Israel Canada Hotels: Revenue Is Growing, but Rent Is Swallowing the Profit
The main article flagged hotels as the area that still needed proof. This continuation shows why: hotel revenue jumped to NIS 389.8 million, but Same Hotels weakened, Brown produced only NIS 0.34 million of EBITDA in nine months, and the lease layer ballooned to NIS 1.1 billion.
More Revenue, Less Profit Left
The main article already flagged hotels as the part of Israel Canada that still had to prove earnings quality. This follow-up isolates the mechanism behind that warning: the hotel platform did get larger, but the lease layer grew faster than the profit left after operations.
The headline growth is obvious. Revenue from hotel operations and management rose to NIS 389.8 million in 2025, from NIS 291.0 million in 2024. But the next line already tells a different story: hotel operating and management cost rose to NIS 402.4 million, from NIS 257.7 million a year earlier. In other words, the consolidated hotel line moved from a positive direct spread of NIS 33.3 million in 2024 to a negative NIS 12.5 million in 2025, before group overhead, financing, and parent-level complexity enter the picture.
That number matters because it prevents a very common reading mistake. It is easy to see almost NIS 390 million of hotel revenue and assume a meaningful profit engine is already in place. In practice, the very year in which the platform got larger was also the year in which accounting profitability weakened and leases stopped being background noise and became a central determinant of earnings quality.
| Layer | 2024 | 2025 | What it means |
|---|---|---|---|
| Revenue from hotel operations and management | NIS 291.0 million | NIS 389.8 million | Activity scale grew by 33.9% |
| Hotel operating and management cost | NIS 257.7 million | NIS 402.4 million | Direct cost rose 56.1%, faster than revenue |
| Direct spread of the hotel line | NIS 33.3 million | NIS 12.5 million loss | Revenue growth did not survive at the direct-profit layer |
| Lease liabilities | NIS 463.6 million | NIS 1,101.3 million | The rent layer more than doubled |
Same Hotels: The Problem Also Sits in the Core Base
The cleanest test in the filing is the Same Hotels table. The company isolates the hotels that were part of the activity in all three reporting years and did not undergo a material physical change. That is exactly the base that should tell investors whether the weakness is only acquisition noise, or whether the core itself is slipping. The answer is uncomfortable.
Inside that legacy base, revenue fell to NIS 258.0 million in 2025 from NIS 273.1 million in 2024, down 5.5%. But EBITDA fell much harder, to NIS 38.2 million from NIS 59.0 million, a decline of 35.4%. EBITDAR also fell, to NIS 67.1 million from NIS 95.2 million. In other words, even before Brown, and inside the supposedly cleaner legacy base, profitability deteriorated far faster than revenue.
The Israel disclosure points in the same direction. Room revenue in Israel slipped to NIS 176.8 million from NIS 181.2 million, while average occupancy fell sharply to 53% from 72%. ADR actually rose to NIS 626 from NIS 582. That means the 2025 problem was not collapsing price. It was a steep decline in volume while rent and the fixed structure remained heavy.
The gap between EBITDAR and EBITDA shows how central rent already is to the story. In Israel, EBITDAR was NIS 53.9 million, but EBITDA was only NIS 11.9 million. Put differently, almost NIS 42 million disappeared between operating profit before rent and operating profit after rent. That is not a footnote. It is the difference between an asset-level business that can look reasonable and a shareholder-level business that still struggles to turn that economics into profit that survives the lease contracts.
That chart highlights the key point: 2024 still looked like a year in which the legacy base could deliver a decent margin. In 2025 that same base lost both revenue and profitability, while the gap between EBITDAR and EBITDA stayed wide. So it is not enough to say the whole problem comes from a newly acquired platform that has not stabilized yet. Part of the friction is already embedded in the older base.
Brown: More Volume, Almost No EBITDA
If Same Hotels show that the legacy base weakened, Brown shows how growth can inflate the revenue line without producing much profit after rent. The filing presents only nine months of Brown activity because the transaction closed on April 3, 2025. Even on that shortened basis, room revenue reached NIS 72.9 million, ADR was NIS 608, and occupancy was 46%.
So far, that looks like a platform that needs stabilization. But the profit line makes the read much sharper. Brown generated NIS 29.9 million of EBITDAR, but only NIS 0.34 million of EBITDA. In other words, almost the entire pre-rent profit disappeared once rent entered the picture. That is an almost perfect illustration of the title: revenue is indeed growing, but rent is swallowing the profit.
The wording needs discipline here. This does not mean the asset-level economics are zero. On the contrary, almost NIS 30 million of EBITDAR in nine months means there is activity, there is revenue, and there is an operating base that can potentially be improved. The problem is that at the layer that matters to shareholders, after leases, almost nothing is left. At the EBITDA layer, Brown still has not proven that it bought real profit for shareholders. So far it has mostly bought volume and complexity.
That also explains why the hotel expansion should not be read through room count alone. Once Brown enters the base, the right question is not whether more scale was added, but what share of that scale survives the lease contracts. As of year-end 2025, the answer is: very little.
The Lease Layer Already Sits on the Balance Sheet, Not Just in the P&L
The filing makes clear that leases are no longer just a current operating expense. They have become a heavy balance-sheet component. Hotel right-of-use assets rose to NIS 1,080.0 million at the end of 2025, from NIS 425.9 million at the end of 2024. Lease liabilities rose in parallel to NIS 1,101.3 million, including NIS 45.9 million current and NIS 1,055.4 million long term. This is no longer a structure that can be described as flexible or temporary.
The company also explains where a large part of that jump came from. In the lease note, first-time consolidation added NIS 651.8 million of hotel right-of-use assets, and the balance sheet itself states that the increase came mainly from the Brown acquisition. In other words, the same growth that enlarged the platform also enlarged the lease layer burdening it.
The expense line tells the same story. Depreciation expense on right-of-use assets rose to NIS 59.3 million in 2025, from NIS 25.3 million in 2024. Finance expense on lease liabilities rose to NIS 39.7 million from NIS 18.3 million. In addition, the company recognized NIS 4.3 million of variable lease payments, which are excluded from the capitalized lease liability and are recorded directly as expense. So even after leases are capitalized onto the balance sheet, not all of the economic rent burden is sitting inside the reported liability.
And this does not look like a one-off distortion tied to a single transaction. In the lease note, the company describes hotel leases running for five to ten years, with extension options of another ten to fourteen years. In the hotel inventory itself, a long list of hotel assets appears under lease structures, and in the summer of 2025 the group added another long lease for Club Hotel Tiberias for 15 years, with estimated renovation cost of NIS 45 million split equally with the landlord while any overrun is borne by the tenant. That is already a business model pattern, not an exception.
So the right question about the hotel business is no longer whether the assets can generate turnover. It is how much of that turnover survives rent, depreciation, and lease finance. As of 2025, the answer is still far from reassuring.
What Has To Happen Now
To flip the story, Israel Canada does not need another hotel headline. It needs proof in three very concrete places.
- Same Hotels need to rebuild steadier EBITDA. As long as the legacy base is weakening, the company cannot argue that the problem is only Brown integration.
- Brown needs to convert room revenue into real EBITDA after rent. EBITDAR on its own is no longer enough, because it leaves out exactly the layer that is currently erasing most of the profit.
- The lease layer needs to stop growing faster than hotel operating profit. Otherwise every new hotel will look like another growth engine from the outside and another burden layer from the inside.
Until that happens, Israel Canada's hotel line is still a story of scale without enough margin. The revenue is already there. The proof that it can survive rent is not.
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