Russia Tourism Report Q2 2010

Tourism Overview Following weak growth in the number of foreign visitor arrivals to Russia between 2006 and 2008, there was a marked deterioration in the number of arrivals in 2009. Latest figures from national data sources for the first nine months of 2009 show visitors declined by 11% year-on-year (y-o-y), with significant negative y-o-y growth in arrivals from major source countries outside the former Soviet Union such as China, Germany, Poland, the US, the UK and Italy. Considerable rates of decline were recorded for the number of visitors from Poland (-48% y-o-y), Italy (-16% y-o-y) and the UK (-13% y-o-y). More recent data released by Moscow’s tourism committee show that foreign visitors to the city totalled 3.7mn in 2009, a decrease of 9.7% y-o-y. On the positive side, tourism numbers to the capital showed an improving trend at the year’s end.

Train Terrorist Attack Russia suffered another major terrorist attack at the end of 2009. In November, a bomb derailed the Nevsky Express train, popular with tourists, travelling from Moscow to St Petersburg, killing 27 and injuring nearly 100 people. A North Caucasus Islamist group claimed responsibility. This also bore similarities to an attack in 2007 on the same line which injured 30 people.

Forecast Scenario Taking into account official data on arrivals in the first three quarters of 2009, we forecast a decline in foreign tourists of 10% y-o-y for the year as a whole. In line with our forecast of broad economic recovery in key source markets in 2010, we expect a slight pick up in arrivals in 2010 of 1% y-o-y.

However, after marked weakness of the Russian rouble against the US dollar and the euro in 2009, we forecast relatively strong appreciation of the rouble against both currencies over the extended forecast period. The anticipated appreciation of the rouble is likely to be an important factor working against recovery in foreign tourism over the next few years. As a result, growth in arrivals over the forecast period through to 2014 is expected to be subdued.

Aeroflot The Russian government is plans to purchase a 25.8% stake in the national airline Aeroflot from business tycoon Alexander Lebedev. The government already owns 51% of the airline’s stock. In February 2010, the government said it will privatise six airlines run by Rosavia (which was set up to absorb regional carriers struggling with the global financial crisis) in order to merge them with Aeroflot this year.

Transaero Russian airline Transaero reported operating income of RUB37.4bn (US$1.5bn) for FY08, an increase of 82% y-o-y. Net profit totalled RUB109mn (US$4.4mn), against a profit of almost RUB102mn in FY07. Transaero has recorded a net profit every year since 2002.

Rezidor Hotel Group Towards the end of 2009, Rezidor Hotel Group announced the development of another property in Russia, a hotel in Yaroslavl, scheduled to open in 2013. The development arises from its strategic agreement with the Russian company Regional Hotel Chain (RHC) to introduce Park Inn hotels throughout the country. A Park Inn property in Lipetsk, eastern Russia, is under construction and is expected to open in 2012