2010, 2012). Instead of providing funds for tourists only, grants and investments monies could be placed into local transportation facilities, helping to strengthen Israeli transportation and infrastructures that are important to both locals and backpackers.

Third, budget tourists are much less likely to excessively consume resources. This applies to water, electricity, garbage, etc. For example, backpackers often swim in public beaches and take shorter water showers, while luxury tourist demand hot baths and large swimming pools within their hotel complex. The demands of luxury tourism can put significant strain on water resource management (Noronha 1999) and cause other long-term environmental concerns. Budget tourism, by contrast, is much more likely to demand resources in ways that are sustainable.

Finally, budget tourists tend to better engage and employ local communities. Budget tourists spend more face-time with residents. They also consume a higher number of local products than their counterparts in luxury tourism. Practically, this means budget tourists are more likely to buy goods made in Israel than expensive imports.

Similarly, businesses that cater to budget tourism are more likely to employ the local community and more likely to purchase their supplies from other local businesses. Support for budget tourism, therefore, works as an engine of growth by facilitating demands for local products and services and creates employment opportunities in less prosperous areas. All of these things can cause positive economic spillovers and multiplier effects.

These facts are heartening, but is backpacking and budget tourism really a panacea for economic growth? In order for budget tourism to be successful, local communities must be able to actively participate in the tourism process. In other words, tourism development strategies that do not engage local communities are much more likely to fail than initiatives that encourage locals to participate. What this means in practice is that the supply of goods and services to tourists, planning and development decisions, and finally, resource management, must include the local community. Scheyvens finds that budget tourism, especially backpacking, is much better at strengthening community participation than luxury tourism. This means that budget tourism may not only strengthen the local economy, but also may have a positive impact on local political development.

The experience of Australia and New Zealand demonstrates the importance of government intervention in harnessing the growth of the budget tourism market. How does Israel support budget tourism? Israeli budget tourism is slowly starting to develop but surprisingly, it is hard to see this when examining official statistics. According to a new report published by the statistics bureau, the total number of reported hostels and reported hostel beds in Israel has actually declined between 2001 and 2010, down from 31 hostels reported in 2001 to 26 in 2010, and with 6,492 reported beds available in 2001, to 5,988 for 2010. Part of the problem, however, is that the official statistics only report those hostels associated with Israel’s Youth Hostels Association. Hostels associated with Israel’s Hostels network – ILH, are not included in official statistics. This means that Israel’s most recent and largest hostel, the Abraham hostel in Jerusalem, is not included. Incorporating the statistics from those hostels on the ILH network with those in Israel’s Youth Hostels Association, the number of hostels in Israel has actually increased from 48 hostels in 2007 to 58 hostels in 2012. Similarly, the number of hostel beds has increased from 7,270 beds in 2007 to an estimated 8,029 beds in 2012. Assuming that an average hostel bed costs 90 NIS, at full occupancy, hostels alone can contribute approximately $190,000 tourist dollars a night to the Israeli economy.

What is interesting is that a lot of the hostels missing from the official statistics are hostels in those locales off the beaten path and are therefore ripe for budget tourists and backpackers. For example, statistics on the Fauzi Azar- a 200-year-old Arab mansion turned guest house in the Arab city of Nazareth are missing altogether, despite the fact that the hostel has been around for 7 years, has been featured extensively in prominent backpacking guide books such as the Lonely Planet, and has been visited by British ex-Prime Minister, Tony Blair. Most recently, the Fauzi Azar won a responsible tourism award for the best accommodation for local communities, defined as “a hotel, lodge or other accommodation with a positive impact on the local supply chain and local people.” In other words, peripheral hostels such as this one and others exhibit those qualities that researchers stress are important for economic success, not only for the local community, but also for the nation as a whole.

The fact that Israel has two main hostelling organizations, with one supported with national facts and figures and the other one not, is perhaps indicative of a larger problem with tourism in Israel: how to engage constructively with the periphery in developing tourism. Like the larger problem with luxury tourism, when it comes to even budget tourism, the bypassing of peripheral communities and the lack of government support for their efforts misses out on an important opportunity for both the local community and the national economy to prosper. And, as the statistics show, backpackers are at least double the economic value of someone looking wistfully out the window on a tour bus.


Dudding, V. & Ryan, C. (2000) “The impacts of tourism on a rural retail sector: a New Zealand case study,” Tourism Economics, 6(4), pp. 301–319.

Hampton, M.P. (1998) “Backpacker Tourism and Economic Development,” Annals of Tourism Research, 25, pp. 639–660

Laurie Loker-Murphy, Philip L. Pearce, “Young budget travelers: Backpackers in Australia,” Annals of Tourism Research, Volume 22, Issue 4, 1995, Pages 819-843.

Israel Central Bureau of Statistics (2010) Tourism 2010

Noronha, F. (1999). “Culture Shocks” In Focus (Spring), pp. 4–5.

Scheyvens, R. (2002) Tourism for Development: Empowering Communities, Harlow:
Pearson Education.