Strategy Challenge Management Report « The Experience »

Group 4 École Hôtelière de Lausanne May 2012

UNWTO SILK ROAD PROJECT - 1

Honor Code As a student at the École Hôtelière de Lausanne, I uphold and defend academic integrity, academic rigor and academic liberty as core values of higher learning. I attest, on my word of honor, that work submitted in my name is my own work, and that any ideas or materials used in support of this work which are not originally my own are cited and referenced accordingly

DUBOIS Charlotte 444567517 ______

BOURDIN Alix 572116579 ______

KUMLE Theresa 896890897 ______

LAMARCHE Victoria 367902453 ______

RUESCH Diniz 584091594 ______

WEILENMANN Pamela 336647123 ______

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Table of Contents Honor Code ...... 1 1. Introduction to the Silk Road in Iran ...... 3 2. Iran ...... 3 2.1 Iran’s Hospitality Industry ...... 3 2.2 Challenges ...... 3 2.3 Mashhad ...... 4 3. Who is visiting? ...... 4 3.1 Target Market ...... 4 3.1.1 Primary Target Market ...... 4 3.1.2 Secondary Target Market ...... 5 4. Iran’s Silk Road Strategy ...... 5 4.1 Silk Road Strategy ...... 5 4.2 The Mashhad Experience ...... 6 4.3 Measurement of Success ...... 6 4.4 Marketing ...... 7 4.5 Capacity Management ...... 7 4.6 Stakeholders ...... 8 4.7 Financial Analysis ...... 9 5. Limitations ...... 9 6. Conclusion ...... 9 Bibliography ...... 10 Appendix 1 : Segmentation of Iranian cities ...... 13 Appendix 2: Segmentation of the Target Market ...... 14 Appendix 3: Proposed five-day package ...... 15 Appendix 4: Measurement of Success ...... 16 Appendix 5: Financial Forecast ...... 17

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1. Introduction to the Silk Road in Iran During the 1st century the major routes of the Silk Road were developed in Iran. The country was part of the Sassanid Empire where luxury goods such as Indian jewels, Chinese silks, spices and opium were transported. Furthermore, there are still many important monuments representing the era of the Silk Road thus allowing possible tourist opportunities to be identified (Advantour, 2012)

2. Iran

2.1 Iran’s Hospitality Industry In 2012, the current market in Iran was set to 1.8 million hotels, with an estimation of a 2% growth per year until 2017 (Euromonitor, 2012). Moreover, there are presently no international chains located in Iran due to the Islamic revolution, which forced them to close and leave the country (International Iran). Based on statistical analysis there are more domestic (79%) than international travelers (21%) (Euromonitor, 2011) . However, the international tourists represent a large proportion of tourism expenditure with 51% (Euromonitor, 2011). The visa requirements for entering Iran can be difficult to attain. However, some countries receive the visa upon arrival usually issued for a duration of 14 days (IranianVisa.com).

2.2 Challenges In order to formulate a strategy, different challenges facing Iran were analyzed, ranging from social to environmental issues. Out of the 8-Millennium goals, the focus fell on “Developing a global partnership for development” specifically in regards to tourism and growth (Institutional and Corporate Relations UNWTO). Iran is currently experiencing the disappearance of its cultural heritage, (United Nations Educational Scientific and Cultural Organization) which is divided into two parts - Tangible (monuments and buildings) and intangible (skills and knowledge of the population) – and impacted by both, social and economic factors. The social aspect is related to the high unemployment rate of 30% amongst the young Iranian population (Euromonitor, 2011) as well as a lack of education amongst people in Iran. Moreover, many highly educated young Iranians immigrate to other countries, which will challenge Iran in the long term (Euromonitor, 2011). Furthermore, the Iranian population has largely increased in the past decades and projected to grow further, from 20.4 million in 1980 to more than 58 million in 2020. This high growth can be linked to the high unemployment rate and leads to difficulties for current and future job seekers (Euromonitor, 2011). Additionally, this situation is reinforcing the highly educated young Iranians to leave the country, which in turn leads to a loss of cultural identification. Furthermore,

UNWTO SILK ROAD PROJECT - IRAN 4 due to the increase in population and the use of transportation, the country’s historical and cultural monuments are badly affected. The climate and environmental factors, especially pollution, damage historical and cultural monuments, leading to international as well as domestic visitors being dissatisfied ( Assari, 2012). UNESCO has identified the importance of using Iran’s cultural heritage to help improve the economic, environmental and social issues, thus creating a competitive advantage for Iran (UNESCO, 2011).

2.3 Mashhad The analysis looked at the different aspects of cultural heritage, namely the historic, religious, and social ones. Religion was identified as having the biggest impact and influence in the country (Council on Foreign Relations, 2008). Several cities were studied in order to recognize those that incorporated religion into their cultural heritage. These cities include Mashhad, Tabriz, , Tehran, amongst others. Mashhad was classified as an important location for the Muslim religion (La revue de Teheran). It is the religious ‘capital’ of Iran and after Mecca, the most important pilgrimage place in the Muslim world (Persia). The city offers religious and cultural points of interest that attract regional as well as international travelers (Iran Travelling Center.com, n.d.) (Appendix 1).

3. Who is visiting?

3.1 Target Market The countries selected for the target market were chosen based on statistical analysis. Visitors from the top countries who are currently and most often travelling to Iran have been identified. Japan travels the most from the Asian continent with a 10% share, whereas Germany represents the highest inbound tourism from Europe with 7%. From the Middle East, is the country travelling the most to Iran with 13% market share (Euromonitor, 2011). The target markets have been divided into two categories: Primary and secondary target market. The criteria upon which the markets were divided are from the travel patterns of the individual countries. The following measurements were used: segmentation (families, couples or groups), expenditure, method of transportation, length of stay, seasonality, age, interest of travel, as well as the visa requirements to travel to Iran (Appendix 2).

3.1.1 Primary Target Market Due to the cultural potential of Iran and the novelty for international travelers, the focus was set on international inbound tourism. As international inbound travel to Iran has generally increased

UNWTO SILK ROAD PROJECT - IRAN 5 in past years (Euromonitor, 2011), emphasis was on those countries that are visiting Iran the most. Repeat travelers are less likely to be influenced by reports in the media, which highlights turmoil in the country (Toursim Management, 2009).From the criteria comparison it can be seen that Germany (Euromonitor, 2011), Italy (Euromonitor, 2011), France (Euromonitor, 2011) and Japan (Euromonitor, 2011) present the same travel habits. They mainly travel as families and accommodation takes up the largest portion of expenditure (40%). Travelers are mainly over 65 years old whose prime interest is traveling for cultural enrichment (Helium, 2007). Their average length of stay ranges between four to seven days with visa distribution upon arrival of 14 days (Appendix 2).

3.1.2 Secondary Target Market The Middle Eastern market has been positioned as the secondary target market. Based on statistical analysis, Mashhad is being frequently visited by Middle Eastern countries (Travel and , 2011) due to similar cultural and religious beliefs, as well as Mashhad representing the second largest pilgrim city in the world. Hence, as there is a large portion of neighboring Middle Eastern countries visiting Iran, it represents well as a secondary target market. Middle Eastern countries such as Saudi Arabia, , , and Kuwait have similar travel patterns. The patterns consist of traveling in families with an average age ranging from 35-49 years old. Moreover, July is the month when most people travel, with road being the main mean of transportation. For Saudi Arabia, there are no visa requirements whereas travelers from other Middle Eastern countries receive visas upon arrival (IranianVisa.com). Finally, the main purpose of interest when traveling is for religious reasons (Travel and Tourism in Iran, 2011)(Appendix 2).

4. Iran’s Silk Road Strategy

4.1 Silk Road Strategy The focus of the strategy will be on the preservation of the cultural heritage. This will be accomplished through short term and long-term strategies. The short-term strategy will be the education of locals, offering a deeper insight on their cultural heritage and Islamic faith. The long term will include the creation of jobs through a package offer involving local communities and positioning Iran as a touristic destination in the Middle East. This strategy will be achieved through the positioning of Iran as one of the best destinations on the Silk Road project of the UNWTO. The proposal consists of offering travelers an immersion

UNWTO SILK ROAD PROJECT - IRAN 6 and insight into the historical heritage and the Islamic religion in Mashhad. The best way to promote Iran is to encourage the tourists to discover and understand the culture and the Muslim religion, which has driven the country for many years. In this way travelers are able to experience the Iranian culture actively and create their own perception different from the one published around the world by the international press.

4.2 The Mashhad Experience A five-day package was formed with the intention of creating a unique experience, both tangible and intangible. The tangible aspects will consist of visits to the famous Reza shrine, several tombs of famous historical figures whose work shaped the religion of , as well as one of the most important in the Muslim religion. The intangible aspects will include an introductory and closing workshop where tourists will receive information relative to the trip and will also be able to ask questions. Visits to the local communities will be organized, thus allowing travelers to experience the culture on a personal level and be able to exchange ideas. Finally, one day of the five-day trip will be dedicated to visiting a top ranked Iranian university. A working lunch will be organized with the students and staff, allowing for a cultural exchange and allowing the traveler to gain an insight to the younger generation of the country and their attitude towards the Islamic faith. This journey to Mashhad, based on cultural and religious history, represents a great opportunity for Iran to provide a unique experience for the primary and secondary target market as mentioned in chapter 3 (Appendix 3).

4.3 Measurement of Success Having decided on the main strategy, a way of measuring progress of the project is necessary. The focus is set on three aspects: social, economic and the tourism perspective. Amongst others, the most important objectives established for this strategy are: the increases in the preservation of monuments, tourism receipts, as well as the overall tourism satisfaction. In order to measure the success of these objectives, key performance indicators (KPI) were identified. The main KPI’s would be the % change in international tourism receipts, % change of locals visiting the cultural sites and the number of customers booking the package. The initiatives that will be implemented to monitor the objectives will be those best suited to preserving the cultural heritage(Appendix 4).

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4.4 Marketing Focus should be put on the unique selling points of Mashhad. It is the second most famous religious place in the world for the Islamic World after Mecca (Persia). Moreover, Mashhad has an important historical background reflected in monuments such as the Imam Reza Shrine. Based on the research, travelers from France (34%) book their holiday through online travel agents (OTA’S), followed by Germany (32%), Italy (21%), and Japan (35%) (PhoCusWright, 2012) (European Online Travel Agencies, 2011). Online travel bookings will represent almost a third of the worldwide volume by the end of 2012 and will continue to grow (Global Online Travel Report, 2012). Thus, this marketing approach is an important part for selling the offer. The most popular sites acting as the main OTA’S for the primary target markets were selected based on their global recognition. ‘Expedia.com’ and ‘booking.com’ (Alexa, n.d.) are the main booking sites for Italy and France, ‘holidaycheck.de’ for Germany, and ‘jtb.co.jp’ for Japan (Alexa, n.d.). Due to the fact that the international market is being targeted primarily, it is essential that the offers be marketed through world-renowned OTA’S. These have a large platform and have already consolidated their reputation. Furthermore, alternative channels will be exploited. These will include the official tourism site for Iran, Mashhad’s official online site, and also the embassy websites of Iran. In this way, the package offer receives high-level publicity. Finally, social media plays as an important marketing tool. Mashhad’s tourism office could have its own page with news updates, pictures and active blogging. Most of the OTA’S use social networks such as Facebook and Twitter to promote their offers and implement contests, which could draw attention (Amoros, 2012). The purpose of the contests is to offer travelers the opportunity to win discounts on the package. The OTA’s will propose games every day for one month a year through the social media link on its website, thus creating awareness of the product as well as Iran as a destination.

4.5 Capacity Management The tourism office of Mashhad will handle the logistics of the five-day package tour. The logistics will involve the local communities. This will be achieved through providing workshops, using local tour guides and setting up cultural exchanges with students from the university. Locals will be introducing the travelers to their everyday life as well as their traditional gastronomy. The objective is to engage the community in order to develop the local commerce and help them to improve their education and better appreciate their cultural heritage. The project will aim to give the locals a deeper understanding of the history of the Islamic religion, pride in their culture, and a new appreciation of the economic benefits of tourism, which will

UNWTO SILK ROAD PROJECT - IRAN 8 directly impact the preservation of their historical heritage. Furthermore, locals will be able to learn new languages and learn professional ethics, which will allow them to better integrate and be more flexible with different cultures and behaviors. In order to achieve the objectives of educating locals culturally, the tourism office will create a partnership with a university such as The Razavi University of Islamic Sciences. The reason for the partnership with this university is the existence of an English faculty for communications purpose, and the aim of creating an awareness of ethical development in the local community.

4.6 Stakeholders Different stakeholders that could impact Iran as a member state of the UNWTO Silk Road project were analysed. There are four stakeholders identified for this strategy and listed in a matter of importance to the project. The primary stakeholder for Iran is the government, including the different Iranian embassies located around the world, the police, the religious power, and the political opposition. It is important to keep all institutions informed and satisfied in order to provide a good journey for the travellers. If the government shows objection for the development of the project, the travellers will be facing unwanted difficulties when trying to enter the country. The second most important stakeholder is the UNWTO since the organisation is the driver of the project. It is then crucial to communicate with the UNWTO at all times. This is essential as to receive their support and benefit from their communication strategy. Moreover, the UNWTO is able to give information on other project developments on the Iranian Silk Road and possible partnerships. If the UNWTO is not satisfied, the risk is to lose the right to be part of the journey. The third stakeholder is the media. It needs to be informed at all times in order to advertise and communicate the correct image of the project, raise awareness and encourage people to travel to Iran. Ignoring the media can lead to a deficiency of knowledge amongst international travellers. The fourth stakeholder groups all the suppliers of the project together, such as the local communities, the hotels, tour guides and the tour operators. These stakeholders are an important part for the experience and satisfaction of the travellers as they are in direct contact. It is important to involve them in the project in order to offer the best journey and to communicate the spirit of the government and the UNWTO. If not taken care of, the participation of the suppliers in the project might be at risk.

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4.7 Financial Analysis Aligned with the non-profit status of the UNWTO, the benefits rely on the value creation for local communities and the preservation of cultural heritage more than the distribution of profit back to investors. The financial benefits achieved from the package are distributed in two funds. The first fund, “reserve”, set at 3% of the total revenue, is estimated at $1’820 for the year 2013 (Appendix 5). It is mainly directed to the tourism and development education of employees, seen as the investments in human capital. It is aimed to provide opportunities to the locals as well as decrease the unemployment of the young Iranian population. The second fund includes the remains of the generated profit (net income). During a five-year period an average of $1’670 is generated annually (Appendix 5). The income contributes to sustainable projects driving the heritage value, such as the maintaining and restoring sites. In the first year it will represent 2% of the total revenue and is estimated to grow 2.2% per year until 2017 (Appendix 5). The package is estimated to trigger an initial investment of $15’000 and achieve a return on investment (ROI) of 63% for 2017. It is estimated that more than 50% of the average tourist expenditure will be relocated to entertainment and shopping activities (Appendix 5) as the package offer includes accommodation, food and beverage expenses. These are intentionally set below the average competitive price of $1500 per person with an average of $870, facilitating the tourism multiplier effect (Rusu, 2011). By providing 4% higher salaries than the national average and relocating the tourist expenditure, the ethical professional approach helps develop tourist commerce among local communities. This leads to easing unemployment and increasing cultural awareness.

5. Limitations The limitations that were identified during the project consisted of the lack of available data, in order to provide a thorough analysis, as well as the impossibility of controlling the political and environmental situation in Iran. It was challenging to promote the country in a feasible way.

6. Conclusion Being part of the Silk Road project of the UNWTO is a major highlight for Iran. It enables Iran to reconnect with part of its history, as well as offer a new perspective and image of its tourism and culture. In order to make the proposed strategy succeed, it is important to be aware of the challenges that are currently occurring in the country. However, if the government of Iran, as well as the UNWTO manages to realize this project it will have a great impact on the local communities and travelers in the long-term.

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http://www.iranchamber.com/history/articles/contribution_iranian_civilization_silkroad.p hp Iran Chamber Society. (2012). Cities of Iran. Retrieved May 06, 2012, from http://www.iranchamber.com/index.php IranianVisa.com. (n.d.). Retrieved May 13, 2012, from http://www.iranianvisa.com/uponarr.htm La revue de Teheran. (n.d.). Retrieved May 12, 2012, from le tourisme religieux, "cle de votre" du secteur touristique iranien?: http://www.teheran.ir/spip.php?article820 Mashhad University of Medical Sciences A. (n.d.). Health Tourism. Retrieved May 06, 2012, from http://www.mums.ac.ir/treatment/en/index Mashhad University of Medical Sciences B. (n.d.). Mashhad. Retrieved May 06, 2012, from http://www.mums.ac.ir/ Alexa. (n.d.). Retrieved May 19, 2012, from Top Sites: www.alexa.com/topsites/countries Iran Travelling Center.com. (n.d.). Retrieved May 08, 2012, from Iran Travel Tour, Iran TravellingCenter: http://www.irantravelingcenter.com/mashhad.htm Persia. (n.d.). Retrieved May 15, 2012, from Iran Land of Nature and Culture: http://www.tourismiran.ir/main.php?t=7&cid=259&lng=en Rusu, S. (2011). Tourism multiplier effect. Arad: Journal of Economics and Business Research. United Nations Educational Scientific and Cultural Organization. (n.d.). Retrieved May 09, 2012, from Convention Concernig the Protection of the World Cultural and Natural Heritage: http://whc.unesco.org/pg.cfm?cid=175 World Tourism Organization. (2012, February). Silk Road Action plan 2012/2013. Retrieved May 6, 2012, from UNWTO Silk Road Programme: http://silkroad.unwto.org/en/content/silk- road-action-plan

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Appendix 1: Segmentation of Iranian cities

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Appendix 2: Segmentation of the Target Market

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Appendix 3: Proposed five-day package

Day 1 2 3 4 5 Other Pick up at the airport Breakfast At the hotel At the hotel At the hotel At the hotel At the hotel Walk around Mashhad Introduction Workshop at Imam Reza Shrine Qadamgah (footprint Visit to Toos Morning with a tour guide the hotel Museum Imam Reza) Ferdosi Tomb Workshop at the hotel In a local restaurant in Lunch At the hotel Take away lunch Take away lunch Droping at the airport Toos Ferdowsi University of Boq`eh-we khajeh Rabi Imam Reza Shrine Mashhad Visit to Ghazali Afternoon (Mausoleun) Museum Afternoon tea with the Visit to Harunieh student Local Restaurant In a local restaurant in Local House (explain the Hezardestan (manager of Free time Diner Mashhad history of Muslim Religion) the Restaurant speeks with the local People fluent english

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Appendix 4: Measurement of Success

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Appendix 5: Financial Forecast