Latest Market Insight

30 July 2020

Economic Update

By June, Russia's GDP has made an annual decline by 6.4%, according to the Ministry of Economic Development. At the height of the quarantine measures, the Russian economy contracted 12% in April and 11% in May. As a result, during the second quarter of 2020, Russia's GDP fell by almost 10% in annual terms after growing 1.6% in the first quarter.

According to the research by Romir, 60% of Russians believe that Russia is suffering an economic crisis. Over the past five years, only in 2016 this figure was higher (71%). The confidence in the Russian economy became stronger in 2017 when 51% had a positive attitude. Today, 80% believe the economic situation is negative due to the increase in the prices of goods and services along with a higher level of inflation. 60% has suffered salary reductions and/or unemployment. 

The number of officially registered unemployed citizens now exceeds 3 million people. Since mid-June, the official number increased by more than half a million people, but the Ministry of Labor noted that the growth rate of unemployment is declining. It increased by 1.1% in April, and only by 0.3% in May and 0.1% in June.
Real disposable incomes in the second quarter of 2020 decreased by 8% in annual basis. As in most countries, this is a record quarterly drop, the last time it fell that much was in 1999. In the first half of 2020, real disposable income declined by 3.7%.

According to Sberbank analysts, consumer demand in Russia has reached a plateau, and weekly fluctuations are mainly caused by slight changes in consumption habits. Last week, the consumer activity index reached 77.1 out of 100. Previous weeks, it remained close to 2019 level, only 0.2% down year-on-year. This is compared to the rates of 50.2 and 58.3 in April and May.

Resumption of international flights from August 1

On the 24th of July, Russian Prime Minister announced resumption of international flights from August 1st. Rosaviation, the Federal Aviation Transport Agency, has allowed to re-start the international flights from August 1st. The three initial destinations with a flight corridor to Russia are: Turkey, the UK, and Tanzania and include flights to Ankara, Istanbul, London and Zanzibar. The flights will operate from three Russian cities: Moscow, St. Petersburg and Rostov-on-Don. Turkey will open in two stages, flights to Antalya, Bodrum, and Dalaman will re-open after August 10th.

According to the Minister of Transport, Russia is in negotiation with 30 other countries. Connection with EU has not yet reopened for Russian tourists. The next time the EU will review safe countries on August 3, after that the airline companies will require at least a week to prepare, and the flights may re-start after August 10 in the best-case scenario. The Maldives, UAE and South Korea are expected to be the next countries to open.

Russians are waiting for the opening of Turkey, Greece, and Egypt

The online booking platform Tutu.ru conducted a survey among 2,800 users and found out which countries Russian tourists believe will re-open as soon as possible. Russians expect flights re-opening with Turkey (20%) and Belarus (14%). There is also a high interest in Greece and Egypt: 7% expect flight corridors with these 2 countries. Georgia and Thailand were selected by 6% of the respondents, whilst 5% of the surveyed participants voted for Cyprus. Another 4% are waiting for a flight corridor with Armenia, Israel, and Montenegro. Bulgaria, Cuba, and Moldova received 3% each. Finally, 2% of Russians are waiting for the Dominican Republic, Maldives, UAE, Indonesia, Hungary, Mexico, and Croatia to open-up.

The European Union keeps the borders closed to Russian tourists for the moment

EU countries are not yet ready to reopen their borders for Russian tourists. Finland and Estonia also have the same position, despite economically important cross-border traffic for these countries with Russia. The Finnish Government will keep the borders with Russia closed until August 25th and Estonia will only open in September.
Due to the significant number of new cases of COVID-19 in Russia, almost all EU countries want to delay tourist flows from Russia, at least until mid-August. Only Croatia and Malta are ready to accept Russians.
The EU has officially extended its temporary restriction on the entry of Russian citizens till the end of July.

Business travel is recovering

Aeroclub business travel agency analysed bookings by corporate clients in the second quarter of 2020 and found out how business travel has changed.
The study showed that in the second quarter of 2020, the demand for air tickets by business travelers reached only 11% of the volume of Q2 2019. In April, the share of air travel for business was only 2% of 2019 volume, but after the lifting of the self-isolation measures, demand has begun to grow. It increased by 54% in May compared to April and by 173% in June compared to May.
As for international business travel, the most frequently booked destinations in June were Frankfurt, Prague, Paris, Rome, and Vienna. Only 1% of business travelers booked business class for flights in Russia.
The lead time has significantly decreased. 44% of tickets were purchased not earlier than 3 days before departure, and 33% - from 4 to 7 days before departure.

40% increase in spending on tours after the announcement of international flights

According to VTB bank, in the first weekend after the resumption of international flights was announced, Russians spent 40% more on tour operators' services compared to the previous weekend. The volume of spend with travel companies over the weekend exceeded 2.1 million USD. August is traditionally the peak season, so a 40% growth may only be a "starting point", and the future sales of tour operators will significantly grow throughout August.

Russians’ travel plans and behavior

According to a study by the Analytical Center and the Association of Russian Tour Operators, 67.4% of participants said that their decision to take a vacation in Russia was not related to the closure of the borders. At the same time, 32.6% of respondents decided to travel in Russia, as it was impossible to travel abroad.
As for travel expenses, 64.2% have a budget of 550 USD per person per trip and only 1% can spend more than 4,150 USD per person per trip.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

More than half of the Russians (55.6%) go on vacation once a year, 40.4% - from 2 to 5 times a year, 2.9% travel from 5 to 10 times a year, and only 1% - more than ten times. 81.2% of the respondents organise their trips independently, 28.9% book via a travel company. 

Kazakhstan extended strict quarantine measures

The President of Kazakhstan has extended quarantine restrictions till August 16th. The restrictions introduced on July 5 helped the country reduce infection rate of COVID-19 by 29%. According to the Head of the Government, the number of new cases has stabilized at 1500-1600 per day. 63% of infected persons have now recovered, but there is still a total of 86 192 live cases in the country.

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