In these financially turbulent times, Russia has yet to feel the real impact of the financial crisis affecting the rest of Europe. As Russian banks were not involved in subprime lending and Russia’s substantial currency reserve of 409 Billion EUR ($556 billion) which is providing  Russia with plenty of liquidity during hard times. For this reason, Russia was in the enviable position of offering to bail out to Iceland with a potential loan of 4 billion EUR when the country could not obtain support from more traditional allies. Nevertheless it would be foolish to say that Russia and the Russian travel industry will not be affected by what is rapidly becoming a global financial crisis, Russia’s largest companies have taken a severe battering over the last 2 months, resulting in a 60% loss of their total value of the Russian stock exchange.

At present the financial crisis is not yet affecting the man on the street, but the oligarchs (Russia’s richest individual business men) have lost a large amount of their wealth and some are now in the process of selling off some of their assets. The global slowdown is reducing the price of energy and raw materials, which are Russia’s main exports and the income.  During these difficult financial times, we are starting to see the first impact on the Russian travel industry. St Petersburg’s  main airline Rossiya previously called Pulkova) has cancelled its winter charter flight programme and two large Tour operators have decided to enter into a partnership in order to be in better shape to deal with the more difficult times ahead. Nevertheless Russia’s rich is still immensely rich and unlikely to forgo frequent luxury breaks during these challenging times.

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Russia’s Kazan chosen to host Universiade - 2013

Kazan, the capital of Tatarstan , a republic inside the Russian Federation, has won the right to host the 2013 Summer Universiade ( better known as the World University Olympics Games). Kazan, a city on the Volga river, was chosen ahead of Gwangjiu in South Korea and Vigo in Spain. The Tatarstan Tourism Ministry said that they have allocated a budget of 604 million euro for the event. In the next 5 years Kazan is planning to improve its infrastructure and complete 48 different sports facilities, 39 of which are already constructed. Universiade is an international sporting event with students from all over the world taking part, and is considered to be second in importance after the Olympic Games.

Israel has become visa-free for Russians

Russia announces the Federal program for tourism development until 2015

The Federal Tourism Agency, has adopted a strategy for the development of the Russian tourism industry until 2015. Among the main priorities for the next 7 years are the development of the Azov Sea and Caspian Sea coastlines as a destinations for low-cost holidays affordable for the Russia’s middle class. Another important goal is the improvement of Russian visas for foreigners. A positive example of this occurred recently during the Football Champion league, when supporters were able to enter Russia with a ticket to the match and were not required to obtain a standard visa. As a result around 40,000 foreigners attended the match, spending a record 80 Million US Dollars during their stay.

The key priorities of the Federal agency for tourism are :

• support the construction of tourist class hotels (especially at Russian resort destinations)
• substantial increase in the number of hotels of international hotel chains in large cities
• development of  local (Russian) hotels chains
• increase the growth of foreign and local investments in the Russian hotel sector
• the stable growth of both inbound and outbound tourism (with over 9 million Russian traveled abroad in 2007)

 

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Wyndham Hotel Group comes to Russia

The first Hilton in Russian opened in Moscow during the summer of 2008. The hotel is located in the city center, in a historical 24-story Stalin-era building that is an officially recognized Moscow historic and cultural landmark - one of the so-called famous “Seven Sisters” skyscrapers, built in Moscow in the 1950s.

 

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A new large hotel chain is to be created in Russia

Intourist, the oldest Russian tour operator and also a hotel company, has signed an agreement  with International Hotel Investments (IHI) concerning the creation of a chain of 4 and 5- star hotels in cities across Russia. The two companies formed a shared investment fund that has an initial 100 million US dollars at its disposal. During the next 3 years IHI and Intourist are planning to build 5 hotels for about a thousand rooms in total in Moscow, Saint-Petersburg, Novosibirsk, Rostov-on-Don, Nizhny Novgorod and Sochi. 5-star hotels will operate under the brand of Corinthia, and 4-star hotels – under the brand of Intourist.

 

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Raffles Hotels & Resorts has extended its presence to Moscow, announcing the opening of a new deluxe hotel scheduled for 2011. The new hotel will be located in the city center, a few minutes walk from the Red Square, in a historical building, originally built in the 17th century. The building will be redeveloped into a luxurious 130-room property of 1300 meters of space featuring bars, restaurants, swimming pool and spa. Fairmont Raffles Hotels International that owns the Raffles brand already has one property in Moscow - Swissôtel Krasnye Holmy.

Etihad Airlines come to Russia

From December 1, 2008 the Abu-Dhabi based carrier Etihad will launch direct flights from Abu-Dhabi to Moscow. They are scheduled to fly 5 times a week by Airbus A319 aircraft. The airline will become a second OAE carrier flying to Russia. Earlier this year Etihad began direct flights to Minsk, the capital of Belarus, and became the first Gulf airline flying to this country.

The first Direct Flights between Moscow and Dublin

From April 2008 Russian S7 (formerly known as “Siberian Airlines”) began operating direct flights to Dublin, Ireland. There are 3 regular flights from Moscow’s Domodedovo airport (DME). S7 is one of the largest Russian airlines with around 120 regular flights per day, including more than 50 flights from Moscow, it is now extensively expanding its international network.

 

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Domodedovo, Russia’s largest airport, launches the construction of its second terminal in 2009 while Sheremetevo airport announces further construction delays

Moscow International Domodedovo Airport (DME) has begun the construction of a new Passenger Terminal for international flights. The cost of the project is estimated to be 42.5 million dollars and will be funded totally by the East Line Group that operates the airport. The construction of Terminal 2 is planned to be implemented in 3 stages, with the first should be ready by early 2009 and be finished by 2011. In 2019, when the final stage of the project is scheduled to be completed, the total area of the new Terminal will be 270 thousand square meters, and its total annual passenger capacity will become 14 – 15 million passengers.

The Third Passenger Terminal of Moscow International Sheremetevo Airport (SVO) will not begin operating until spring 2009, according to the top management of Aeroflot airlines. The new Terminal will be almost twice as large as the current Terminal 2. When completed, Terminal 3 will serve most of Aeroflot flights and all of Sky Team alliance airlines. Its throughput is planned to be around 10 million passengers per year, with a maximum annual capacity of 14 million.

 

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IATA has finally completed the full implementation in Russia of IATA’s Billing and Settlement Plan (BSP). Russian VTB Bank and Aeroflot Airlines became strategic partners in the project. The implementation of IATA’s BSP links Russian aviation to a massive global network, makes the work of airline and travel agents much more efficient and improves passenger services. Now some 35 airlines and over 400 travel agents can benefit from fully automated ticketing and reporting procedures based on international standards.

 

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Russian authorities are planning to create a new large national carrier that will unite the previous members of the Air Union and some other Russian air companies like Rossiya or Atlant-Soyuz. The amount of passengers planned to be carried by this new airline may allow it to compete with the leader of the national aviation, Aeroflot.

The Air Union alliance, uniting 5 different domestic carriers, has been suffering a major financial crisis since this August, caused by constantly increasing oil prices. Over 20 flights were delayed in the airports all across Russia due not non-payment of fuel charges, leaving thousands of passengers stranded. They were renewed after state corporation Rostechnologies, which is to become the group’s biggest shareholder, provided guarantees to pay the dept. The new nationwide transportation company will take over Air Union’s routes and assets, but according to the executives, it could take another nine months at least.

Until now, the largest Russian airline was considered to be Aeroflot, which remains the leading flight company for international flights. In 2006, passenger traffic increased by 12%, to 8.17 mln people. Estimates for 2008 were to carry 9.4 mln passengers making a further increase of 16% on the figures for 2007.

The second largest airline is S7 (formerly called Siberian airlines or “Sibir”) - the largest Russian airline for the regular domestic flights market. But its charter flights traffic also increased, by 11% last year. Transaero (along with Rossiya) is jointly the third key industry player, carrying over 3 mln passengers in 2007 and is the fastest growing Russian carrier with a 51.7% increase in passenger traffic. After Aeroflot, it is the second largest Russian carrier in terms of international flights and the only Russian airline flying to all 5 continents.

Generally, in 2007 45 mln people went on a flight in Russia either domestically or internationally. Passenger traffic increased by 18% which is the highest increase over the last 15 years. International traffic increased at even faster rate of 22% while domestic traffic still grew by 16.5%. The main passenger traffic increase was due to an increase in leisure travel.

 

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Requirement

Although in a much better position than Europe or the US, Russia is nevertheless affected by increasingly global economic crisis, many Russian companies continued to borrow extensively during the first half of 2008, as confidence levels remained high. But with oil and commodity prices falling and investors fleeing from anything slightly risky, not to mention Russia’s risqué foreign policy, financial markets have lost around 60% of their value and the banking system is slowly seizing up.

The Russian central bank has been quick and decisive by offering $190 billion in funding to the financial sector, to reduce liquidity problems. Nevertheless there are signs that the financial crisis is starting to affect the real economy, as many rapidly expanding companies have put expansion on hold, due to the high price of lending. Speculative activities have been hardest hit (such as the real estate sector) and although Russia will fare better than most, it is unlikely that Russia will continue at the previously predicted high rates of growth which are now reduced to 7% next year. 2009 will no doubt indicate a slow down and a consolidation of business. Businesses with government packing are likely to fare better than those led by independent entrepreneurs but overall, the crisis is likely to affect only the elite by redistributing their business shares, and as long as the Russian climate does not change, Russians are likely to continue travelling abroad as much the same pace, with the luxury end being the least affected.

 

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