It's not about the hotel/beach quality. It's about being a close, modern destination with Western freedoms above and beyond theirs.
I've seen various reports of wealthy Gulf residents "having a good time" in the U.S. for example, in a manner that would be forbidden or, at minimum, frowned upon in their home country.
Add to that the "exotic" factor Israel probably has for them, food they would certainly relate to, and an abundance of Arabic on signs/products etc., and the financial resources to enjoy it all. Putting myself in their shoes, it would be a very attractive concept.