h ospitality and t ourism a dvisory s ervices e future marketing strategy for the international...

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Future Marketing Strategyfor the International Markets

November 2006

Quality in Everything We Do

2Quality in Everything We Do e

The surveys clearly revealed

Israel has considerable “growth prospects”

in the international markets


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?


Israel’s 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

Overcoming the Barrier “Political Situation”


Because,

the more present

the more attractive

Israel appears as a tourism destination in the international markets,

the more this barrier can be overcome


The precondition to realize Israel’s 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

Active Marketing


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)

5-Year Marketing Program


A realistic target (also considering political setbacks and, on the other hand, aviation reform) is:

The Aim for the Int'l Markets:

2006 2011

2 m

4-5 m

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


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 Israel’s GDP

The creation of nearly 45,000 new jobs in Israel

The Potential


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

Marketing Strategy for the Int’l Markets


“First Priority” Markets

USA

Great BritainGermany

USA

Great BritainGermany

The “three Big” demand markets worldwide with high Interest Potentials for IsraelThe “three Big” demand markets worldwide with high Interest Potentials for Israel

France

Italy

Sweden

France

Italy

Sweden

The second most important market for Israel at present with a traditionally high affinity towards IsraelThe second most important market for Israel at present with a traditionally high affinity towards Israel

A growing market with a high interest in IsraelA growing market with a high interest in Israel

A smaller but very high spending market and having an above average interest for IsraelA smaller but very high spending market and having an above average interest for Israel

Priority / “High Potential” Markets


“Second Priority” Markets

Switzerland

Netherlands

Russia

Canada

China

Switzerland

Netherlands

Russia

Canada

China

A smaller but substantial, high-spending marketA smaller but substantial, high-spending market

A smaller market, but having one of the highest outbound travel intensitiesA smaller market, but having one of the highest outbound travel intensities

The most important Eastern European source market but altogether a smaller outbound marketThe most important Eastern European source market but altogether a smaller outbound market

A smaller market for overseas trips but having a high ethnic / Jewish shareA 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)

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)


Non-Priority Markets (at least in the next 5 years), among others

India

Poland

Hungary

India

Poland

Hungary

Small outbound market, primarily business tripsSmall outbound market, primarily business trips

Smaller / low spending market (religious-inclined market)Smaller / low spending market (religious-inclined market)

Small / low spending outbound marketSmall / low spending outbound market


USA

Great Britain

Germany

France

Italy

Sweden

“High Potential” / Most Promising Markets for Israel:


Marketing / advertising budgets should above all invest in Marketing / advertising budgets should above all invest in

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

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

and only to a lesser degree inand only to a lesser degree in the second priority markets the second priority markets

No specific investment (at least in the next 5 years) in No specific investment (at least in the next 5 years) in the “non-priority” markets the “non-priority” markets

After 5 years the ranking of the high potential markets / budget allocation should be reviewed and adjusted if necessary After 5 years the ranking of the high potential markets / budget allocation should be reviewed and adjusted if necessary


Future Target Groups / High Potential Segments

Israel’s growth prospects in the international markets lie above all

in the “holidaymaker” segment

namely, in the segment interested in “Culture / Tour”


Additional segments (but only for smaller target groups and/or single markets):

Sun&Beach with affinity for culture

religiously-motivated / Pilgrimages

ethnic / VFR

Generally not a target group for Israel:

families with small children


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

the Tour

The Future Product Strategy

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)

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)


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


Also important for all markets:

Tour with a few “relaxing days”

above all at the seaside (Tour combined with Sun&Beach)


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

Sun&Beach 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)


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

The Future Price Strategy

The realization of Israel’s growth prospects will also significantly depend on

the price strategy Israel follows in the future


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)


Therefore, in the international markets, Israel should primarily follow a

“mid-priced” strategy

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

Thus important:

A sufficient offer “good quality mid-grade accommodations” (3-star hotels, particularly also with a sense of place)

inexpensive air fares


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


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)


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)


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


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:

Except: Flight bookings for repeat / VFR-visitors

personal contact and consultation are very important in the case of Israeland it would be counterproductive for a good and close relationship

with tour operators


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”

The Future Communication Strategy


With highest priority, Israel has to set up a second / positive / peaceful

in the markets / in the consumers’ minds

a “touristic” imagea “touristic” image


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


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 Israel’s growth prospects

5-year budget of 250 million USD

50 million USD per year

5-year budget of 250 million USD

50 million USD per year


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)


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.

ROI of 9:1


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


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

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


Israel has

a large unexploited interest potential in international markets

and thus considerable growth prospects

Summary

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

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


Israel’s most important strength is

its worldwide unique “religious culture / history”

(but primarily in a touristic culture / sightseeing than a pure religious sense)


Recap of Core Measures for Int’l 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


Great prospects for Israel

Take your chance!

Be’Hatzlacha!

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