Feature

While the Russian travel market structure is starting to resemble more that of other European countries, the entry of TUI, one of Europe's largest tour operators, shows the level of potential growth which is expected from the market over the next 3-5 years. TMI had the privilege to have a direct interview with the new Managing Director of TUI Russia and CIS, Mr Chris Mottershead.

What purchases has TUI already made in the Russian market and what is your future growth strategy?

TUI initially entered the Russian market with the partial purchase of a the Tour operator Mostravel, more recently TUI Russia & CIS, has purchased a 75% stake in 2 other tour Operators including: VKO travel in Russia and Voyage Kiev in Ukraine and increased its ownership in Mostravel to 75%, the tour operators are still run by the former owners who have maintained 25% of the ownership. TUI aims to become one of the top 2 or 3 tour operators within the next few years.

What do you think about the present financial situation amongst Russian Tour operators and what affect this might have on the future structure of the Russian tour operator market?

TUI Russia & CIS, is a partnership between TUI International (49% of shares) and S Group (investment group) owned by Alexei Mordashov who owns 51% of the company, thus we have deep pockets and a solid financial structure. However, we do understand that a number of Russian Tour operators have cash flow issues and this is a problem for the whole market and not just the individual company. We expect to see a further consolidation of the Russian Tour operator market, as the present structure means there are too many tour operators for the size of the market and everyone works on very tight margins, which can result in financial instability and an overall destabilization of the travel market.

What does TUI want to achieve in the Russian market?
TUI plans to bring its international expertise to the market, by introducing good financial management, by improving operations and systems and most importantly, by bringing a higher quality product to the Russian market. The Increased level of service levels will ultimately lead to an overall higher quality overall holiday experience which will result in loyal clients and a trusted and prestigious brand with which travel agents will be proud to be associated with. We also plan to introduce more online booking systems.

How do you plan to expand yourselves in the Russia market and what plans do you have for the CIS Region?

TUI plans to expand its operations in Russia in two ways: by organic growth and by acquisition. In 2011, TUI Russia & CIS, plans to develop further its vertical integration process of the tour operators and retailers they have already acquired, as well as expand its franchising programme for travel agents. The aim is also to create a brand which is better recognized by consumers within the next year and a half through branding and various consumer campaigns.

TUI would also like to expand outside of Moscow, as at present most of TUI's business is Moscow based, which only represents 60% of the Russian market. TUI is therefore keen to expand its presence and the sale of their products in the Russian regions.

Expansion to the CIS region is for the moment limited to Ukraine, which is estimated to be have around 1.1 Million leisure passengers per year. Ukraine is the 2nd largest outbound travel market after Russia, but even this market is 10 times smaller than the Russia. Russia and Ukraine are therefore likely to remain our main focus for the time being.

What are TUI's product development plans for the Russian market?
TUI has already introduced new products to the Russian market, for eg. the Kid's Club "Toucan" was introduced this year. TUI's aim is to continue developing and introducing innovative products, specifically for different market segments, and create a differentiated, quality travel products.

What new Destinations is TUI Russia & CIS planning to develop in the future?

TUI believes that Turkey and Egypt will remain the most popular destinations in the Russian market for now and the future, due to the proximity of the destinations, the good value aspect of the destinations and because their travel products are new and high quality. TUI would like to expand further to Dubai and the Middle East. Concerning long haul destinations, Chris Mottershead stated "I believe that destinations which have good potential for the Russian market are the Dominican Republic, Cuba and Mexico, as well as destinations such as Malaysia, Thailand and Indonesia".