Travel

Russian tourism market today

MITT 2016

These days the Russian tourism market undergoes great changes. This situation includes all travel flows: outbound travel flow, domestic and inbound tourism. Many aspects have an impact in this context:

  • decline in the ruble and increase of prices for foreign travels
  • full termination of the Russian tourists’ trips to Egypt and Turkey
  • reduction in the number of outbound tour operators by 30 percent (according to figures of the Association of Tour Operators)
  • legal restriction on outbound travels for some Russian citizen groups
  • general system-wide economic downfall

According to the data for the first half of 2015, the outbound travel flow downfall has reached 33.8 percent. Apart from the Turkey-Egypt flows termination, a demand for foreign trips has declined for a number of reasons: erosion of purchasing power because of low rate of ruble, security threats arose in Europe and in other regions, refugees’ flows in Europe. According to estimates, the figure will increase up to 40 percent.

In these conditions, the tour operators are crossing over to the domestic market. As reported by Russia’s State Statistics, the inbound flow has increased by 13 percent for 2015. Among Russia’s visitors, the leaders were China, Poland and Finland. The Russian resorts attract the foreigners mainly because of cheap ruble, which allowed travelling countrywide for little money. According to Interfax and ATOR, “the inbound increase will go on, if accommodation vendors do not raise the market”.

According to the ATOR analysis, there are the following problems in the context of the inbound tourism development:

  • negative image of the Russian Federation
  • complex domestic policy circumstances
  • weak marketing policy
  • poor standards of service
  • rise in prices for air tickets, unstable air traffic market
  • complex visa regime for some destinations
  • narrow product range for foreigners

By the projections of the Federal Agency for Tourism, the domestic travel growth will reach 10 percent this year. The demand for domestic tourism has totaled 10-15 percent during the year 2015. The growth in demand for domestic tourism has a number of grounds:

  • favorable travel offer prices
  • big companies entry into the market
  • expansion in the number of domestic travellers assisted by tour operators
  • favorable air tickets prices
  • improvement in service at some Russian resorts

According to ATOR, the following aspects hamper the development of Russian tourism:

  • poor infrastructure
  • insufficient federal funding
  • nonconformity of prices for leisure to the service quality.

The following table summarizes the dynamics on main travel flows and its forecast for 2016, based on the Federal Agency for Tourism and ATOR data.

Tourist flowsPercentage in 2015
Forecast for 2016, %
Outbound travel flow-33,8-40
Inbound flow1010-15
Domestic tourism1010-15

 

23-26 March 2016 in Moscow was held 23-th Moscow International Exhibition «Travel and Tourism».

The Researching Center “Effet” visited the exhibition, interviewed its participants and took in the situation in the Russian tourism market.

Outbound tourism

During the conversation the exhibition members mostly confirmed the outbound downfall statistics. In their opinion, this happened primarily because of the discontinuance of the Egypt and Turkey travel flows.

The main problem is that now there is no possibility to proportionally compensate the absence of these regions in the market by other countries, and is it impossible to do it inside the country, for the latter are the coastal resorts and there is no conditions to provide such leisure in Russia.

Alongside, according to the opinion of the marketing director of a web portal “Turizm.Ru”, Maria Konabeeva, “there is only one problem with the outbound flow: we have lost the key countries – Egypt and Turkey, they brought the main profit. We do not have such capacities inside the country to receive all these millions of tourists, who opted for Egypt and Turkey. There are no beaches with recreational sand, and 90 percent shores at the Black Sea are pebbly. We do not have such hotel room capacity to meet the requirements of all tourists. They will partly cross over to the Russian hotels, and some of them will switchover to Greece, Cyprus and Spain. But we won’t have them fully… They will just give it away and wait for the things get better. Many tourists who have lost an opportunity to travel to these destinations, they will just stay at home. They will spend their vacation travelling by car, travel within region and countrywide. In other words, the tourism sector has lost these clients now.”

The marketing director of “TBS” Group, Ivan Bublyaev, added on the subject: “People usually get used to the rise of prices. But no one can get used to the resort “closure”. The tourists partly crossed over to Greece and Cyprus, but these flows are significantly less, it is incomparable. I mean, a lot of people have decided to stay at home”.

Still, the luxury tours have not shown a decrease at latest. The sales director of the “ART TOUR” company, Anna Grigoryan, told us about the situation in the luxury segment. “Our average product is a deluxe product, from five stars and more. The company deals with many foreign trends, such as Middle East, Europe, Latin America, Malaysia, Indonesia, the Caribbean and many others. Of course, it is difficult to ignore the general decline in the market, but it affected us less than others. Moreover, we have a slight growth in the number of bookings this year. For more mainstream destinations, the decline is more tangible.”

A representative of the “RUS TOUR” company, within which activities is the organization of tourist tours to China, Yevgeny, also mentioned a positive tendency in the sales volume: “In comparison with 2014, the year 2015 showed a decline in demand, but we have an increase these days. Regardless the decline in demand for foreign tours, we can provide a constant tourist flow to Hainan. It goes without saying, that our volumes could have increased, was it not this general decline.”

Among the key problems in the market the exhibition members mentioned a general worldwide instability, such as a rise in number of security threats, the unpredictable exchange rate, common economic decline. Anna Grigoryan: “We would like this situation to be more predictable. A diminution of the security in other countries has a direct impact on the desire of people to travel abroad, the demand falls. And in our economy, even if we have a cheap ruble, may it be so for some time, as we cannot plan our activities, the market is shaking, and it is impossible to plan business.”

Meanwhile, many participants noted, that the foreign travel ban for some Russian citizen groups has not influenced substantially decline of the outbound flow, as their share is small in the whole volume.

The members have also estimated positively the competitive factor, because it triggers the improvement of service quality in the market. Moreover, most participants did not notice any strengthening of competition, because the survival and cooperation questions came to the fore.

Inbound tourism

The tour companies confirmed the official data on the inbound volumes increase. Most companies call China the leader in this field.

The PR-director of a major tourist online-service “Datravel.com”, Svetlana Baranova, said: “According to our partners, a great number of the citizens of China have visited our country this year, because a low exchange rate of ruble created the attractive prices for tourism in Russia”.

According to the opinion of Maria Konabeeva, the improvement in quality of Russian resorts had an influence on the inbound increase: “Now the Russian resorts are actively built up and people learn more about our country, this heightens the interest”.

The summary on the market estimates based on the participants opinion is given below, and it includes the dynamics for 2015 and as at the beginning of 2016.

Market estimates according to the opinion of its participants, average data

 

 

Market dynamics based on participants estimates, %

 

Opinions on the situation in the market

Companies market orientationNotes
Big companies working on all activities
  • The outbound flow declined because of Turkey and Egypt
  • There is an increase in the inbound flows based on favorable exchange rate
  • Domestic tourism growth backed by the market reorientation
  • Problems with infrastructure and the service diversity in the domestic market
  • The outbound flow refocusing on other foreign destinations is incomparable
  • Would like to view a more stable, predictable market
  • A tendency toward the expansion of activity
The outbound flow companies
  • Agree with official statistics on other tourism segments
  • Constant flow as of the beginning of 2016
  • Comparing to 2014, the volumes declined in 2015
  •  A small flow increase in volume of luxury tours in 2015
Regional companies and inbound flow companies
  • Underdeveloped infrastructure in the field (distant regions)
  • Problem of qualified personnel
  • Lack of hotels and insufficient quality if service
  • Hoteliers’ reluctance to improve the quality of service
  • Increase of the inbound flow from Asia in regions for the past year
  • Intensification of competition, scores of new companies arose (distant regions)
  • Unsatisfied with high prices for air tickets (Kamchatka, Krasnoyarsk, Altay), resulting in the rise of prices for tours
  • The flow from the European countries slightly increased (Spain, Germany)
The outbound companies, luxury segment
  • Constant flow within the field
  • Small decline in 2015 comparing to 2014
  • Small increase in 2016

 

Domestic tourism

The companies also confirmed the official data on the increase in demand for domestic tourism. Russians began to visit the domestic resorts more actively. Svetlana Baranova noted: “Sochi and Simferopol became the sales leaders in summer 2015. There is no a tendency for a general decline in demand for travelling, but we have a tendency for reorientation, and generally, the whole 2015 year has passed under the badge of domestic tourism. The growth totaled about 30-40 percent for the past year”.

Among inbound flow companies, most respondents also say about a stable situation. Among typical problems that regional domestic tour operators face with are the following:

  • high price for airlines
  • underdeveloped infrastructure
  • lack of information about the region in the market
  • problems with staff

Anyway, the regional companies are on firm ground, the tourists arrive, and the only thing they plan is to expand activity.

For instance, the director of the Krasnoyarsk “Horba Hunting” company, Olga Parushkina, said: “We have always been dealing with the inbound tourism. I can say, that the interest in the services that we render, is obviously higher than it was in 2015. The company renders services in adventure tourism connected with hunting and fishing. All respondents were unanimous on the key impact factor affecting the demand in the field: the expensiveness of moving to the places of resort.

The deputy director of the “TRAVERS-TOUR” company in Kamchatka, Tatyana Langburd, noted: “Our region is environmentally unique, but there are informational gaps about it in the market. In view of our specifics, the main problem is the prices for air tickets. When “Transaero” closed, our flow decreased by 400 spaces per day. That is why many people visit us in winter, as the prices for air tickets are cheaper at this time. But in winter we have a lack in personnel, because the volunteers arrive mostly in summer, it is seasonality. We would like to see the easing of the situation.”

To sum up, we can say that the market is changing, but there is no crisis in the field. Of course, the lack of Turkey-Egypt flows is notable, and many companies closed. However, to the opinion of the exhibition members, it was small companies, who failed to cross over in new circumstances. Alongside, the number of inbound tourism companies is growing. A part of the outbound flow switched to domestic trips, and a large number of the flow stopped travelling, as a result of decline in earnings. Possibly, this group of tourists will cross over to the Russian resorts.

Sources: Rossiyskaya Gazeta, ATOR, Ekonomica i zhisn, ATOR, Interfax, ATOR, Pronedra, ATOR.