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H OSPITALITY AND T OURISM A DVISORY S ERVICES. Future Marketing Strategy for the International Markets November 2006. e. Quality in Everything We Do. The surveys clearly revealed Israel has considerable “growth prospects” in the international markets.

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HOSPITALITYAND TOURISM

ADVISORYSERVICES

Future Marketing Strategy

for the International Markets

November 2006

e

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”

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


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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 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


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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 Israel’s GDP

    • The creation of nearly 45,000 new jobs in Israel


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Marketing Strategy for the Int’l 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: others

  • France

  • Italy

  • Sweden

  • USA

  • Great Britain

  • Germany


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Marketing / advertising budgets should above all invest in others

  • 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 others

Israel’s 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):

  • Sun&Beach 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 and/or

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 and/or

  • 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: and/or

  • Tour with a few “relaxing days”

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


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Further products and/or 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)


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The Future Price Strategy and/or

The realization of Israel’s 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, and/or

  • 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 primarily follow a

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? primarily follow a

  • 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: primarily follow a

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”: primarily follow a

  • 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 primarily follow a

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 primarily follow a

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 done overnight

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


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In this context, it should again be mentioned that done overnight

  • 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 9:1 done overnight

  • 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: done overnight

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: done overnight

  • 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 done overnight

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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Israel’s done overnightmost 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 Int’l Markets: done overnight

  • 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 done overnight

Take your chance!

Be’Hatzlacha!


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