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19 November 2020
Russia’s Prime Minister has extended the deferral of payments of taxes and insurance contributions for small and medium-sized businesses by another three months. The tax holiday has been extended to the travel and hospitality sector, as well as the conference sector, exhibitions, sports, cultural events & entertainment and the catering sector. Nevertheless, business sentiment in Russia is still not very optimistic and the company optimism index has collapsed by 14% since June, according to IHS Market estimates. Manufacturers are preparing to raise prices and reduce investment.
Until the end of 2020, the rate of inflations is expected to increase.In the third quarter, inflation exceeded the forecast value of 3% by 0.7%. To stay within the target value of 4%, prices in October-December should grow at a slower pace, not more than 0.2-0.3% a month.
The State Duma will increase the amount of personal income tax for those who have high salaries. Presently, Russia has a flat rate of income tax of 13% for all income levels. The new law will mean that those with an annual income above 5 million roubles will be taxed at a rate of 15%, 2% more than the rest of the population. According to Rosstat, only 0.8% of working population (about half a million people) earn over 3 million roubles a year (38,830 USD), and even less people receive over 5 million roubles (64,700 USD). (Please note this refers to only declared salaries and many Russian have investments and other income abroad not declared in Russia).
According to the Moscow Mayor, the impact of the pandemic on the economy and other aspects of Moscow life will be felt until May 2021 but the city is not planning to cut their spending in 2021, notwithstanding the slump in revenues due to the pandemic.
As of November 13th, the Moscow authorities require that all bars, restaurants, night clubs, remain closed from 11 p.m. to 6 a.m. to slow the spread of coronavirus. This law will be enforced until mid-January 2021 and includes the Xmas and New year holiday period.
Russian ups and downs of outbound travel over 10 years
2013 was the record year for outbound travel with 54 million international trips abroad from Russia. From 2010, outbound traffic from Russia grew by over 10% a year, with a record growth rate of 15% in 2010 and 13% in 2013. However, due to the annexation of Crimea and the sanctions imposed due to this action, 2014-2016 saw outbound tourism number decrease dramatically. The impact of low oil prices and the closure of Turkey in 2016 also contributed. As a result, by 2016 there were only 34 million Russian international trips abroad, 20% lower than in 2015. Outbound travel started to recover in 2017 with 24% increase in the number of visits abroad to 42 million in 2017 and 2018. Last year (2019) the market showed a healthy 8% increase in growth with the total number of outbound trips, reaching 45 million. More than 65% of those visits were to Europe.
Outbound travel from Russia dropped by 70%
From January-September 2020, Russians made just over 11 million trips abroad. This is just 30% of the same period in 2019 (37.2 million trips). However, compared to many countries a 30% reduction can be considered a success, this is due to the “strong” outbound statistics of the first quarter, mainly for skiing and long-haul destinations popular during the Russian winter. The opening of Turkey in August also promoted many Russians to take last minute breaks in warmer destinations and continued up until early November, as the summer season was extended.
In the third quarter (July-September) of 2020, Russians made over 3 million trips abroad, which is only 20% as the same period in 2019 (16 million). Thus, even with the opening of the borders to a limited number of destinations, the outbound visitor flow from Russia have decreased by five times.
Top destinations for the third quarter included: Turkey, Ukraine, Kazakhstan, Finland, Lithuania China, Estonia, and Great Britain. Almost 95% of all trips by Russians to the following destinations of Ukraine, Kazakhstan, Finland, Lithuania, Latvia, Estonia were classified as being private visits related to visiting friends and family, business or work. Turkey accounts for 98% of outbound leisure trips in the third quarter of 2020.
New destinations open but with limitations
Aeroflot will resume weekly flights from Moscow to Cyprus (Larnaca) from November 22. However, only Cypriot citizens and their family members as well as Russians and other nationals with Cypriot residence permit and diplomats will be able to enter.
Russia will restart flights to Ethiopia and the Seychelles, with 3 flights a week from Moscow to Addis Ababa and 2 flights a week to the Seychelles. However, the Seychelles has not yet included Russia in the list of "safe" countries. In the short-run only Russian arriving by private jets and staying at the certified island resorts can enter the country. A negative Covid test is required to enter the Seychelles 48 hours before arrival.
Ethiopia requires all passengers to have a negative COVID-19 prior to boarding. Russians also require a visa for entry but this can be obtained on arrival. Until now Ethiopia has not been a major destination for Russian tourists, as there is no access to the sea. But like Zanzibar may receive a sudden increase in interest, however the current unstable political situation in the country may put visitors off.
Flights to Kazakhstan (Moscow - Nur-Sultan route) will be increased to 3 times per week whilst flights to the United Arab Emirates will increase to a daily frequency. Flight to Cuba will increase to 4 times a week while the Maldives will have the highest frequency. Due to the increased demand, there will be 8 flights a week. It seems the Maldives are taking full advantage of the fact that Thailand is not available, a traditional winter favourite in the Russian market. The Maldives is an aspirational destination for many Russians and the resorts have been flexible in terms of the conditions offered to the market to encourage 1st time visitors.
The impact of Covid-19 on the Russian traveller’s attitude towards travel
Russian tourists interviewed by the online travel service OneTwoTrip have described how the pandemic has changed their attitude towards travel. A study of 1,900 travellers says that 54% now plan their holidays more carefully. 49% choose tickets with a refund option, and 39% purchase them only on the eve of their trip. This autumn, travel cost has dropped significantly compared to last year, and this has also impacted the preferences of the respondents. 60% said that low airfare has a positive impact and encourages them to travel. Despite all the restrictions and concerns, 52% are already thinking about a New Year's trip.
Russian tourists plan to go on New Year's vacations earlier than last year
75% of Russian travellers are planning a winter holiday trips (from December 25 to January 10). Most of them plan to leave Russia by the end of December, before the New Year. A year ago, it was only 55%, according to Biletix booking service. However, due to the impact of COVID-19 restrictions and the massive transition to remote work and study, many Russians intend to take advantage of this new-found flexibility and go on holiday earlier than in previous years. In addition, many Russians have discovered the domestic travel, a year ago only 52% of airline tickets booked early were for Russia, now that rate has increased to almost 97%.
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