When visiting Israel last May, my wife and I stayed in rented apartments.
When planing the trip we contacted a few decent hotels and prices were out of this world. There was nothing for less than $180 a night.
We started looking for alternatives and found apartments for rent on airbnb.com a great place to find places to stay all over the world.
We rented an apartment in Tel Aviv for less than $100 a night. A beautiful renovated place.
We also rented a place up North for $60 a night. All in all we saved HUNDREDS of dollars. It will be the only way we will travel from now on
In most of the world you can find decently priced hotels but in Israel a decently priced hotel also means bad stay, so the tendency is to stay in the chains and those are expensive. VERY EXPENSIVE.