Forging the Competitive Future of TurkeyIstanbul Sultanahmet Tourism Cluster

Prepared by Dr.Melih BuluInnovative Clusters-A New Challange

18.Sepember.2003, Gothenburg , Swedenwww.competitiveturkey.org

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300

600

900

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1500

1800

1980 1985 1990 1995 2000F 2010F 2020F

Worldwide Growth of Travel

Source: Trends in international Tourism-B.H.Archer

Tourism receipts and arrivals are growing rapidly. “…growth will continue into the next century and the rate of increase is unlikely to fall significant ly…”

Number of Tourists:1980-2020E

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600

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1800

1980 1985 1990 1995 2000F 2010F

Revenue:1980-2010E

Basic Factors

History:A fundamental advantage Turkey has many historical sites surrounded by nature. History

provides great advantage. Most important places are related to Byzance (Haga Sofia, wall of Istanbul,etc.) and Ottoman Empire (Blues Mosque, Topkapi Place,etc.). Also many interesting places related to beginning times of Christianity (House of Maria, various ancient churches, etc.)

Nature:Nature provides great advantage. You can go either skiing or beach at the same season.

Mediterrian beaches are very appropriate for sun and beach tourism whereas high mountains are the places for outdoor sports like paragliding, rafting, etc.

Geographical Position:Turkey is very near to Europe where many tourists come from. Moreover Istanbul is an

important airline node.Hospitality:Turkish people are very warm to guests. They like to help foreigners traditionally.Entrepreneurs:Since 1983, very brilliant Turkish entrepreneurs were appeared in the country. Some of

them have established considerable tourism companies.

History:A fundamental advantage Turkey has many historical sites surrounded by nature. History

provides great advantage. Most important places are related to Byzance (Haga Sofia, wall of Istanbul,etc.) and Ottoman Empire (Blues Mosque, Topkapi Place,etc.). Also many interesting places related to beginning times of Christianity (House of Maria, various ancient churches, etc.)

Nature:Nature provides great advantage. You can go either skiing or beach at the same season.

Mediterrian beaches are very appropriate for sun and beach tourism whereas high mountains are the places for outdoor sports like paragliding, rafting, etc.

Geographical Position:Turkey is very near to Europe where many tourists come from. Moreover Istanbul is an

important airline node.Hospitality:Turkish people are very warm to guests. They like to help foreigners traditionally.Entrepreneurs:Since 1983, very brilliant Turkish entrepreneurs were appeared in the country. Some of

them have established considerable tourism companies.

AntalyaTravel agencies, tour operators, hotels, airport,

museums, car rental firms Sultanahmet hotels,travel agencies, tour operators, carpet sellers, touristic shops,

restaurants, museums

AntalyaTravel agencies, tour operators, hotels, airport,

museums, car rental firms Sultanahmet hotels,travel agencies, tour operators, carpet sellers, touristic shops,

restaurants, museums

Sultanahmethotels,travel agencies, tour operators,

carpet sellers, touristic shops, restaurants, museums

Sultanahmethotels,travel agencies, tour operators,

carpet sellers, touristic shops, restaurants, museums

TaksimTravel agencies,tour operators, hotels,

car rental firms, restaurants, entertainment places

TaksimTravel agencies,tour operators, hotels,

car rental firms, restaurants, entertainment places

FethiyeTravel agencies, tour

operators,hotels, paragliding companies, diving companies

FethiyeTravel agencies, tour

operators,hotels, paragliding companies, diving companies

MarmarisTravel agencies, hotels,

yatching companies, diving companies

MarmarisTravel agencies, hotels,

yatching companies, diving companies

KusadasiTravel agencies,hotels, touristic

shops, yatching companies, diving companies

KusadasiTravel agencies,hotels, touristic

shops, yatching companies, diving companies

Except Istanbul and Cappadocia, all other tourism cluster areas are using the benefit of sun&sea tourism

CappodocciaTravel agencies, hotels, airport,

museums, ballooning companies

CappodocciaTravel agencies, hotels, airport,

museums, ballooning companies

Tourism Cluster Formation Areas of Turkey

0

50.000

100.000

150.000

200.000

250.000

300.000

350.000

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Number of Beds in Turkey Increases

Winter is dead season for Turkish tourism business

Seasonality in Turkish Tourism

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

Janu

ary

Febru

aryMarc

hAp

rilMay

June Ju

ly

Augu

st

Septe

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r

Octobe

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Novembe

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Dece

mber

199619971998

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1981 1982 1985 1987 1988 1989 1990 1993 1996 1997

years

% o

f sel

ectin

g to

urist

ic a

ctiv

ity

personal

Package tour

Source: DIE

Percentage of people who prefer package tours is increasing

Domination of package tours is increasing

EU Countries%50

ABD%9

Japan%6

Old Eastern Block%13

Arabic Countries%5

Other%17

Most of the tourists came from European countries by airways

source: bulletin of accommodation statistics 1998

air%90

sea%10

How Tourists reach Istanbul ?Where tourists come to Istanbul?

Istanbul is an attractive place for the people from all over the world

0

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

1994 1995 1996 1997 1998

ISTANBULANT+IZM+MUG

A tourism expert says “firms in Istanbul were sure that tourists would come to Istanbul due to its magnificent cultural treasuries and they did nothing during past years; however, tourists started to prefer Southern

Turkey

Tour operators prefers Southern Turkey

w Rich cultural infrastructure

w Most of the cluster members are available

w Decrease in share of the tourists coming to Sultanahmet

w Geographical concentration of related elements

w A success story in Sultanahmet will be copied easily to other potential cluster candidates

w We believe that the probability of being successful in this area higher

w Rich cultural infrastructure

w Most of the cluster members are available

w Decrease in share of the tourists coming to Sultanahmet

w Geographical concentration of related elements

w A success story in Sultanahmet will be copied easily to other potential cluster candidates

w We believe that the probability of being successful in this area higher

Why Istanbul Sultanahmet Tourism Cluster?

We started with the cluster so that we are the strongest

High

Low

Low HighHigh

• High structural barriers to entry• Rich history infrastructure required

• Taksim area provides competitive service to coming tourists to Istanbul

• Istanbul vacations can be replaced by Athens, Rome, Paris or Madrid

• Tour operators constructing new hotels in southern part of Turkey so they can divert tourists to those hotels instead of Istanbul

• No bargaining power for basic inputs: buses, accommodation, unskilled service workers

• During peak times utilization rate of 5 star hotel reaches high rates; those times the bargaining power of these hotels rise

• During national holidays, most of the transportation companies have high bargaining power due to increase of domestic demand

• Agents are bombarded with information on numerous new destinations

• Agents often receive “incentives” to recommend specific sites

• Internet provides more information to customers about all possible options but Istanbul is not good at preparing necessary web sites

Sultanahmet is an attractive tourism area for Turkey

• Sultanahmet has great advantage because- Low labor costs-High differentiation opportunities-unique historical sites

• Paris, Rome, Madrid and Athens have similar characteristics

Rivalry AmongExisting

Competitors

BargainingPower of Suppliers

BargainingPower of Suppliers

Threat of SubstituteProducts or ServicesThreat of SubstituteProducts or Services

BargainingPower of Customers

BargainingPower of Customers

Threat of NewEntrants

Threat of NewEntrants

Istanbul Sultanahmet Tourism ClusterIndustry Attractiveness

ChanceChance

Government Policy —LOW

Government Policy —LOW

The Cluster — MED+Hotels, tour operators, tourist shoppingcenters are working together for tour organizations-Sector members are not sharing the information with others

Demand Conditions — MED-Number of people travelling is fluctuating- Foreign tourists generallyprice sensitive-Most of the tourists came fromEuropean countries+Big potential from Muslim countries -Summer time is the peak season whereas winter time number of tourists are too low+/-Local people does not know the area so they are not visiting currently

Strategy Structure Rivalry — LOW+Many travel agents competing -No committed long term strategy plans in the sector-Volume driven strategies emphasizeprice-based competition

-Municipality does not give priority to sector-Ministry of Tourism does not have related mechanisms for understanding the sector

Basic Factors — HIGH+History of different civilizations+Good nature+Strategic location: close to Western and Eastern Europe,Russia, the Middle East+/-Low cost labor-Bad cap drivers

Advanced Factors — LOW-Tourism related schools are not enough both in quantity and quality+New airport building +Candidate membership of

Turkey can provide new

opportunities

Strategy, Structure and

Rivalry

Strategy, Structure and

Rivalry

SupportingIndustries (Cluster)

SupportingIndustries (Cluster)

DemandDemandFactorsFactors

Istanbul Sultanahmet Tourism ClusterDiamond Analysis

No long term strategy in the sector

Nurdogan Sengüler- Web Designer, Carpet SellerIskender Çayla - General Director of Retur Group (travel agency mainly working on Spanish speaking countries)Celal Ögmen - Associate President of Kumkapi Development AssociationErdalKüçükyalçin - Associate General Secretary of Turkish History FoundationErhan Çakay - General Secretary of TUROBNurdan Üstman - Board member of TURSAB responsible from trainingNebi Yasar - Tan Tourism Ministry Sultanahmet RepresentativeCemal Ekingen - President of Private Hotels AssociationAhmet Basar - 4RENK (manager of Design Company)Irfan Arikan - Bogaziçi UniversityHülya Yilmaz - General Coordinator of Çitlembik Yayincilik

and many hotel, travel agency and restaurant representatives

Nurdogan Sengüler- Web Designer, Carpet SellerIskender Çayla - General Director of Retur Group (travel agency mainly working on Spanish speaking countries)Celal Ögmen - Associate President of Kumkapi Development AssociationErdalKüçükyalçin - Associate General Secretary of Turkish History FoundationErhan Çakay - General Secretary of TUROBNurdan Üstman - Board member of TURSAB responsible from trainingNebi Yasar - Tan Tourism Ministry Sultanahmet RepresentativeCemal Ekingen - President of Private Hotels AssociationAhmet Basar - 4RENK (manager of Design Company)Irfan Arikan - Bogaziçi UniversityHülya Yilmaz - General Coordinator of Çitlembik Yayincilik

and many hotel, travel agency and restaurant representatives

Sultanahmet Tourism cluster started to solve the problems of the sector

Istanbul Sultanahmet Tourism ClusterSultanahmet Cluster Participants

Challenges1. EU Accession changed the rules of the game

2. External challenges

1. War in iraq(first and second war)

2. Terrorism(PKK and others)

3. Earthquakes

3. Trust problem

4. University industry cooperation

5. International Marketing

1.EU Accession changed rules of game

• Travelling between EU and Turkey getting easier

• Big European tourism companies introduced all inclusive system

• They either buy or rented most of Turksih hotels yearly

• They capture the tourists who are travelling alone with

increasing portion

2.External Challenges

– War in iraq

• first and second war

– Terrorism

• PKK and others

– Earthquakes

• Izmit and Bolu

3.Trust and Communication

Ring of direct tourism product

Ring of direct organization

Supporting ring

Transport(air, bus,rental, taxis etc.

Accommodation(hotels, hostels, etc.)

Food

Shopping(carpet, souvenirs,etc)

Guides

Entertainment & culture

Historical Sites

Turkish travel agents

Turkish tour operators

Tourismoffices of Ministry

Financial services

Health

Telecom Companies

Police

Transportinfrastructure(roads, airports, signs)

Manpowertraining(managerial,service)

Ministry of Tourism

Ministry of Culture

Media

TÜRSAB

TÜROB

TYD

Turkish History Foundation

Customes

Museums

Universities

Lines indicate strong links.Between all other items,almost no organised links

Insurance

Foreign Travel

agents

Foreign Tour Operators

Mislink between cluster members and foreign travel agencies, foreign tour operators prevents control on the demand side

Istanbul Sultanahmet Tourism ClusterCluster Map

ANALYSIS1.cluster members do not trust each other. Especially, fierce competition in last years has created a trust problem 2.Communication channels are either not available or not open to everybody 3.Sector organizations are collects same type of sector members: TURSAB for travel agencies, TUROB for Hotels. There is no hybrid organizations that serves different members that is in tourism sector

ANALYSIS1.cluster members do not trust each other. Especially, fierce competition in last years has created a trust problem 2.Communication channels are either not available or not open to everybody 3.Sector organizations are collects same type of sector members: TURSAB for travel agencies, TUROB for Hotels. There is no hybrid organizations that serves different members that is in tourism sector

PROBLEMCurrent communication level is not sufficient among cluster members

PROBLEMCurrent communication level is not sufficient among cluster members

SOLUTIONS1.Sultanahmet e-group was established in order to open new communication channel among cluster members2.Cluster meetings will continue by increasing the participation3.www.sultanahmetonline.org is being launched4.A new newspaper will be launched Sultanahmet Postasi

SOLUTIONS1.Sultanahmet e-group was established in order to open new communication channel among cluster members2.Cluster meetings will continue by increasing the participation3.www.sultanahmetonline.org is being launched4.A new newspaper will be launched Sultanahmet Postasi

Training programs for internet usage, increasing participation to cluster meetings and usage of the benefits of e-mail group will increase the communication level

Current communication level is not sufficient among cluster members

u Web site will be very useful to make the cluster members come together

u It will be good example to other potential clusters to show an example of team work

u A professionally designed site will help cluster members’ understanding of where the available technology is

u Web site will motivate people in order to come together

u Web site will help communication of cluster members effectively

u By using the tools that web site provide, they will use the latest marketing tool in the world

u Demonstrate the benefits of cluster cooperation through short-term gains

u Reach out to new customer segments via the Internetu An integrated approach to customer service:w get information, make flight, hotel, restaurant reservations, in-country travel plansw Build your own customized travel itinerary on-line with cluster members

u Link other clusters to the site, develop a one-stop Turkey site u Partner with the World Bank on the Turkish National Gateway project

A Virtual cluster is being established with the help of www.sultanahmetonline.org

“Sultanahmet Web Site” is the first seeable output of the cluster work

4. University industry cooperation

Some eduation organizations tries to give support to industry however, they are not very successful

until nowTurkish History Foundation:

This foundation is occurred mostly from academicians. They have very satisfactory issues related to Istanbul History. Moreover, they are planning to arrange some Istanbul History tours. But their tourism sector related contacts are not developed.

Turkish History Foundation:

This foundation is occurred mostly from academicians. They have very satisfactory issues related to Istanbul History. Moreover, they are planning to arrange some Istanbul History tours. But their tourism sector related contacts are not developed.

Tourism Related Schools:Tourism and history related departments

are present in universities; however, university members do not have improved communication link with the sector. General miscommunication situation between university and industry is similar in tourism as well. People from the sector says that education level in tourism high schools are quite low. Graduates of these high school can not speak a foreign language sufficiently and they do not have enough knowledge about Istanbul’s historical background.

Tourism Related Schools:Tourism and history related departments

are present in universities; however, university members do not have improved communication link with the sector. General miscommunication situation between university and industry is similar in tourism as well. People from the sector says that education level in tourism high schools are quite low. Graduates of these high school can not speak a foreign language sufficiently and they do not have enough knowledge about Istanbul’s historical background.

5. International Marketing

• Low internet usage skill in the sector• Problems about reaching the target foreign

market

We have very important assets; however, we do not know how to market them

History Tourism Cluster should develop strategies urgently in order to market its products

Big potential from Muslim counties

l “When we tell about beard of Prophet that is in Topkapi Palace, everybody got interested in to coming to Istanbul.”

–One of the tourism expert participated a tourism fair in

Malaysia

Big potential from Muslim counties

l “When we tell about beard of Prophet that is in Topkapi Palace, everybody got interested in to coming to Istanbul.”

–One of the tourism expert participated a tourism fair in

Malaysia

l “A Canadian tourist want us to prepare a tour for his family in order to see Armenian locations and historical monuments in Turkey. Therefore I believe that Greeks, Jews and Armenians living all around the world are great potential for us”

– A travel agency in Sultanahmet

area

l “A Canadian tourist want us to prepare a tour for his family in order to see Armenian locations and historical monuments in Turkey. Therefore I believe that Greeks, Jews and Armenians living all around the world are great potential for us”

– A travel agency in Sultanahmet

area

- Most of the people emloyed in the sector has not got any computer courses during their education

- Computer tarining courses in the sector is not available. Moreover,managers who are illetarate in computer related issues do not trust computer sellers.

- Most of the top managers still think about computer as a game tool that childeren play games

- Most of the sector managers have not realized the opportunuities of computer networks yet.

- Most of the people emloyed in the sector has not got any computer courses during their education

- Computer tarining courses in the sector is not available. Moreover,managers who are illetarate in computer related issues do not trust computer sellers.

- Most of the top managers still think about computer as a game tool that childeren play games

- Most of the sector managers have not realized the opportunuities of computer networks yet.

Training to sector managers about the opportunities that computers provide will be very helpful

Tourism personnel do not have computer knowledge

- Most of the people in manager position has not get any internet training so they are illeterate about the possible opportunities of internet. This cause the other people working under these managers could not give necessary importance to internet opportunities.

- People in te sector are not following the technologic changes; therefore they are not well prepared to serious changes that will effect their future . For example, travel agencies has not realized the threat of internet travel agencies yet.

- Do not know how to reach potential customers (searching, putting the site in search engines)

- Tourism sector needs to people who have internet knowledge urgently. These people will bring both necessary know-how and dynamism to the sector

- Most of the people in manager position has not get any internet training so they are illeterate about the possible opportunities of internet. This cause the other people working under these managers could not give necessary importance to internet opportunities.

- People in te sector are not following the technologic changes; therefore they are not well prepared to serious changes that will effect their future . For example, travel agencies has not realized the threat of internet travel agencies yet.

- Do not know how to reach potential customers (searching, putting the site in search engines)

- Tourism sector needs to people who have internet knowledge urgently. These people will bring both necessary know-how and dynamism to the sector

By introducing internet training courses together with TURSAB and Bilkent University, Sultanahmet Tourism Cluster members will gain an new competitive tool.

Managers of firms do not realize the opportunities of the internet

- e-mail usage on the personal base is only %20 in Sultanahmet Tourism Cluster. Moreover, most of the users are checking their e-mails once in two days.

- People are using e-mail since the tourists push them to do so. Therefore travel agency employees are using more e-mail compared to other sector members.

- 90% of the firms do not have their own domain name related e-mail adresses givento their employees.

- e-mail usage on the personal base is only %20 in Sultanahmet Tourism Cluster. Moreover, most of the users are checking their e-mails once in two days.

- People are using e-mail since the tourists push them to do so. Therefore travel agency employees are using more e-mail compared to other sector members.

- 90% of the firms do not have their own domain name related e-mail adresses givento their employees.

E-mail usage will increase the efficiency of the cluster to work

E-mail usage is not developed among the tourism sector members

PROBLEMskill and infrastructure problem on internet usage

PROBLEMskill and infrastructure problem on internet usage

ANALYSIS1.Tourism personnel do not have computer knowledge2.Managers of firms do not realize the opportunities of the internet.3. e-mail usage is not sufficient in the sector members

ANALYSIS1.Tourism personnel do not have computer knowledge2.Managers of firms do not realize the opportunities of the internet.3. e-mail usage is not sufficient in the sector members

SOLUTIONS1. training programs will be started together with TURSAB andBilkent University for internet usage skill2. Cluster members will be pushed for participating trainings

SOLUTIONS1. training programs will be started together with TURSAB andBilkent University for internet usage skill2. Cluster members will be pushed for participating trainings

Increase in usage of internet will provide great support Sultanahmet Tourism Cluster members in their business

Most of the Sultanahmet tourism people does not use the benefits of internet

- Most of the sector members do not have clear customer definition on their mind that will serve. When asked they are giving such definitions that they want serve whoever comes; however, this causes a situation that they are spending the scarce resources in order to satisfy everybody, and at the end nobody become satisfied.

- People are accostumed to live within the fight-firing activities. This prevents to make longer term plans for the sector. Target customer definition is one of the things that should be done urgently.

- There is no study made until now by tourism related organizations such as Ministry ofTourism, TURSAB and TUROB about the target customer that Turkish Toursim sectro should target

- Most of the sector members do not have clear customer definition on their mind that will serve. When asked they are giving such definitions that they want serve whoever comes; however, this causes a situation that they are spending the scarce resources in order to satisfy everybody, and at the end nobody become satisfied.

- People are accostumed to live within the fight-firing activities. This prevents to make longer term plans for the sector. Target customer definition is one of the things that should be done urgently.

- There is no study made until now by tourism related organizations such as Ministry ofTourism, TURSAB and TUROB about the target customer that Turkish Toursim sectro should target

Sultanahmet tourism cluster started to discuss about its target customer!

Target customer definition is not clear for foreign tourists

- Sultanahmet travel agencies find their customers in Sultanahmet square. They are either do not know other marketing channels that they can reach the potential customer or they could not have effort to do it alone.

- Sector firms do not know how to use marketing channels. They are no serious contacts with foreign tour operators, travel agencies, journalists, writers, etc.

- Opportunities about direct marketing of internet has not known yet. For example, searching possible contact points from internet and reaching to target customers via e-mail was not tried until now.

- They are not participating at international tourism fairs

- Sultanahmet travel agencies find their customers in Sultanahmet square. They are either do not know other marketing channels that they can reach the potential customer or they could not have effort to do it alone.

- Sector firms do not know how to use marketing channels. They are no serious contacts with foreign tour operators, travel agencies, journalists, writers, etc.

- Opportunities about direct marketing of internet has not known yet. For example, searching possible contact points from internet and reaching to target customers via e-mail was not tried until now.

- They are not participating at international tourism fairs

Usage of marketing channels will be developed by new trainings and usage of new tools such as internet in order to reach target customers

Marketing channels are not known

- Sultanahmet cluster participants have resource problem while using some marketing tools. For example they are not participating to international tourism fairs due to financial, human and time resource scarcity

- Sector members also did not follow the tourism fairs regularly.

- Sector members do not know how to find new adresses of potential customers

- Since the organizations are not working properly in tourism sector, they have not the capability of inserting power on potential marketing channels like newspapers, TV’s,etc.

- Sultanahmet cluster participants have resource problem while using some marketing tools. For example they are not participating to international tourism fairs due to financial, human and time resource scarcity

- Sector members also did not follow the tourism fairs regularly.

- Sector members do not know how to find new adresses of potential customers

- Since the organizations are not working properly in tourism sector, they have not the capability of inserting power on potential marketing channels like newspapers, TV’s,etc.

Cooperation for marketing within cluster will provide extra power to members

Sector members do not have power to use marketing channels

PROBLEMReaching the foreign tourists that is willing to pay more in their touristic activities

PROBLEMReaching the foreign tourists that is willing to pay more in their touristic activities

ANALYSIS1.Target customer definition is not clear2.Marketing channels are not known3.People do not have power to use channels

ANALYSIS1.Target customer definition is not clear2.Marketing channels are not known3.People do not have power to use channels

SOLUTIONS1.Decide about target customer together with cluster2.Give training about possible channels 3.Give training about how to use channels4.Web site will be developed5.Cooperation for marketing provide extra power to members

SOLUTIONS1.Decide about target customer together with cluster2.Give training about possible channels 3.Give training about how to use channels4.Web site will be developed5.Cooperation for marketing provide extra power to members

With the necessary trainings and the usage of internet facilities, Sultanahmet cluster members will be reaching their target customers

Reaching the Target Foreign Market

Questions and

Discussion