h ospitality and t ourism a dvisory s ervices e tourism infrastructure and product the ministry of...

HOSPITALITY AND TOURISM

ADVISORY SERVICES

e

Tourism Infrastructure and ProductThe Ministry of TourismGovernment of Israel

November 2006

Quality in Everything We Do

2Quality in Everything We Do e

1 Introduction

2 Physical Infrastructure

3 Organizational Infrastructure

4 Investment Environment

5 Summary

Agenda


1 Introduction


Researching Israel’s Tourism Infrastructure and Product

Interviews with 104 tourism industry stakeholders in Israel

135 site inspections of tourism infrastructure

Survey interviews with a total of 8,400 respondents in 8 countries

Total of 18 focus groups in 8 countries

51 interviews with international tour operators in 8 countries

Research at 2006 ITB Trade Show

The Primary Research


The main goal is…The main goal is…

To offer a high quality tourism product To offer a high quality tourism product and a modern tourism infrastructure that and a modern tourism infrastructure that

would support growth in inbound would support growth in inbound tourismtourism


The main obstacles…The main obstacles…

Aging infrastructureAging infrastructure

Limited fundingLimited funding

Limited cooperationLimited cooperation


2 Physical Infrastructure


Putting things in prospective…

Demand In 2005: 1.9 million international visitors – 26.4% increase over 2004

85% from Europe and North America

58% from US, France, UK, Germany and Italy

Supply in 2005: 334 hotels – 46,700 guestrooms

7,700 rural guestrooms (Zimmerim)

29 youth hostels – 6,190 beds

60 National Parks and Nature Reserves; 200 museums; 35,000 known archeological sites; 5 World Heritage Sites; numerous religious and historical sites; natural, sports and entertainment attractions

Destination Israel


Lodging Supply…

Largest lodging markets:

Eilat: 10,828 rooms (23%)

Jerusalem: 9,218 rooms (20%)

Tel Aviv: 5,865 (13%)

Dead Sea: 4,011 (9%)

Tiberias: 3,961 (8%)

Top 5 combined: 33,883 (73%)

Hotels

Jerusalem20%

Tel Aviv13%

Eilat23%

Dead Sea9%

Tiberias8%

Haifa3%

Netanya3%

Herzeliya1%

Safed1%

Other19%


-25%

-20%

-15%

-10%

-5%0%5%

10%

15%

20%

25%

1

Jerusalem31%

Tel Aviv24%

Eilat11%

Dead Sea5%

Tiberias5%

Haifa3%

Netanya4%

Herzeliya3%

Safed0%

Other14%

Lodging Demand…

Top 5 lodging markets by share of total international person nights:

Jerusalem: 31%

Tel Aviv: 24%

Eilat: 11%

Tiberias: 5%

Dead Sea: 5%

Top 5 combined: 76%

Hotels


Lodging Demand…

International person night in 2005 versus 2000:

Haifa: + 20%

Herzeliya: + 20%

Tel Aviv: + 2%

Dead Sea: - 25%

Jerusalem: - 28%

Netanya: - 43%

Eilat: - 54%

Tiberias: - 60%

Hotels


Lodging Demand…

Spending per international person night in 2005:

Herzeliya: $125 Tel Aviv: $95 Dead Sea: $81 Haifa: $77 Eilat: $76 Jerusalem: $70 Tiberias: $48 Netanya: $37

Hotels


Some general observations…

Dated and relatively unsophisticated Generic in appearance Do not incorporate unique architecture and design Do not reflect current trends in hotel development Do not fully capitalize on their surroundings In need of renovation Limited variety in product Few international brands Highest quality: Eilat, Jerusalem and Tel Aviv Lowest quality: Netanya, Haifa and the Dead Sea

Hotels


Recommendations

First Priority: Renovate Existing Hotels Faster and requires smaller capital investment than new development

Once several hotels in each sub-market are renovated, others may follow suit in order to remain competitive

Higher-quality lodging product would: Improve traveler’s experience

Promote perception of high-value

Improve Israel’s standing relative to other destinations

Encourage repeat visitation

Facilitate efforts to attract major international hotel brands

Hotels


Recommendations

Second Priority: Develop New Hotels

New lodging development could induce overnight demand

Develop lodging products that currently are under-represented in Israel

New development should meet market needs: primarily high-quality moderately-priced 3-4 star hotels and architecturally-distinct hotels

Develop architecturally distinct, flagship luxury hotels, with broadly recognized international brands – Tel Aviv and Jerusalem

New hotels should offer a sense of place, incorporate local architecture and design and capitalize on their surroundings

Hotels


Recommendations

Attract Well Known International Hotel Brands

Attract well known international hotel brands to increase awareness and visibility of Israel as an international destination

Applies to both conversions and new developments

Major hotel brands could induce high-rated demand and raise the standards for existing hotels

International brands are important to American travelers

Hotels


Present vs. Future

Hotels



Unmatched concentration of unique attractions in small geography

Jerusalem is the “anchor” attraction

Most attractions currently have excess capacity

Many are in need of renovation and further development

Many are poorly maintained

Majority do not include high-quality tourist-oriented facilities and amenities

Public infrastructure in some tourist areas is in poor condition

Insufficient awareness of attractions

There are examples of well-developed attractions

According to focus groups and trade interviews: limited interested in casino or theme park

Sites and Attractions


Recommendations

First Priority: Further Develop Existing Sites and Attractions Further develop, expand and upgrade existing attractions in order to make

them truly exceptional

Improve facilities, incorporate new technologies and multimedia tools, add and upgrade amenities and generally enhance the visitor experience

Upgrade and better maintain public infrastructure in tourist areas: Old City of Jerusalem; Tel Aviv beachfront; Eilat promenade; Tiberias city center; etc.

Capital investments by the public sector, public-private partnerships, private donations, corporate sponsorships, etc.

Sites and Attractions



Israel has ample high-quality amenities

Examples of markets that generally offer high-quality amenities: Tel Aviv Jerusalem Eilat

Examples of markets that do not offer sufficient amenities: Dead Sea Tiberias Netanya

Amenities

Haifa Herzeliya

Akko Nazareth Safed


Recommendations

Develop Amenities in Underdeveloped Areas

Develop additional amenities in submarkets that currently lack high quality/value amenities:

Food and beverage

Retail

Nightlife

Amenities


Present vs. Future

Attractions and Amenities


Recommendations

Reform aviation policy

Make airport security more tourist-friendly

Provide better information resources on public transportation

Make public transportation more tourist-friendly by improving signage, providing schedules and system maps in English, etc.

Consider needs of international tourists in future development of mass transit

In the short-term increase number of direct charter flights to Eilat

Improve taxi service

Transportation


Recommendations

Development efforts should be concentrated in Israel’s primary tourism areas

Make those destinations truly exceptional

Specific areas that have substantial growth potential include:

Jerusalem Tiberias The Galilee Tel Aviv Akko

Future Development


3 Organizational Infrastructure


Organizational Infrastructure

What organization are involved in Israeli Tourism?

National Government Organizationse.g. Ministry of Tourism, Ministry of Finance, Ministry of Transportation

National Public Sector Organizationse.g. Israel Nature and Parks Authority, Israel Antiquities Authority

National Private Sector Organizationse.g. Israel Hotel Association, Israel Incoming Tour Operator Association

Regional Public Sector Organizationse.g. Red Sea Resort Tourism Administration, Western Galilee Tourism Trust

Regional Private Sector Organizationse.g. Tel Aviv Hotel Association, Jerusalem Hotel Association


Some key observations…

No clear strategy and methodology

Little long-term planning

Reactive not proactive

Bureaucratic and thus slow moving

Limited expertise in financial evaluation of development projects

Approves projects without securing maintenance budgets

Promotes developments that do not always meet market demand

The Ministry of Tourism


Recommendations

Reform the Ministry’s Operations

Reform the Ministry to become less bureaucratic and more responsive to changing market conditions

Adopt more business-like mentality

Focus on streamlining processes, reducing hurdles, establishing goals and objectives, measuring success and demanding accountability



Recommendations

Long-Term Strategy

Adopt a clear research-driven strategy for the development and marketing of Israeli tourism

The strategy should set short, medium and long-term goals and establish tools to measure success

Adopt long-term planning and budgeting, as well as clear methods for economic and financial analysis



Recommendations

Clear Criteria for Assessing Investments

Establish clear criteria and processes for assessing investments in tourism

Include clear and systematic financial analysis/screening

Evaluate investments based on fit with Israel’s overall tourism strategy, financial viability, economic impact, guaranteed availability of funds for ongoing maintenance, etc.




The Ministry has limited coordination and cooperation with public and private sector:

Other government ministries

Municipalities

National public and private organizations

Regional public and private organizations

No established forum for regular cooperation

Coordination with Public and Private Sector


Recommendations

Establish a Forum for Cooperation

Establish a forum for the Ministry to work with the private sector and other public sector organizations

Hold regular, frequent and systematic meetings in which ideas could be exchanged and opportunities and challenges discussed

Include the Tourism Ministry, the Finance Ministry, the Israel Hotel Association, the aviation sector, the Israel Incoming Tour Operators Association, relevant municipalities and other organizations

Coordination with Public and Private Sector



Multitude of public and private organizations involved in the tourism industry on regional level:

Regional Tourism Associations

Regional Hotel Associations

Regional Tourism Development Organizations

Regional Organizations



General characteristics:

Small, employ few employees and have limited budgets

Responsible for small geographic areas (micro-regions)

Limited international reach / marketing

Focus on the domestic market

Overlap with other regional organizations

Limited interaction and coordination with other organizations

Compete rather than cooperate with other organizations



Recommendations

Consolidate Regional Organizations

Encourage the consolidation of small regional organizations

Create incentives for small organizations to merge and disincentives for those organizations that refuse to merge

New integrated organizations should have larger budgets and better marketing capabilities

Regions of focus: the Galilee, the Northern and Central Coastal Regions



4 Investment Environment


Tourism Investment Policy

A demand-side perspective is an insufficient basis for a tourism strategy

The product (supply-side) matters!

Traditional paradigm: Marketing => Visitation => Economic returns

Israel requires a paradigm with a new focus… the investor.

Holistic Strategy

Investment

Facilitation

Destination Developme

nt

Visitation

Earned Media

Public

Sec

tor

Private

Sector

Marketing

Economic Returns


Investment Catalyst #1: TIB

Establish a single Tourism Investment Board (TIB):

A prospective investor in tourism in Israel faces a confusing array of organizations and procedures to gain government approvals and/or grants.

There are presently five separate organizations with responsibility for tourism investment.

Not only does this create confusion and inefficiencies, it does not allow for an overarching development strategy to be implemented.

Turnover within key organizations undermines continuity of any strategy that may exist.



A separate entity, under the umbrella of the Tourism Ministry. Separate full-time staff.

Final decisions on projects will be taken by the TIB board, which will include IMOT, HAMAT, Finance Ministry, and the Land Administration.

Guided by an established set of investment goals and strategies including:

Product improvement Attractions development

Product improvement Attractions development

Lodging Attraction-related

Infrastructure

Lodging Attraction-related

Infrastructure

Tourism Investment Board (TIB) will be responsible for tourism investment, grants, incentives and partnerships with the private sector. This will integrate attractions and lodging strategy under a common long term vision.

Tourism Investment Board (TIB) will be responsible for tourism investment, grants, incentives and partnerships with the private sector. This will integrate attractions and lodging strategy under a common long term vision.



Develop and promote product concepts to investors

TIB will act as a concierge to court prospective investors. Fast-track approvals

TIB will develop in-house evaluation metrics for projects

Initially funded by the government. Joint ventures should be sought to fund the TIB in the longer term. (TIB should not be considered a developer – only a promoter and/or participant.)



Current Decision-Making Structure

Investment Center,

Ministry of Industry, and Trade & Labor

Ministry of Finance

Ministry of Tourism

HAMAT Tourism Investment Decisions

Bank for Development

Israel Land Administration

Investment Center,

Ministry of Industry, and Trade & Labor

Ministry of Finance

Ministry of Tourism

HAMAT Tourism Investment Decisions

Bank for Development

Israel Land Administration



New Decision-Making Structure

Tourism Investment Board

IMOT

ILA

Finance

HAMAT

Legislation may be required to establish the TIA. However, the legal environment was not assessed in relation to the new entity.


Investment Catalyst #2: Incentives

Realities

1. Current grant and incentive system is too limited to make an impact.

2. Israel’s investment incentives must address the real issue of a deteriorating product in the midst of new regional development of a much higher quality.

3. Further, incentives need to address the particular risks to tourism investment in Israel.

4. And these incentives must be at least as compelling as those of destinations competing for the same capital and developers.


Investment Catalyst #2: Incentives

Recommendations

1. Award grants and incentives for renovations, not just for expansions and new projects.

2. Require a budget for annual maintenance as a grant criterion.

3. Offer low interest financing for projects of special significance and/or when private financing is difficult to obtain. For mega projects, the government can back bonds.

4. Offer a safety net policy to investors to counterbalance security risks.

5. Seek private sector equity and operational expertise in public projects.


5 Summary


Renovate existing lodging supply Develop new lodging Attract well-known international hotel brands Further develop existing attractions Develop amenities in underdeveloped areas Address issues relating to transportation to and in Israel Reform the Tourism Ministry Consolidate regional organizations Establish a tourism investment Board Provide better incentives for tourism development

Summary

h ospitality and t ourism a dvisory s ervices e tourism infrastructure and product the ministry of...

Documents

physical infrastructure

introduction slide

inbound tourism slide

high quality tourism

tel aviv lowest quality

modern tourism infrastructure

dead sea hotels

primary research slide