Russia Tourism Report Q4 2012

The Russia Tourism Report examines the long-term prospects for the tourism sector but, in the short term, considers the negative consequences of an economic slowdown in the key source markets. The strong pick-up in growth in 2011 in visitor numbers from major markets (outside the former Soviet Union), including the eurozone, China, Poland and the UK, is expected to slow sharply in 2012, halving growth in arrivals compared with the previous year. Some recovery, however, is anticipated in 2013 and beyond.

The report analyses official data on the number of foreign visitors to Russia, which showed sharp negative growth in 2009 (after years of low growth) but relative buoyancy in 2011. BMI also considers figures on the departure of Russian citizens abroad, which, aside from 2009s negative growth, have witnessed continual healthy growth rates in recent years.

Factors constraining potential tourism to Russia also feature heavily, including the threat of terrorism and concerns about Russian flight safety standards. Business opportunities, though, clearly exist in the midmarket accommodation sector, infrastructure development and low-cost airlines.

Solid growth of foreign arrivals continued in the early part of this year, with latest figures showing an increase of almost 14% year-on-year (y-o-y) in Q112. As in 2011, Finland, Poland and China – major source markets outside the former Soviet Union – continued to register sizeable growth rates in arrivals, equal to 14%, 72% and 8% y-o-y respectively. Thirteen members of the eurozone though recorded a slowdown in growth in Q112 compared with 2011.

Over the last quarter BMI have revised the following forecasts and views:

- Despite a strong start to the year, BMI maintains its forecast of a slowdown in foreign visitor arrivals to Russia in 2012, although we have upped the forecast slightly to around 6% y-o-y. A moderate pick-up in growth is anticipated in 2013 and 2014.

- BMIs real GDP growth forecasts for the eurozone – an important source market for tourists – have been lowered slightly for 2012 to -0.6% from -0.5%, rising to only 0.9% growth (down from 1.0% previously) in 2013.

- BMI has opted to lower its average 2012 and 2013 currency forecasts for the Russian rouble, providing some relief for the tourism sector.

- A recent plot by Islamist militants to attack Sochi during the 2014 Winter Olympics, uncovered by the authorities, and a deadly suicide bomb attack on the outskirts of the capital of Russias Dagestan region, add to BMIs concerns about security at the Winter Olympics in 2014.

- In May, a Russian-made Sukhoi Superjet-100 aircraft crashed in Indonesian during an exhibition flight with 45 people on board – no survivors were found. BMI believes that the incident, potentially (depending on the cause of the crash), could be a major blow to the Russian aviation industry.