Latest Market Insight

30 September 2020

Economic Update

The Russia’s Central Bank took a breather from successive rounds of interest rate cuts after a surprise jump in inflation over the summer and a recent fall in the value of the ruble. But the Central Bank Governor said further rate cuts were likely before the end of the year due to the slow pace of economic recovery.

Russia’s current interest rate of 4.25% is the lowest-ever, since the Central Bank slashed two percentage points from it so far this year in a bid to stimulate the Russian economy as it emerges from the coronavirus pandemic. An unexpected jump in inflation to 3.6% in August and the renewed possibility of fresh sanctions against Russia following the poisoning of leading Kremlin critic Alexei Navalny prompted the Bank’s rate-setters to hold back from further monetary easing at this stage.

The Russian ruble has lost 8% against the U.S. dollar in the last three months and is down more than 20% since the start of the year. The ruble plunged to its lowest level since the height of Russia's coronavirus epidemic in the spring. The ruble also fell steeply against the euro, down 1.2% at 91.6 to its weakest level since February 2016.

Russia's GDP has declined by 8% in the second quarter of 2020 year on year. According to the first estimate of the Federal Statistics Service, it declined by 3.4% year-on-year in the first half of the year.

The unemployment rate continued to grow in August and is above 6% of the working population.

The Ministry of Economic Development said that real wages of Russians in the first half of the year increased by 2.9%. However, by the end of the year the real disposable income will decline by 3%. It is assumed that in 2021 real disposable income will grow by 3%, in 2022 and 2023 - by 2.4% and 2.5%, respectively.

18% of travel agencies could not survive the pandemic

According to IT-company Evotor, 18% of travel agencies and 14% of small hotels have left the market this summer. Those who continued to work missed the lion's share of the traditional summer revenue: travel agency turnover in June-August fell by an average of 43% year-on-year, and hotels - by a third. At the same time, the average check increased by 9% year-on-year and amounted to 225 Euro.

Russian Statistical Committee confirm the trend. According to statisticians, 3,659 agencies have left the market in a year since July 2019, with the lion's share of them already in 2020 - 2,849 agencies. The number of hotels since the beginning of the year has decreased by 6.3 thousand units.

Since Turkey opening, the situation has improved somewhat: in August, agencies earned 11% more than in July, but 36% less than a year ago.

During the first half of September, turnover lagged behind last year by 22%. Moscow agencies are the least affected by the crisis, losing only 18% during the three summer months, compared to last year's turnover, and revenue in the first half of September even exceeded last year's by 9%, with an average cost of a trip  increasing by 25%  to 825 EUR per person

In the hotel segment, everything is the opposite with Moscow and St. Petersburg, who have deprived of business travellers and tourists, suffering the most. According to the OFD platform, hotels in Moscow this summer earned 47% less than last year, and in St. Petersburg they earned 46% less. Whereas the regions of Krasnodar (Southern Russia) and hoteliers in Karelia earned only 4% less over the summer. Hotels in Kaliningrad received less than 16% of last year's revenue. In general, sales of Russian hotels over the summer and the first half of September lagged behind the same level of the last year by 35% and the average bill fell by 10% to 37 Euro.

In September, the demand for hotels in a number of regions exceeded that of August and last year. At the beginning of autumn, hotels in the Astrakhan region saw an increase of 18% compared to a year ago, the Kaliningrad region was up by 8%, and the Arkhangelsk region increased by 5%.

Up to 25% of travel agencies may leave the market by March 2021

As reported by the press secretary of the Russian Union of Travel Industry, several thousand travel agencies have not opened in Russia after the quarantine. Travel agencies found themselves in a very difficult situation, as they generate their profits mainly on outbound tours. According to some travel experts, as many as 40-45% of sales offices will leave the market by March 2021. Agencies which previously had two or three sales offices, will only have one. The total number of travel agencies may reduce by 20-25%.

Russia resumes flights with Belarus, Kazakhstan, Kyrgyzstan, and South Korea

Russia resumed flights to neighboring Belarus, Kazakhstan and Kyrgyzstan on September 21 and to South Korea on September 27.

Citizens and permanent residents of these countries are now allowed to enter Russia through air corridors, and Russians will be able to enter these countries without restrictions as well. The weekly flights will connect Russia to the capital cities of Minsk, Nur-Sultan, Bishkek, and Seoul.

Aeroflot resumed the flights to Czech Republic and Hungary

On September 26, flight restarted to the Czech Republic and Hungary. Flights from Moscow to Budapest and Prague appeared in the Aeroflot schedule. However, leisure tourists will not be able to take advantage of these flights until the governments of the two countries agree to jointly lift travel restrictions. At the moment, flights are only available to those Russians who have the right to enter, for example, for medical purposes, for work or study, as well as to visit relatives or any other serious reason.

Other aviation news from the market

Azur Air, Ukraine, is starting charter programs to the Dominican Republic and UAE in October. However, their earlier announced charters to Maldives are now postponed due to travel restrictions from the Ministry of Health of Ukraine which were updated several days ago. As a result, Ukrainians can fly now to the following destinations: Turkey, Egypt, Dominican Republic, UAE, Tanzania, Mexico and the Maldives. Bulgaria is available for winter skiing, while Sri Lanka and Bali are to open soon.

Pegas Turistik announced a new charter program from Moscow to Zanzibar (Tanzania) from October 25. The flight program will be operated by Nord Wind airline. The charter flights will be operating once every 10 days.

Russia and Greece agreed on the gradual restoration of air traffic. The first flights may start as early as October 1. At the first stage, one flight is expected to operate on the Moscow-Athens route. Within two weeks after the start of flights and as long as there is no major change in the epidemiological situation, the flight frequency on the Moscow - Athens route may be increased to two or three frequencies per week.

Cyprus Airways has included flights to Moscow in winter routes schedule.

The State Duma adopted amendments to strengthen the responsibility of travel agents

The State Duma supported in the first reading the amendments to a bill on strengthening the responsibility of travel agents. This is part of the new legislation that will require any travel agent to be part of the all-Russia register. Until now only Tour Operators had to apply to the Government Tourism Agency to be included in the register of the Tour Operators. According to the amendments adopted in the first reading, a travel agent will have a financial responsibility to sell the tours only of those tour operators that they enter into an agent’s agreement with.

The Government Tourism Agency is trying to structure the market and eliminate the risks of the consumers if the tours are bought from independent mediating companies or individuals. At the same time, the new regulation may lead to reduction of the number of individual companies acting as travel agents.

80% of Russians did not go on holiday this summer

The majority of Russians (81%) did not go on vacation this summer, a survey conducted by the NAFI analytical center. The poll was conducted in late August-early September 2020 noted that many of those who did not have a holiday this summer live in Moscow or St. Petersburg (86%). According to the Director of the Tourism and Transport Research Department, Moscow and St. Petersburg residents tend to travel abroad more than other Russians. Considering Moscow and St. Petersburg entertainment infrastructure provides a wide variety of leisure activities in and around the cities, they prefer to wait and travel outside Russia rather than travelling on a domestic holiday. According to NAFI, summer vacationers decreased by 10% as compared with same period in 2019. Among those who went on vacations, most often travellers decided to go by car (63%).

Consumer spend abroad in summer 2020

According to VTB Bank, in June-August 2020 the number of transactions made by the Russian citizens abroad decreased by 54% compared to the last summer, the total spend decreased by 77%.  Turkey that was the first destination opened for Russian tourists after the pandemic lockdown, has seen 164 times increase of expenditures made by Russians in August compared to June.  The spend increased even in those countries that are still closed for Russian tourists – 2.9 times in Italy and 1.3 times in France.  The highest decline was in the expenses on excursions – by 94% and car rental abroad – by 93%. 

60% of Russians are unsure about the coronavirus vaccine

Online travel agency Tutu.ru conducted a survey among 2000 respondents in Russia to understand if vaccination, which is currently being developed in Russia, may be motivated by the ability to start travelling again. More than 60% of Russians are not sure they would like to be vaccinated even if overseas travel will then be permitted. The results of the survey state that 41% of respondents are willing to accept not travelling abroad, and 20% will try to bypass the system in order to still go abroad, but without a vaccination.19% of Russians are ready to get vaccinated if this will be the requirement for international travel. 18% of respondents said that their decision may depend on the vaccine offered. 2% of respondents stated that they have already been vaccinated.

Ten states opened their borders for Kazakhstan

By September 21, ten countries have opened their borders to travellers from Kazakhstan. Countries which accept Kazakhs include the UAE (from 17 August), Germany (from 18 August), Belarus (from August 19), Turkey (from 27 August), Poland (from September 16), Egypt (from September 12 – there will be charter flights), Kyrgyzstan (from September 20), Russia (from September 21), Ukraine,  and Uzbekistan will open on October 1st (as well as for Ukrainian and Russian citizens).Foreigners can start to travel to Kazakhstan from September 28.

Belarusian citizens can enter Poland

From September 22, all Belarusians can enter Poland with any type of visa and for any purpose. This follows from the document of the Polish Ministry of Internal Affairs. However, a 10-day quarantine on arrival is still required.

 

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