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HOSPITALITY AND TOURISM
ADVISORY SERVICES
Tourism Infrastructure and Product
The Ministry of Tourism
Government of Israel
November 2006
e
Quality in Everything We Do
Agenda
1 Introduction
2 Physical Infrastructure
3 Organizational Infrastructure
4 Investment Environment
5 Summary
Quality in Everything We Do 1 e
1 Introduction
Quality in Everything We Do 2 e
The Primary Research
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
Quality in Everything We Do 3 e
The main goal is…
To offer a high quality tourism product
and a modern tourism infrastructure that
would support growth in inbound tourism
Quality in Everything We Do 4 e
The main obstacles…
Aging infrastructure
Limited funding
Limited cooperation
Quality in Everything We Do 5 e
2 Physical Infrastructure
Quality in Everything We Do 6 e
Destination Israel
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
Quality in Everything We Do 7 e
Hotels Israel - Hotel Room Supply - Year End 2005
Lodging Supply… Regional Distribution
Largest lodging markets: Other
19%
Jerusalem
20%
Safed
1%
Eilat: 10,828 rooms (23%) Herzeliya
1%
Jerusalem: 9,218 rooms (20%) Netanya
3%
Haifa Tel Aviv
Tel Aviv: 5,865 (13%) 3% 13%
Dead Sea: 4,011 (9%) Tiberias
8%
Tiberias: 3,961 (8%)
Dead Sea
Top 5 combined: 33,883 (73%) 9% Eilat
23%
Jerusalem Tel Aviv Eilat Dead Sea Tiberias Haifa Netanya Herzeliya Saf
Quality in Everything We Do 8 e
INTERNATIONAL PERSON NIGHTS
REGIONAL DISTRIBUTION
Hotels CHARTS
Lodging Demand…
Year 2000 Year 2005
Top 5 lodging markets by share of
Other
%
r
total international person nights: Safed
0%
14%
Jerusalem Herzeliya
Jerusalem
3%
Jerusalem: 31% 30%
Netanya
31%
4%
Tel Aviv: 24% Haifa
3%
Eilat: 11% Tiberias
5%
Tiberias: 5% Dead Sea
5%
Dead Sea: 5%
Tel Aviv Eilat
Eilat
Top 5 combined: 76%
16% 11% Tel Aviv
17% 24%
iv Eilat Dead Sea Tiberias Jerusalem Tel Aviv Eilat Dead Sea Tiberias
ya Herzeliya Safed Other Haifa Netanya Herzeliya Safed Other
Quality in Everything We Do 9 e
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%
Quality in Everything We Do 10 e
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
Quality in Everything We Do 11 e
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
Quality in Everything We Do 12 e
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
Quality in Everything We Do 13 e
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
Quality in Everything We Do 14 e
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
Quality in Everything We Do 15 e
Hotels
Present vs. Future
Quality in Everything We Do 16 e
Sites and Attractions
Some general observations…
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
Quality in Everything We Do 17 e
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.
Quality in Everything We Do 18 e
Amenities
Some general observations…
Israel has ample high-quality amenities
Examples of markets that generally offer high-quality amenities:
Tel Aviv Haifa
Jerusalem Herzeliya
Eilat
Examples of markets that do not offer sufficient amenities:
Dead Sea Akko
Tiberias Nazareth
Netanya Safed
Quality in Everything We Do 19 e
Amenities
Recommendations
Develop Amenities in Underdeveloped Areas
Develop additional amenities in submarkets that currently lack high
quality/value amenities:
Food and beverage
Retail
Nightlife
Quality in Everything We Do 20 e
Attractions and Amenities
Present vs. Future
Quality in Everything We Do 21 e
Transportation
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
Quality in Everything We Do 22 e
Future Development
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
Quality in Everything We Do 23 e
3 Organizational Infrastructure
Quality in Everything We Do 24 e
Organizational Infrastructure
What organization are involved in Israeli Tourism?
National Government Organizations
e.g. Ministry of Tourism, Ministry of Finance, Ministry of Transportation
National Public Sector Organizations
e.g. Israel Nature and Parks Authority, Israel Antiquities Authority
National Private Sector Organizations
e.g. Israel Hotel Association, Israel Incoming Tour Operator Association
Regional Public Sector Organizations
e.g. Red Sea Resort Tourism Administration, Western Galilee Tourism Trust
Regional Private Sector Organizations
e.g. Tel Aviv Hotel Association, Jerusalem Hotel Association
Quality in Everything We Do 25 e
The Ministry of Tourism
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
Quality in Everything We Do 26 e
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
Quality in Everything We Do 27 e
The Ministry of Tourism
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
Quality in Everything We Do 28 e
The Ministry of Tourism
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.
Quality in Everything We Do 29 e
Coordination with Public and Private Sector
Some key observations…
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
Quality in Everything We Do 30 e
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
Quality in Everything We Do 31 e
Regional Organizations
Some key observations…
Multitude of public and private organizations involved in the tourism
industry on regional level:
Regional Tourism Associations
Regional Hotel Associations
Regional Tourism Development Organizations
Quality in Everything We Do 32 e
Regional Organizations
Some key observations…
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
Quality in Everything We Do 33 e
Regional 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
Quality in Everything We Do 34 e
4 Investment Environment
Quality in Everything We Do 35 e
Tourism Investment Policy
A demand-side perspective is an Holistic Strategy
insufficient basis for a tourism
strategy Economic
Visitation
Returns
The product (supply-side)
matters!
Traditional paradigm: Marketing
Marketing => Visitation =>
Economic returns Earned Media
Israel requires a paradigm with a
Investment Destination
new focus… the investor. Facilitation Development
Quality in Everything We Do 36 e
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.
Quality in Everything We Do 37 e
Investment Catalyst #1: TIB
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.
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:
Lodging Product improvement
Attraction-related Attractions development
Infrastructure
Quality in Everything We Do 38 e
Investment Catalyst #1: TIB
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.)
Quality in Everything We Do 39 e
Investment Catalyst #1: TIB
Current Decision-Making Structure
Ministry of Ministry of
Finance Tourism
Investment
Center,
Tourism Investment HAMAT
Ministry of
Industry, and Decisions
Trade & Labor
Bank for Israel Land
Development Administration
Quality in Everything We Do 40 e
Investment Catalyst #1: TIB
New Decision-Making Structure
IMOT
Tourism
HAMAT ILA
Investment
Board
Finance Legislation may be required to
establish the TIA. However, the legal
environment was not assessed in
relation to the new entity.
Quality in Everything We Do 41 e
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.
Quality in Everything We Do 42 e
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.
Quality in Everything We Do 43 e
5 Summary
Quality in Everything We Do 44 e
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
Quality in Everything We Do 45 e
Quality in Everything We Do 46 e
