Ernst & Young: Israel Falls Way Short of Tourism Potential

Tourism to Israel could be doubled within five years, and reach 2-5 million tourists in 2011 - according to a report by Ernst & Young which the international consulting firm presented yesterday at a press conference. The report recommends revolutionizing Israel's management of tourism investment. The main points include substantial investment in marketing; establishment of a tourism investment committee to supervise investments in the sector by grants; and incentives and partnerships with the private sector.

The report was contracted by the Tourism and Finance ministries. Finance Minister Isaac Herzog said he planned to present the consolidated plan to the Socio-Economic Cabinet. "For the first time we have before us a real, overall working plan for the tourism sector," he declared. According to the report, Israel's greatest market potential lies in the United States, Britain, Germany, France, Italy, Sweden, Russia and China, which total about 18 million tourists - but only 6.6 percent of this number currently reaches the country.

The areas with the greatest tourism potential in Israel are, according to importance - Jerusalem, Tiberias, the Galilee, Tel Aviv and Acre. According to the report, it is not economically viable to invest in tourism in Eilat.

Israeli bureaucracy was among the problems highlighted in the report with regard to difficulties in the sector. "Investors who must wait two years for permits, take their money elsewhere," explained Adam Sachs, manager of the tourism economics department in Ernst & Young. "Investors should be sought out, rather than just responding to requests."

The political situation in Israel, adds the report, is not an insurmountable hurdle that cannot be overcome by the creation of a tourism image and substantial price discounts. One of Ernst & Young's recommendations is to conduct a five year, worldwide image campaign for the country, with a budget of $250 million - $50 million annually. They estimate that an annual investment of $50 million will yield an annual increase of 510,000 tourists. This would result in an annual increase of NIS 15 billion to the GNP, and 45,000 new jobs. The Israeli economy will regain $9 for every dollar invested in marketing Israel internationally.

A significant part of the report deals with aviation policy in Israel. The report found that this policy has hampered the market's development. A more liberal policy ("open skies") will lead to an additional 580,000 tourists by 2011, and result in 10,300 new jobs. The analysts also recommend taking steps to encourage foreign charters and inexpensive flights, and grant additional Israeli companies extended aviation rights to Europe and the U.S.

The Israel Association of Hotels commented it accepts the Ernst & Young report and applauds Herzog on its acceptance and implementation. A senior source in the Ministry of Transportation expressed his disappointment over the fact that Ernst & Young analysts had not consulted with the ministry or the Civil Aviation Authority regarding Israel's aviation policy.