HOSPITALITY AND TOURISM

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HOSPITALITY AND TOURISM ADVISORY SERVICES
Future Marketing Strategy for the International
Markets November 2006
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Quality in Everything We Do
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• The surveys clearly revealed
• Israel has considerable growth prospects
• in the international markets

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• Which strategies / measures are necessary
• to realize these growth prospects
• to convert interest into trips?
• Or else
• What does the realization of the growth prospects
  depend on?

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Overcoming the Barrier Political Situation

• Israels political situation acts as a strong
  barrier, but this should
• not be an argument for being inactive in the
  international markets
• In contrast,
• the political situation should be a spur to be
  particularly active in the markets

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• Because,
• the more present
• the more attractive
• Israel appears as a tourism destination in the
  international markets,
• the more this barrier can be overcome

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Active Marketing

• The precondition to realize Israels growth
  prospects is
• a very active
• continuous
• long-term oriented
• marketing in the international markets
• And (in connection thereto)
• a sufficient / long-term secured marketing budget

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5-Year Marketing Program

• In a first step, irrespective of the political
  situation, an at least
• 5-year marketing program
• with a guaranteed 5-year marketing budget has
  to be consequently realized

(For more than 5 years Egypt e.g. is consequently
and successfully adhering to its marketing
program independent from political events)
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The Aim for the Int'l Markets
A realistic target (also considering political
setbacks and, on the other hand, aviation reform)
is

• to double the number of international tourists in
  the next 5 years

4-5 m
2 m
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The Potential
Substantial growth prospects for Israeli economy

• Doubling the number of annual international
  visitors by 2011 to 4 million visitors could
  result in
• An annual addition of approximately NIS 18
  billion in international travel and tourism
  receipts in Israel
• An annual addition of approximately NIS 15
  billion to Israels GDP
• The creation of nearly 45,000 new jobs in Israel

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Marketing Strategy for the Intl Markets
What would be the most important strategies /
measures for the international markets in order
to reach this target? At first to select the
right markets for investment
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Priority / High Potential Markets
First Priority Markets
USA Great Britain Germany
The three Big demand markets worldwide with
high Interest Potentials for Israel
The second most important market for Israel at
present with a traditionally high affinity
towards Israel
France Italy Sweden
A growing market with a high interest in Israel
A smaller but very high spending market and
having an above average interest for Israel
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Second Priority Markets
Switzerland Netherlands Russia Canada China
A smaller but substantial, high-spending market
A smaller market, but having one of the highest
outbound travel intensities
The most important Eastern European source market
but altogether a smaller outbound market
A smaller market for overseas trips but having a
high ethnic / Jewish share
A smaller market but a growth market, also with
an interest in Israel (but only for 1-2 stays in
the scope of a multi-destination trip)
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Non-Priority Markets (at least in the next 5
years), among others
India Poland Hungary
Small outbound market, primarily business trips
Smaller / low spending market (religious-inclined
market)
Small / low spending outbound market
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High Potential / Most Promising Markets for
Israel

• France
• Italy
• Sweden

• USA
• Great Britain
• Germany

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Marketing / advertising budgets should above all
invest in

• the first priority / high potential markets,
• the markets with the best earning prospects for
  Israel

and only to a lesser degree in

• the second priority markets

No specific investment (at least in the next 5
years) in

• the non-priority markets

After 5 years the ranking of the high potential
markets / budget allocation should be reviewed
and adjusted if necessary
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Future Target Groups / High Potential Segments

• Israels growth prospects in the international
  markets lie above all
• in the holidaymaker segment
• namely, in the segment interested in Culture /
  Tour

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• Additional segments (but only for smaller target
  groups and/or
• single markets)
• SunBeach with affinity for culture
• religiously-motivated / Pilgrimages
• ethnic / VFR
• Generally not a target group for Israel
• families with small children

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The Future Product Strategy

• The absolute main product for all international
  markets / the product with the best market
  chances is
• the Tour

In European markets primarily Tour only
Israel America Both, only Israel and
multi-destination Tour (Greece, Egypt,
Italy) Asia Only multi-destination Tours
(whereas the visit of Israel is limited to a
maximum of 1-2 days)
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• Strengths of the Tour
• highly competitive (due to the uniqueness of the
  religious sites)
• and
• less price-sensitive
• less safety-sensitive
• due to less exchangeable
• - the pyramids can only be found in Egypt
• - the places of the bible only in Israel

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• Also important for all markets
• Tour with a few relaxing days
• above all at the seaside (Tour combined with
  SunBeach)

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Further products for the international markets
(although for smaller target groups and not for
all markets)

• SunBeach holiday at the Red Sea (especially
  Great Britain, Sweden)
• Traditional religious Pilgrimage (USA, Italy,
  Poland, Canada)
• Spiritual/ Meditative/ Self-finding trips
  (Germany, Sweden, Italy, USA)
• Visiting Israel as part of a cruise (Great
  Britain, Sweden)
• Medical stay at the Dead Sea (Russia, Germany)
• CityBreak (Jerusalem) (Italy)
• Kibbutz stay (young people) (France, Sweden)
• Desert trip (Sweden)

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The Future Price Strategy

• The realization of Israels growth prospects will
  also significantly depend on
• the price strategy Israel follows in the future

• In this context, it is decisive
• prices must not constitute a second barrier
  (beside the political barrier)
• on the contrary,
• prices should be an instrument to somewhat
  compensate the risk of the political situation

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• Given moderate prices,
• the political barrier can be brought down
• and
• a much broader target group can be reached (a
  large part of the Israel potential, especially in
  Europe, comes from the middle income brackets)

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• Therefore, in the international markets, Israel
  should primarily follow a
• mid-priced strategy

• Thus important
• A sufficient offer good quality mid-grade
  accommodations (3-star hotels, particularly
  also with a sense of place)
• inexpensive air fares

Focusing on a mid-priced offer does not exclude
high-priced offers, but the main emphasis should
remain on good quality mid-grade offer
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The Future Distribution Strategy

• The main distribution channel for Israel in the
  international markets should be
• Tour Operators / Travel Agencies

• In order to better exploit the large interest
  potential, Israel needs to
• strongly cooperate with tour operators / travel
  agencies
• and should
• significantly increase the number of tour
  operators / travel agencies offering Israel
• This represent a central marketing task in the
  next years to come

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• What do tour operators expect from Israel?
• Financial support in subsidizing aviation in the
  form of a safety net for seat occupancies /
  cancellations(although only relevant to large
  tour operators with own charter flights)
• Well-priced flights(generally more important
  because this also benefits the small and
  medium-sized tour operators)
• Free information trips (particularly important
  for tour operators not offering Israel)

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• But
• The by far most important sales-supportive
  measure from the tour operators / travel
  agencies view would be
• a more moderate price policy
• and conducting
• a continuous / intensive consumer advertising
• both in order to activate / increase the consumer
  demand

Therefore, the so-called safety net would be an
important but only flanking measure (for large
tour operators with own charters only)
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• Expected support in the case of an acute
  crisis
• fast, honest and reliable information
• professional first response / evacuation measures
  
• assumption of all costs (cancellations /
  transportation, etc.)
• and a post-crisis management, including
• advertising to rebuild the clients trust
• reduction of prices / special offers in the
  following season

• That means, decisive for the tour operators are
• moderate prices
• and consumer advertising

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The Internet as a Sales Channel
The tour operators themselves are increasingly
offering online bookings At least for the next
few years, Israel should refrain from its own
online sales because

• personal contact and consultation are very
  important in the case of Israel
• and
• it would be counterproductive for a good and
  close relationshipwith tour operators

Except Flight bookings for repeat / VFR-visitors
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The Future Communication Strategy

• The image of Israel (above all in Europe) is a
  negative image shaped by the political situation
• It is a must to contrast this negative (news)
  image in the future
• Therefore, if Israel wants to better exploit its
  large interest potential, it is a precondition
  (irrespective of the present political
  situation)
• to run a strong consumer advertising campaign

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With highest priority, Israel has to set up a
second / positive / peaceful in the markets /
in the consumers minds
a touristic image
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• The development of such a second / touristic
  image cannot be done overnight
• This is
• a long-term process
• following a long-term concept
• which should only be briefly interrupted in the
  case of a political event
• It is a measure which is also long overdue from a
  touristic point of view but not only
• such a campaign would also have an extremely
  important function for Israel in general

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In a first step, a should be provided for the
international markets This budget would be in
line with the competitors And this budget
represents a precondition to realize Israels
growth prospects
5-year budget of 250 million USD 50 million
USD per year
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• In this context, it should again be mentioned
  that
• tour operators give such a touristic image
  campaign a higher priority
• than a so-called safety-net (subsidizing in the
  aviation sector)

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ROI of 91

• Our analysis suggests that for every additional
  dollar invested in marketing, the return on
  investment will be 9 in additional spending
• An annual increase in marketing spending to 50
  million could initially yield an annual average
  of 447 million in spending and over 510,000
  additional visitors.

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• In general important for the future advertising
  measures
• It is not recommendable to
• provide ad hoc budgets at the end of the year
• sporadically place one or two ads or TV
  commercials
• change the advertising concept / line within
  short intervals

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• Additional communication measures
• Development of a crisis plan
• and
• a superlative Israel website as the central
  information system

In contrast Printed promotional material as a
Tourist Board service abroad can be
dispensed with
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Summary

• Israel has
• a large unexploited interest potential in
  international markets
• and thus considerable growth prospects

• The political situation acts as a barrier but it
  can be overcome via
• the establishment of an attractive touristic
  image
• and a moderate price policy

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• Israels most important strength is
• its worldwide unique religious culture /
  history
• (but primarily in a touristic culture /
  sightseeing than a pure religious sense)

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• Recap of Core Measures for Intl Markets
• Concentration on the first priority / high
  potential markets
• Concentration on the core product Tour
• Implementation of a 5-year image campaign (with
  a budget of 250 million USD)
• Following a mid-priced strategy
• Close partnership with tour operators / travel
  agencies as the central distribution channel
• Improvement of the offer quality / orientation on
  the core product Tour
• Improvement of the flight offer / cheaper flight
  prices

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Great prospects for Israel Take your
chance! BeHatzlacha!