Ukraine crisis tests resilience of Russian outbound travel market

* Ruble devaluation and halted payments are hurting Russians’ appetite for travel
* Southeast Asia unlikely to limit Russian arrivals to protest Ukraine invasion
* Large swathes of closed airspace may impact European long-haul to Asia

Russia’s shocking invasion of Ukraine is testing the resilience of its outbound travelers who are prized for their long average length of stay and determination to travel no matter what.

This determination can be terminated. Even before the crisis, the devaluation of the Russian ruble weighed on the purchasing power of Russian travellers. Today, following harsh sanctions imposed on Russia by the United States and its Western allies, the ruble has fallen 30% against the dollar.

The sanctions imposed to date, in particular the withdrawal of Russia’s central bank and certain Russian banks from the SWIFT global payments system, are intended to disrupt payments for energy and other Russian exports, and to cripple the economy. According to a BBC report, Russians are already waiting in long queues, fearing that their bank cards will no longer work or that limits will be placed on the amount of money they can withdraw.

Travel might be the last thing on their minds.

In 2019, Russians made 20 million trips abroad and continued to travel the world even at the height of the pandemic, as seen in 2020, when 12 million Russians traveled abroad, according to Sri Lanka Tourism. The country lifted restrictions on international travel last October and saw Russia become its top market.

But Sri Lanka and other popular Russian haunts in Asia, such as Thailand, are already seeing cancellations or an easing of the market.

Michal Zitek, Regional General Manager of Angsana Laguna Phuket, said: “Our hotels in Laguna Phuket, the Maldives and Corfu (an island in Greece) have not reported significant cancellations, but the pace of pick-up could decrease slightly.

The market had appeared more “reserved” due to the devaluation of the currency, Zitek said.

Softer blow on Asia
Asia should be less impacted than Europe, if only because its share of the Russian market is smaller. Data from Mabrian Technologies, a Barcelona-based travel intelligence platform, shows that the countries with the most scheduled flights and seats from Russia over the next six months are Turkey, the Arab Emirates States, Germany, Greece, Egypt, Cyprus and Italy, among others.

According to Mabrian Technologies, the countries with the most scheduled flights and seats from Russia will see the greatest tourism impact

These countries would see their tourism sector affected if the crisis drags on, Mabrian said.

“Further instability jeopardizes the recovery of tourism in Europe when it looked like we had overcome the crisis caused by Covid-19,” said Carlos Cendra, director of sales and marketing at Mabrian.

It is difficult to estimate the magnitude of the impact at this stage.

“We don’t know all the sanctions, the reaction of Russian travelers in terms of appetite for travel as a result of this situation, how long this war might last, whether Russia itself might respond by restricting outbound tourism, etc.,” Cendra said.

Kenneth Atkinson, founder and senior adviser to the board of directors of Grant Thornton Vietnam, believes that restrictions imposed on Russian travelers by Western countries are likely. “Additionally, banking and currency restrictions will make overseas travel difficult. Also, I think people won’t want to leave Russia for fear of not being able to come back,” he said.

Asia, with the exception of countries like Japan and Singapore, should not impose sanctions on Russia. “I don’t see any massive action from Southeast Asia to restrict movement because of sensitivities with China and because Russia is an important air corridor,” Atkinson said.

Disrupted flights
Geography is called upon to play a major role in the redesign of air routes. This may inadvertently impact the European market for travel to Asia, which is beginning to recover following announcements of reopenings by one Asian country after another.

Due to its vastness, Russia’s airspace is the popular flyover for EU flights en route to Asia. However, most European countries have closed their airspace to Russian airlines, and Russia has returned the favor with its own bans, forcing airlines to take circuitous intercontinental routes, Bloomberg reported on Feb. 27.

The latest measures “take Russian carriers such as Aeroflot away from the shortest routes to the west, forcing them to head south to Turkey to go around. European carriers going the other way are also facing delays and higher fuel expenses, after Russia, a key route to Asia, began blocking access in response,” the report said. report.

Finnair, which has bet its strategy on short routes to Asia, said such a move would likely stop such flights.

So Asian destinations hoping Russia could help fill the void left by Chinese travellers, face uncertainty not only in the Russian market, but also in the European market, which may prefer to stay closer to home. him that flying longer and paying higher fares due to higher fuel prices. costs. Oil prices jumped above US$100 a barrel for the first time in seven years.

Vietnam, which will fully reopen on March 15, is one of them. In 2019, Vietnam welcomed 650,000 Russian travelers. Thailand, which now allows Russians to arrive under its Test & Go plan unlike when the program was launched, is another. In 2019, 1.5 million Russians visited the Kingdom.

Silver lining possible
However, some in the industry believe that the Russian foreigner will remain promising.

Victor Mogilev, Sales Director of Diethelm Travel Group, said: “Russian travellers, whether mass or luxury, are known to be resilient. If there is a chance to travel, they will. Russian demand is still number one when destinations reopen – look at the Maldives, Thailand and many more.

Mogilev: don’t mix politics with business

“I would say to keep focusing on the market, not mixing politics with business, trying to understand what the market needs/wants in the current situation and finding ways to offer solutions. This could be added value for families who might want to go out for a few more weeks, or tactical campaigns for people ready to work remotely in the coming months.

Angsana Laguna Phuket’s Zitek thinks the crisis could even lead to longer stays, longer stays or even “repatriation stays” depending on where guests are coming from.

“Our market segments are diverse. Not all of our guests are from the Russian Federation itself. We also have many guests from Ukraine and the CIS, so the impact may be significant or limited – too early to tell,” Zitek said.

Ukraine’s travel market can’t be compared to Russia’s in terms of size, but it’s “usually quality tourists,” Diethelm’s Mogilev noted.

The greatest concern of Asian industry members is of a humanitarian nature.

“My hope is that the default talk, don’t fight, and result in loss of life,” Grant Thornton’s Atkinson said.

Said Zitek: “The tourism industry will always recover. But not the loss of life.