REPORT ON MISSION TO MONGOLIA ON TOURISM MARKETING

20-24 JULY 2012

REPORT PUBLISHED BY UNWTO

TABLE OF CONTENTS

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Introduction Background of Mongolia Analysis of the tourism industry General recommendations for the tourism industry Recommendations for marketing Conclusion Annex 1 Annex 2 Tourism trends, Assessment and Glimpse of UNWTO Successful Marketing case from Malaysia

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REPORT ON MISSION TO MONGOLIA ON TOURISM MARKETING

INTRODUCTION

From July 20-24, 2012, UNWTO organized a mission to Mongolia. The UNWTO delegation was led by Secretary-General Mr. Taleb Rifai, who was accompanied by Mr. Xu Jing, UNWTO´s Regional Director for Asia and the Pacific, and Ms.Oyundelger Sengee, officer of UNWTO. A key purpose of the mission was for the Secretary-General to meet the President of Mongolia, H.E. Mr. Elbegdorj, and present him withthe Open Letter for Tourism as part of UNWTO and WTTC´s Global Leaders for Tourism Campaign. In conjunction with the visit, aTechnical Workshop on Tourism Marketing was held on 23 July 2012 for officials from the Ministry of Nature, Environment and Tourism, as well as the players and stakeholders of the Mongolian tourism industry. This workshop was also attended by representatives from China and Russia. UNWTO commissioned Dr. Victor Wee, Chairman of Tourism Malaysia to participate in the mission to Mongolia as an expert. During the mission, Dr. Wee held discussions with key tourism industry players and presented a paper on “Successful Tourism Marketing: The Case of Malaysia” at the Technical Workshop.

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Mr.Taleb Rifai, Secretary-General of UNWTO with Mr. ElbegdorjTsakhia, President of Mongolia.

BACKGROUND OF MONGOLIA Mongolia is a land-locked country with China and Russia as its immediate neighbours. Current day Mongolia covers an area of 1.56 million square kilometers, which isabout the size of Western Europe. The total population of Mongolia is 3 million with a very low population density of 1.7 persons per square km. More than 90% of the total population comes from Mongolian nationalities and about 94% are followers of Buddhist Lamaism. Mongolia’s traditional economic activities are based on herding and agriculture. However, the mining sector has now grown dramatically in importance, given the extensive mineral deposits of copper, gold, coal, oil and other mineral resources. Mongolia has one of the largest untapped copper deposits in the world with an estimated 32 million ton of copper. Its gold deposit is estimated at 1000 ton. In terms of trade, Mongolia purchases 95% of its petroleum products and electric power from Russia and over half of its external trade is with China. In 2011, Mongolia received 457,514 touristswith tourism receipts

reachingUSD282.7million,amounting to 3-4% of the country’s GDP.Its main source markets are China (43.3%), Russia (22.5%), Republic ofKorea (9.6%), USA (3.4%) and Japan (3.3%). The arrivals from European markets are very low, with 1.9% from Germany, 1.6% from France, and 1.6% from UK.Around 1.6% of Mongolia´stourists come from Australia. To increase its tourist numbers, Mongolia participates in international tourism trade shows and organizes 30 events in international and domestic exhibitions with representatives from Russia, Japan, India, and Inner Mongolia.

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The Mongolian government has organized several tourism year campaigns. Visit Mongolia Year was held in 2003, Discover Mongolia Year in 2004, and the 800th anniversary of the founding of the Mongolian Empirewas celebrated in 2006. Mongolia has a short tourism season which is mainly confined to the summer months. Since the 1990s, the tourism sector has been privatized and many of the functions have been moved to the private sector and NGOs. The Mongolian Government maintains some skeletal staffing to look after tourism policy. Tourism was earlier placed under Ministry of Road, Transport and Tourism (MRTT) before being shifted to Ministry of Nature, Environment and Tourism (MNET) in 2008. There are only five personnel looking after tourism matters: the director, deputy director and three officers. The role of marketing was transferred to Mongolian National Tourism Centre (MNTC) which has 12 staff and does not receive government funding. Currently there is no government agency involved in the licensing of travel operators and tourist guides. The power of the Ministry to oversee the development of the tourism industry was very much weakened when the licensing function for tour operators, the certification of tourist guides, and the classification of hotels was taken away for them. Meanwhile, the classification of hotels has been transferred to MNTC (Mongolian National Tourism Center) for the duration of one year in 2011.

ANALYSIS OF THE TOURISM INDUSTRY

The main attractions of Mongolia’s tourism are its traditional rural nomadic lifestyle that has remained unchanged over the centuries, its diverse landscape rich with distinctive flora and fauna and its unique history and cultural heritage. Mongolia’s rich biological resources include more than 580 species of flora and medicinal herbs, and rare species of animals such as Argali Sheep, Prezewalski Horse, wild Bactrian camels, snow leopard and ibex. The Gobi desert is well known for dinosaur fossils and there are over 130 hot and cold springs that are yet to be fully exploited. Its historical heritage is related to the remarkable warrior-statesman, ChinggisKhaan, who united various tribes of the Mongolia people in the 13th century and conquered and ruled much of Asia on horseback. Mongolia faces some obstacles in developing its tourism industry. Ithas an isolated location, small domestic population and short tourist season between April to October, peaking in May to mid-September. The average summer temperature could be pleasant at 20 . Having a sharply continental climate, its temperature varies greatly within a year; sharp temperature fluctuations can also occur within a day. The extreme minimum temperature in winter can range between 31 zero to 53 ranges between 28 and 43 . below below zero in January. In July, the extreme maximum temperature

Mongolia has a sensitive and fragile environment with ecological problems of overgrazing of land by cattle, soil erosion, deforestation, extensive mining activities and pollution of water. One of the serious problems for its tourism industry is the quality of tourism products, services and facilities in hotels and tour camps. Standards for hygiene and sanitation are inadequate, including the treatment of waste water from ger camps and around the great lakes.
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GENERAL RECOMMENDATIONS FOR THE TOURISM INDU STRY

The general recommendations for the tourism industry in Mongolia are as follows: Recognition of the role of tourism.To develop tourism as an important industry,its role in generating income and employment, bringing development to the rural areas and helping to preserve the environment and culture must be recognized at the highest level of government and policy making. Mongolia is currently undergoing a mining boom. Last year, its economy grew at a rate of over 17.3%, making it the fastest growing economy in the world. As an indication of the rapid economic transformation, the Mongolian economy expanded from $1 billion in 2001 to $10 billion a decade later. However, Mongolia’s mining sector is export-driven which is highly susceptible to global price fluctuations, especially with the global economic slowdown which could result in a sharp drop in mineral prices and subsequently government revenue. Since its peak in November 2011, the price of copper has fallen by 26%. There is also the danger of falling into the curse that has bedeviled mineral-rich countries. Although tourism is recognized as a priority sector, it is the mining sector that is receiving the most focus. Growing Mongolia’s tourism industry will be an important means of diversifying its economy, while at the same time expanding the number and range of jobs for Mongolians beyond what are created by the mining industry. Although Mongolia´s unemployment rate fell from 13% in 2010 to 9% in 2011, it is still high and more job opportunities should be created to bring the unemployment rate down further.

Strengthen institutional structure.The creation of a strong public administration for tourism is important to develop a strong national tourism industry. There are some functions best undertaken by government, while there are others where the private sector has the comparative advantage. Although the received wisdom is that government has no business in business, there are some roles and functions to be undertaken by government. They include planning and policy making, setting industry standards and enforcement, country branding, establishing good infrastructure and creating a pro-business environment for the tourism industry to prosper. The current staffing strength at the Ministry of Nature, Environment and Tourism should be strengthened to undertake the following functions: tourism policy, planning and research, as well as licensing and enforcement. The regulatory framework will need to be reinforced. For instance, there need to be regulations and industry standards on the services provided by tour operators, product operators (such as ger camps), accommodation, and tourist guides. Where the quality of services provided is below par or the operators fail to deliver the services as promised, enforcement is needed to redress the situation so that the image of the entire tourism industry is not marred by a few ‘bad apples’. In addition, travel to and within Mongolia is relatively expensive. The quality of the tourism products and services must be maintained at a high level if Mongolia aspires to tap the affluent tourist market. Improve inter-agency coordination.There is also a need for close interministerial coordination at a highcommittee level to ensure that there is greater harmonization of government policies and regulations for the development of a dynamic tourism industry. The development of the tourism sector is highly dependent on the policy actions and regulations of other ministries and agencies, which have their own goals and objectives to meet. The lack of synchronization of
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government policies could seriously hamper the growth of the tourism industry. In addition, there is a need for greater coordination between governments at different levels. Officials at the central government will also need to work closely with various levels of government, such as the Aimag, local authorities and city councils for the implementation and coordination of tourism policy and programmes. Establish the Mongolian National Tourism Board. The close partnership between the public and private sector is necessary to grow a dynamic tourism industry.Mongolia should seriously consider the establishment of a National Tourism Board, which would provide a formal platform for the government and industry representatives to sit together and make recommendations on the methods, measures and programmes for the development and promotion of the tourism industry. Although this idea has been broached before, it has yet to be implemented. Strengthen Human Resource Development for the Tourism Industry. Tourism is a relatively young industry in Mongolia, having started in the 1990s when tourists from neighboring countries such as China, Russia, Japan and Republic ofKorea as well as some Western European countries started to visit Mongolia for business and leisure. Despite the strong seasonality of the tourism industry, Mongols invested in establishing tourist camps and other facilities. After the transition period in the late 1990s which witnessed economic and social problems, the Mongolian economy turned around and boomed, attracting domestic and foreign direct investments. Over the last five years, the skyscape for Ulaanbaatarhas changed rapidly with the emergence of new glass tower blocks and 5 star hotels among the Soviet concrete blocks. In fact, several 5 star hotels, such as Radisson, Hyatt, Shangri-la, and Sheraton are in the pipeline for completion by 2014-15. These developments, though positive for Mongolia, will place severe pressure on the demand for experienced manpower.

Mongolia’s tourism industry is hampered by the shortage of professional staff arising from the high seasonality, staff turnoverand the lack of tradition in tourism services and culture. It faces a shortage of trained staff at all levels and lacks training facilities and programmes. At the operational level,it experiences manpower shortage in hotels, restaurants, food and beverage, sanitation and customer service. At the managerial level, it faces manpower constraints for a wide range of expertise, including destination management, accommodation management, marketing and promotion. While the employment of expatriate staff will help to relieve the situation, Mongolia will need to expandand intensify the training of young people in the tourism and hospitality industry not only within the country but also abroad. In addition, it will need to explore new models of work-based training in order to produce the manpower that would be much needed by the tourism industry. Improve infrastructure for domestic travel and international It has limited

connectivity.Mongolia’s infrastructure for travel is currently poor. Since Mongolia is land-locked, the principle means of travel is by air and rail. international access with Ulaanbaatar as the only main international gateway. The road network in Mongolia, which connects cities, towns and villages, covers about 49,000 kilometers but only 1,300 kilometers are paved. The paved roads are found around major cities and urban areas but are poorly maintained. Car rental is not possible without a driver, due to the poor state of many of the roads, and horse riding is still widely used as a form of travel. The surplus obtained from the mining sector should be used to upgrade the road network in Ulaanbaatar as well as other parts of the country. Particular attention has to be given to roads linking to tourist sites and destinations in order to provide comfort to tourists while cutting down the traveling time.
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RECOMMENDATIONS FOR MARKETING

Formulate a long-term tourism plan.Although several studies have been conducted on tourism in Mongolia, the country has yet to adopt a long-term plan for the sustainable development and management of Mongolia’s tourism resources. A comprehensive tourism plan will provide the road map for all activities required to develop the tourism industry, including tourism product development, marketing, infrastructure and connectivity, manpower development, institutional development, destination management, and enabling factors such as visa facilitation, tourism environment, industry standards, licensing and enforcement, and funding. Ideally, the formulation of this plan should have the active involvement of the private sector and other stakeholders. Adoptan Updated Tourism Marketing Plan. There is the need for the

formulation and adoption of a series of strategies designed to raise Mongolia’s international tourism profile by strengthening the country’s brand image, marketing efforts and visitor arrivals in a world of unprecedented change. The strategies should be designed to ensure that the Mongolian travel and tourism industry takes advantage of all the emerging opportunities while preparing itself to deal with any threats and challenges, both external and internal.Global economic and geopolitical stability will be the primary determinant of how travel and tourism performs in future. If this continues, there will be no shortage of opportunities, technologies and activities to capitalize on demand. Tourism players in Mongolia continue to focus on traditional markets in Western Europe and Japan, while not giving much attention to the tourist potential from Mongolia’s two large neighbours, China and Russia. Although these two countries contribute close to two-thirds of Mongolia’s arrivals, they are looked upon as

business travelers or visits by friends and relatives (VFR) and not given special focus in tourism marketing efforts. Within the medium-haul flying distance is also the ASEAN group of countries. By 2015, the 10 ASEAN countries with a population of nearly 600 million will form the ASEAN Economic Community which allows the free movement of products and people. This will increase manifold opportunities, including travel and tourism. At the same time, some traditional source markets such as Europe are slowing down as the result of the Eurozone crisis, while other new markets such as Africa are emerging. Tourism is also becoming an increasingly competitive market as just about every global destination starts intensifying their tourism promotion.Global demographics are also changing the population structure of countries.Some countries have increasing numbers of ageing populations while others have more young populations. Tourism marketing will have to incorporate the population characteristics and psychographics in its strategy and tourism appeal. Mongolia has to ensure creativity and visibility by highlighting its unique strengths, and undertake campaigns that target the right customer with the right message and product at the right place and time. Branding Mongolia. Branding is the process of building up a competitive identity for a destination so that it stands out in the eyes of potential tourists. It should be noted that the value of the brand exists in the eyes of beholder. The brand defines the destination: What kind of a place is this? What makes it different from everywhere else? Will I like it? How will it make me feel? While a successful branding and marketing campaign will be able to create interest in a destination and convince the potential tourist to purchase a holiday, even more important is the fulfillment of the brand promise so that the tourist is left
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fully satisfied with the experience and becomes a strong advocate for the destination. A wide range of factors go into the fulfillment of the brand promise, and these would have to be effectively managed to build a successful tourist destination. The attractions and tourist activities in Mongolia are closely related to its natural environment, history and cultural heritage. It offers natural beauty, a nomadic lifestyle and traditional festivals. International tourists can experience the wide diversity of landscapes from the high mountain zone to the wide open steppe and desert. They can also experience the nomadic lifestyle based on livestock raising and living in traditional gers. In this regard, the tourism authorities should consider whether to continue using the current tourism tagline, “Discover Mongolia” since it has a neutral emotive content and can be used practically anywhere and for any destination. The word “discover” does not create an impact on the potential tourist, to whom we must sell a“dream” destination with a distinctive image to attract them to come. “Discover” is probably appropriate for tactical campaigns to sell packages with a price tag attached to it. For instance, we can have “Discover Gobi Desert 4N/5D” or “Discover 13th Century Mongolia” for $XXXX. Mongolia should consider using more distinctive taglines that inspire potential tourists. Two taglines that I can propose to Mongolia for consideration are:  “Mongolia--Romancing Nature”.“Romancing” is a more attractive and distinctive word than “Love”. “Nature” highlights the main selling points for Mongolian tourism.  “Mongolia—Spirit of Freedom”.In a recent Time Magazine article on Mongolia, the President was reported to have made the statement,the

“Spirit of Freedom” when describing Mongolia.This can also serve as a suitable tagline for Mongolia because of its emotive connotation of the free spirit, spontaneity, and nomadic lifestyle unbound by the trappings of the modern city life. Focus on “Experiencing Mongolian”. The theme for the tourism marketing should beto emphasizeexperiencing the country and people of Mongolia. In its marketing campaign, MNTC should attract tourists by focusing on the authentic Mongolian Experience, Mongolian Way of Life in the Steppes, and Mongolian Culture and Heritage. The marketing message should creatively feature experiential involvement, where tourists can participate in and learn about unique Mongolian experiences, such as wrestling, archery, dancing, traditional medicine and massage, and local wisdom. Tap into the global desire among visitors to learn something new or acquire a new experience that they can take home with them. Some key aspects of the Mongolian lifestyle could be interesting to tourists, e.g. herding animals in the steppes, milking goats, transforming wool into felt, erecting a ger in an open field, baking lamb over heated stones, etc. It is also possible to tap into Mongolia’s spiritual roots and religious traditions—Shamanism and Buddhism. Some of these could include the legends, beliefs, practices and ceremonies in Shamanism and Buddhism, including learningBuddhist meditation and experiencing life at amonastery. Identify Market Segments and Match Them with Products. Mongolia has a variety of tourism products and destinations. The needs and requirements of the tourist segments would have to be clearly identified so that they could be matched in terms of the type and quality of the products and services offered.
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The international tourists who are attracted to Mongolia tend to come from the “special interests”category. They include adventure tourism, community-based tourism, rural tourism, river and lake tourism, railway tourism, history and culture, as well as roots and nostalgic tourism. Since the available resources for international tourism marketing is limited, there is a need to accurately identify the market segments to avoid waste in marketing efforts and ensure that they bring about greatest contribution in achieving the objectives. The basis for segmentation planning is having access to good visitor data through surveys, research, studies and interviews with key informants and players. There is need to strengthen the research capability of the National Tourism Organization. After conducting market segmentation, the next step is to match the products and services to meet the needs of the market. An example of how this is done was given for the case of Malaysia during UNWTO Technical Workshop on 23 July 2012. There is the need to establish the motivations/triggers, etc. of the market segments and persuade them to visit using appropriate and targeted marketing messages and channels. Tapping the Expatriate Markets in Asian Capital Cities. One market segment that Mongolia should tap into is the expatriate business community in the major capital cities, e.g. Beijing, Bangkok, Hong Kong, Manila, and Singapore. Expatriates in major cities like to go off somewhere for their vacation and look forward to a different experience, especially one that involves being with nature, personal enrichment, and off-the-beaten-track holidays. These are potential tourists that are within the short and medium-haul flying distance.

Use Megafam Program to Increase Publicity.

Some communication

channels are more expensive and wasteful than others. For targeted marketing to particular segments, there is less need for mass marketing and mass communication. A more useful approach is to organize a more extensive megafam program, inviting journalists and travel writers, TV channels, tour operators and travel agents to Mongolia for specific programs which are then combined with a visit to selected destinations that are relevant to their market segments. Part of the cost of hosting such a program could be shared among the airlines, hotel, and product owners, thereby reducing the financing cost by the government agency. For this program to be successful, the selection of the right media (right down to the magazine, newspaper or TV channel) and travel writers must be made. In addition, there is the requirement that after the megafam trip the invited media should submit the published report or a report on when the program aired on TV and the amount of publicity value that was generated. The megafam program has been used extensively in countries that have been successful in marketing tourism such as Malaysia and Thailand. Engage a Marketing Representative or PR Agency for key markets.Mongolia should consider engaging a marketing representative to develop its key target markets. There is no need to establish a marketing office as was done by the bigger and better funded national tourism agencies since running an overseas office is expensive. If the marketing representative is well selected, he can work with the local travel operators, airlines and media of the target market to increase the tourist arrivals by the thousands that will more than pay for the cost of engaging his services. Clear performance goals are set for
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the marketing representative who has to submit in his proposal and budget for each year. His performance is measured against arrivals achieved. Another approach is to engage a local public relations agency to keep the communications on Mongolia’s tourism active in the target market. This can be a cost-effective approach to maintaining presence in a market. The PR agency is paid a retainer fee and additional payments are only made for approved assignments. The agency could also be made responsible for proposing the media for megafamand arranging press conferences, interviews, business meetings and other events for a roadshow by the tourism minister or other dignitaries and officials. Getting Results from Travel Fairs.Selective use of trade shows and road shows can help to grow the main markets and penetrate into new potential markets. As part of its marketing efforts, Mongolia participates in international tourism fairs. They include ITB in Berlin, World Travel Mart in London, KOTFA in Seoul and JATA in Tokyo. The Mongolian National Tourism Centre (MNTC) coordinates with industry players and organizes the participation in these travel fairs. To increase effectiveness in the participation of these travel fairs, every effort must be made by the participating hotel, travel operator or airline to link up with overseas partners ahead of time so that deals are made and forged during the travel fair. As part of its KPI, MNTC should get an estimate of the value of business done during the participation in each of the fairs. As suggested earlier, MNTC should also consider participation in some of the regional fairs in China and ASEAN region to develop new markets. At these fairs, the participating private sector should try to seek potential business

partners who would be keen to sell Mongolia. MNTC should also use some gimmicks to draw the crowd to the Mongolian booths. Increase Accessibility by Tapping into Low Cost Carriers (LCCs).The network of LCCs is rapidly expanding and linking up major and secondary cities in East Asia. This is one avenue that Mongolia should tap into to increase connectivity and accessibility. LCCs will provide a wider base for mainstream tourists as well as increase the reach to younger and educated tourists who are more adventurous in their choice of holiday destinations and itinerary. Given the growing affluence within the region among younger travelers, this is a market segment that should not be overlooked. Ride on New Digital Media To Raise Awareness.Digital media should be given special focus because it is the new media of the 21st century, which isnot only used extensively by young people but by people of all ages in seeking information, drawing up their travel plans and purchasing their accommodation, transportation and other arrangements online. The rapid expansion of digital media means that countries will need to upgrade their technological capabilities to bridge the digital divide, mount targeted marketing campaigns, and undertake effective customer relationship management (CRM). For the main website hosted by the MNET, it has to develop powerful images and messages to convince the visitor to come to Mongolia. In updating the website, it will be instructive to visit some good examples of tourism websites (e.g. Australia, Vancouver, London, and Singapore) that have been successful in driving up tourism numbers and providing the flexibility for tourists to draw up their travel arrangements online.

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CONCLUSION

Tourism in Mongolia has tremendous potential for development, particularly in view of the increasing trend among well-travelled tourists to visit exotic destinations that few people have gone to. As a destination, Mongolia has much to offer in terms of varied landscape, wildlife, and historical and cultural sites. The target for Mongolia tourism is to double arrivals to 1 million by 2015, or achieving a growth rate of over 20% per annum for the next 3-4 years. While this target is within reach, there is a considerable challenge of ensuring that tourism remains a thriving and sustainable industry. This will require concerted effort to expand and strengthen tourism products, improve facilities and infrastructure, and beef up the institutional and organization capacities within the government and private sector. Proper standards and licensing requirements could be adopted and enforced to ensure that the quality and standards of service delivery are adhered to and upgraded. Central in developing a successful tourism industry is developing a well-trained and motivated workforce, coupled with the organization and support to undertake effective marketing and promotion. There is a need to increase and strengthen collaboration among the institutions connected with tourism. In addition, close partnership between the public and private sector should be strengthened for tourism planning, product and infrastructure development, marketing and promotion and human resource development, so that tourism will be developed as a dynamic and rapidly growing industry for Mongolia.

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