Latest Market Insight

27 May 2022

RUSSIA

Economic Update

A 10.4% decline is the forecast Russian GDP in 2022.  By 2023, the  economy should stabilize as it adjusts to the broken trade ties and limited imports. However, the real GDP growth is expected to remain at a modest 1.5% as the government tries to implement an import substitution policy to replace the many foreign companies exiting the market, but this is likely to lead to a decrease in economic efficiency.

The worst economic decline is expected in Q3 of 2022 (end of Summer and Autumn) when the impact of the sanctions is likely to start making a full impact. The IMF forecasts a 8.5% decline in 2022. 2 million jobs are at risk in the Russian market with Moscow and St.Petersburg the most impacted due to the much large concentration of international companies being located in these two cities. However, unemployment crisis is likely to emerge gradually as many companies have initially tried to avoid redundancies and are instead reducing salaries, by introducing more part-time work or send staff on unpaid leave.

Russian Rouble strengthened by 53% since it February low

Russia’s Economic Development Ministry said earlier Monday that the ruble exchange rate has ‘peaked’, having reached its highest level for more than 4 years. The government moved quickly to restore the value of the rouble after it tumbled immediately after the start of the conflict in Ukraine began and fell to the historic low of 121.5 Roubles to the US dollar.

However, the Russian government now plans to loosen capital controls in order to bring the Rouble back to a normal level as the surge in the value of the ruble is starting to reduce export revenues. This will start by reducing the share of foreign currency earnings exporters are currently required to convert to rubles from 80% to 50%.

The Rouble is currently trading to 56.61 against the U.S. dollar, partly because of the foreign currency requirement, but it is also due to the huge fall in Russian imports caused by Western sanctions, which was as low as it was in 2001 in April, 2022. There was in fact a 50% drop in imports into Russia, but this is causing problems with the supply of spare parts for factories and industrial plants, according to the Institute of International Finance trade Group, the group also predicted a GDP collapse of minus 30% by the end of 2022.

Russian Outbound travel in Q1 2022 increased by 46%

According to the Russian Border statistics there were 3.9 million international visits out of Russia for Q1 (Jan-March) a 46% increase compared to Q1 in 2021, which shows a rapid recovery from Covid. The leading outbound destinations for 2022 compared to 2021 are showing below (excluding all former Soviet republics).

Top 20 Outbound destinations for Russia for all purposes of travel (leisure and business)

Rank 2022 Q1

Destination

Jan-Mar 2021

Jan-Mar 2022

% of outbound*

1

Turkey

468 924

363 849

20%

2

Egypt

16 928

351 926

19%

3

UAE

115 803

263 519

14%

4

Finland

87 183

157 161

9%

5

Dominican Rep.

9

92 036

5%

6

Germany

38 081

60 928

3%

7

Maldives

42 316

42 246

2%

8

China

32 821

38 765

2%

9

Hungary

1 789

36 422

2%

10

Poland

18 618

36 137

2%

11

Cuba

20 820

35 663

2%

12

Thailand

1 226

30 293

2%

13

Italy

12 709

25 955

1,4%

14

Mexico

2

24 623

1,3%

15

Serbia

7 868

23 766

1,3%

16

Spain

11 949

22 686

1,2%

17

Netherlands

14 026

22 631

1,2%

18

Israel

4 019

22 037

1,2%

19

Cyprus

6 054

19 241

1,0%

20

France

11 610

19 007

1,0%

 

Leisure Travel Doubled during Q1 of 2022 

Leisure travel grew much faster than all kinds of travel and increased by 107%, to reach 1.17 million visits in Q1 of 2022, compared to just over half a million trips in Q1 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Travel Industry Feedback

Due to the lack of competition for international flights, the cost of airlines tickets has increased substantially which in turn has resulted in a sharp increase in the price of all tour packages. The price increase depends on the destination, but prices increased from 30 to 55% compared to the previous years. However, as the volume of traffic to accessible destinations increases and the number of airlines increases, especially to Turkey, the cost of an overseas holiday is expected to decline. The strengthening of the ruble is also helping to even out prices.

Connectivity with Turkey increased

Istanbul Airport is now Russia’s most important travel hub for Europe and many other destinations.  For the May holidays, there were 290 flights to Turkey, but even that was not enough to satisfy the increased demand.  An additional 450 charter flights are approved for May-June. 

Last year Turkey received 4.7 million Russian tourists, and this number is expected to grow.  UAE, Egypt and Turkey are the other destinations currently open to Russians, but due to the summer heat in the UAE, travel is expected to decline and to be replaced by Sri Lanka and Egypt.

Turkish Hotels will accept MIR cards

Visa and Mastercard issued by Russian banks are no longer valid outside of Russia, for this reason, Turkish hoterliers have agreed to accept the Russian bank card ‘MIR’, to assist Russian travellers.

Key destinations for Russians this Summer

According to OneTwoTrip online customers, the main destination booked are Armenia and Turkey. However, it should be noted that both Armenia and Turkey are popular destinations for Russians who wish to leave and work abroad due to the current situation.  

 

Note: the data above represent online bookings of one of the most popular OTSs, which does not feature the importance of Turkey, which is normally sold as a package from a Tour operator.

Cruise companies leaving the Russian market

Several cruise brands, including Costa Cruises (which is part of the US cruise conglomerate Carnival) have stopped all future bookings by Russian and Belarusian residents. Costa Cruises explanation was that it has high debts it has incurred due to Covid, the banks supporting their economic recovery believe that the Russian market is too financially unstable to invest in. It also wishes to support the sanctions due to the conflict in Ukraine.

Instead, Costa Cruises will focus its energies on developing the CIS markets of Kazakhstan, Azerbaijan and Georgia, which all now have direct flights to Italy. Armenia will also open flights from September and Moldova has direct connectivity already.

Aeroflot airline has legally purchased eight Airbus A330 from its foreign lesser

Foreign lessors recently sold 8 airlines to Aeroflot. The aircraft have been transferred to the Russian register. This allows Aeroflot to legally fly (without fear of being impounded) to the Maldives, Turkey and Uzbekistan. This was possible due to the European Union amendment to anti-Russian sanctions on April 8th which allows leasing companies to sell aircraft in Russia to Russian airlines which was on a lease agreements before February 26.

New names for Lifestyle media in Russia

Since Hearst revoked its licenses from their editorial offices in Russia held by Independent Media, as a result the Russian versions of a number of internationally recognized publications have been re-branded under new names, but they will retain the editors-in-chief and the editorial team and will have similar content. The new title include the replacement of "Cosmopolitan" will become "The Voice", "Men's Health" will become "Men Today", "Good Housekeeping" will become "New Hearth" while "Harper's Bazaar" will be renamed "The Symbol". "Esquire" magazine has changed its name to "Rules of Life".

Changes in Russian Social media habits

Since February 24, 2020 due to the blockage of many social media and international media channels, including Facebook (FB), Twitter and Instagram, both Facebook and Instagram have seen a 70% reduction in usage, while Telegram, which still functions has seen the 47% increase in usage. There are 106 million social media users in Russia, many people use a VPN service to access international platforms.

Source: Mediascope

THE BALTIC STATES

Join Up started operations in the Baltic States

Join Up, one of the leading Ukrainian tour operators and charter flights consolidators opened its operations in the Baltic states.  Turkey, Montenegro, Albania and the Greek islands will be offered for the summer season while Sri Lanka and Zanzibar will be offered in 2022-23 Winter season.  The flights from Estonia, Latvia and Lithuania will be provided by SkyUp Airlines.

TUI-TT Baltic have stopped all operations due to sanctions

TUI TT Baltics, the TUI branch in the Baltic states, has cancelled all tours in the Baltic states since its Russian owner, Alexey Mordashov was put on the EU sanctions.  In March, TUI Baltics cancelled 1500 tours planned out of the Baltics a few days before departure. 

Flight cost expected to increase 10-15% for summer season

Ryanair observes growing demand and expects the European flights prices to grow and expects a 10-15% growth compared to pre-pandemic period. The conflict in Ukraine has caused an increase in aviation fuel which will increase the cost of summer prices, but demand is still high  for European beach destinations.

LATVIA

Travel industry feedback

The European Tourism Commission expects travel demand to be 20% lower then prior to the pandemic, with domestic and inter-Europe travel fairing better than long-haul, which will only recover by 2024. Latvian tour operators recorded  an increase in requests in the first quarter. Vanilla Travel had good sales for the March school holidays period and have a growing number of bookings for Summer and Autumn of 2022.  FlyMeAway mentioned that although the demand is recovering, the number of requested destinations has decreased.

The Latvian travel trade is concerned with the growing costs of trips.  Hotel costs increased by 18% in Q1 2022, as compared to the same period of 2021. 

Concerning flights this summer, there are 13 airlines with regular and charter flights to 80 destinations.  Ryanair is launching a number of new flights this summer including the launch of Riga-Palermo for summer season.

In 2021, Riga Airport served 2.35 million passengers, 17% more than in 2020 but 70% lower than in 2019.  The most popular flight destinations in 2021 were London, Tallinn, Frankfurt, Kyiv and Amsterdam. 

Air Baltic, the national carrier, served 57% of the passengers.  Ryanair increased its share to 21% of the passenger traffic from Riga Airport by increasing the number of destinations and planes based in Riga. 

ESTONIA

Passenger traffic recovers

Tallinn Airport served 650 000 passengers in January-April 2022.  In March, the number of passengers reached 80% of pre-covid  levels and reached 88% of this traffic by May 2022.  There are flights to 50 different destinations, including new flights to Zurich and Venice.

According to Tez Tour Estonia there is a good growth trend potential for 2022 due to a pent up desire to travel: Turkey, Bulgaria, Georgia and Greece are the most requested destinations. 

Economics

SEB bank revised its expectation of 3.2% GDP growth in 2022 but this has revised down to 0.6% GDP due to the high rate of inflation.  Despite the cooling of the economy and the growth in inflation, consumer demand remains dynamic in Estonia with the exception of inbound tourism, which is likely to be impacted by the geopolitical situation in the region.

KAZAKHSTAN

Economics

During Q1 of 2022 the Kazakh economy has been very dynamic with a GDP rate expected to reach 4.4% in 2022, part of this accelerated growth is due to the growth in the value of real estate sector as well as oil and other resource exports.

Improved connectivity to Europe

The Ministry of Industry and Infrastructure Development recently announced that flights to European Union countries will soon be increased. The total number of flights between Kazakhstan and Germany will reach 15 flights per week, by early July.

Flights between Turkey and Kazakhstan are expected to double, 124 flights per week are expected from mid-May.

As mentioned in the previous report, Neos plans to start MilanAlmaty–Milan regular flights twice a week from June 11th, 2022.

AZERBAIJAN

Outbound travel tripled in Q1 2022

The number of foreign trips abroad from January-March 2022 increased by 2.7 times to 298,500 international trips. 

 

The number of people travelling to Iran increased 5.1 times, travel to Turkey and Russia increased 2.6 times each destination and trips to neighbouring Georgia increased by 2.3 times.

The top 5 tourism destinations (based on travel trade data) were Turkey, Russia, UAE, Georgia and Ukraine. This was followed by Germany and Italy in the EU.

Recovery of Aviation in Azerbaijan

From Jan-April 2022, international airports in Azerbaijan served 900 thousand passengers, twice more than during the same period of the last year.  51% of passengers used the national carriers AZAL or its budget airline or its subsidiarity Buta Airways. By April, 23 foreign airlines had regular flights to Azerbaijan. 

The most popular destinations from Baku were Istanbul, Moscow, Dubai, Tbilisi (Georgia), Minsk, Ankara, Izmir, Frankfurt, Abu Dhabi and Aktau (Kazakhstan) and Italy.

GEORGIA

Georgia is expected to grow by 3% in 2022 and increasing to 5% in 2023.  According to EBRD, Georgia’s economic recovery in 2021 has performed stronger than expected, due to the  revival of  trade, manufacturing and information & communications technology services on the production side as well as increase in household consumption and net exports.

Connectivity

Condor Airlines recently started from Frankfurt from Tbilisi.  Georgian Authorities expect an increase of flights for the summer season, with the largest number of flights coming from the EU and the CCG countries which will result in 34 airlines will operate flights to 30 countries and 70 destinations by the summer. Georgia benefits from internal competition, as apart from Tbilisi, Wizz Air established its main hub for low costs flights out of Georgia’s second city, Kutaisi.  

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