Part of EyeforTravel’s
Emerging Online Travel Markets Series
TRAVEL DISTRIBUTION
RUSSIA REPORT
including an over view of the CEE region
Edition 1
EyeforTravel Research 7-9 Fashion Street London E1 6PX UK For queries contact:
[email protected] www.eyefortravel.com EyeforTravel Ltd, February 2008
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Table of Contents
Travel Distribution Russia & CEE Report Edition 1
Table of Contents Section 1: Russia
9
Executive Summary & key trends
1.1 1.2 1.3
2.1 2.2 2.3 2.4
3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9
4.1 4.2 4.3 4.4 4.5
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1. Country overview
11
Introduction Macroeconomic setting Key demographics Government policy
11 12 19 26
2. Tourism overview
31
Traveller segmentation analysis Airline capacity The current investment scene in the travel and tourism industry in Russia Scale of the budget for development
36 41 42 43
3. Travel distribution trends in Russia
45
The size of the Russian travel market: online vs. offline Airline sector analysis Hotel sector analysis Car rental sector analysis Package tour sector analysis Online intermediaries Traditional intermediaries Costs and Key Performance Indicators Technological advances in Russia
45 46 50 56 56 59 63 66 66
4. The Russian traveller – search and buying behaviour
65
Internet users Mobile phones in use Technology in the future Payment solutions The use of online facilities
67 67 67 68 68
5. Marketing, PR and Sales
73
Marketing to the Russian traveller
73
6. A ‘how to’ guide for international businesses in the Russian travel industry 75 Useful Contacts in Russia
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78
3
List of Figures
Section 2: CEE Overview This section of the report is intended to provide summary information on the ten countries in Central and Eastern Europe who have joined the EU since 2004: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. Ukraine has also been included in this resume for reasons explained below. In recent years all these countries have experienced considerable change in consumer spending patterns during the transition to free market economies, and
1.1 1.2
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11
3.1 3.2 3.3 3.4 3.5 3.6
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79 with an overall population of around 148 million, the market is of a similar size to Russia, although over a much smaller area. We present overviews of each of the countries in the region in terms of basic macroeconomic information, and data on Internet access and usage and e-commerce developments. This is followed by information and statistics on travel and tourism activity, both domestic and outbound, including some regional information.
Executive Summary
79
1. CEE countries overview
81
Macroeconomic Overview Overview of Internet usage in CEE EU members
81 81
2. Macroeconomic setting, key demographics, Internet use and e-commerce trends - by country
83
Bulgaria Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Ukraine
83 85 87 88 90 91 92 95 96 97 99
3. Travel and Tourism overview
101
Key Trends Bulgaria Czech Republic Estonia Hungary Latvia
101 107 111 113 115 117
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Table of Contents
Travel Distribution Russia & CEE Report Edition 1
3.7 3.8 3.9 3.10 3.11 3.12
Lithuania Poland Romania Slovakia Slovenia Ukraine
120 121 123 124 126 127
Conclusion
128
Methodology
129
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List of Figures
List of Figures Section 1: Russia Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Figure 8 Figure 9 Figure 10 Figure 11 Figure 12 Figure 13 Figure 14 Figure 15 Figure 16 Figure 17 Figure 18 Figure 19 Figure 20 Figure 21 Figure 22 Figure 23 Figure 24 Figure 25 Figure 26 Figure 27 Figure 28 Figure 29 Figure 30 Figure 31 Figure 32
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Resident population: urban vs. rural, 2002-2007 Breakdown of the Russian population by age & gender (2001; 2005; 2006) Nominal GDP, 2002-2008 Gender breakdown of the economically active population of the Russian Federation, 1992-2006 Forecast of the number of employed men and women in the economy of the Russian Federation, 1995-2016 Rouble exchange rate dynamics, 2002-2007 Forecast 2007-2012 exchange rate against the dolla Volume of foreign investments in the economy of the Russian Federation in 2006, by country Volume of foreign investment by types Distribution of population by per capita average income (percentage of the total) Average monthly nominal accrued wages of employees by kinds of economic activities, 2002-2006 Dynamics in the development of Internet users amongst the population over 18 years from, 2002-2006 Internet access location, 2001-2007 Forecasts of increase in debit and credit card usage to 2009 Domestic travel volume and value, 2003-2007 Number of journeys abroad made by Russian citizens including purpose of travel, overview, 2002-2007 Number of journeys abroad made by Russian citizens including purpose of travel, details, 2002-2007 Outbound value of the Russian tourist market, 2003-2007F Top outbound destinations of Russian citizens, 2006 (number of trips) Outbound destinations, volume and reason of travel of Russian citizens, 2006 Number of trips abroad undertaken by Russian citizens for tourism purposes, 2002-2007 Prices for one week tours from Russia to the most popular destinations, June 2005 Airline capacity: domestic and international, 2005-2007 Domestic travel market volume and value, 2003-2012F Outbound travel market volume and value, 2003-2012F Russian travel distribution - offline vs. online bookings, 2005-2012F Value and volume of the Russian airline sector, 2002-2012F Russian airline sector – online vs. offline bookings, 2005-2012F Airline sector: Growth in indirect sales, 2002-2012F Airline sector - Direct vs. indirect sales, 2002-2012F Value of the hotel sector, 2002-2012F Airline sector - Online vs. offline sales, 2005-2012F
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13 13 14 15 16 16 17 17 18 20 21 23 23 26 32 33 33 34 34 35 37 39 41 45 45 46 47 47 48 48 52 52
Figure 33 Figure 34 Figure 35 Figure 36 Figure 37 Figure 38 Figure 39 Figure 40 Figure 41 Figure 42 Figure 43 Figure 44 Figure 45 Figure 46 Figure 47 Figure 48 Figure 49 Figure 50 Figure 51 Figure 52 Figure 53
Hotel sector - Growth in direct sales, 2007-2012F Hotel sector - Direct vs. indirect sales, 2005-2012F Value of the Russian car rental market & car rental fleet size, 2006-2008F Value of the domestic package tour sector, 2002-2012F Domestic tour package sector - Online vs. offline sales, 2005-2012F Value of the outbound package tour sector, 2002-2012F Outbound tour package sector - Online vs. offline sales, 2005-2012F Package tours - direct vs. indirect sales, 2002-2012F Breakdown of online visits to Russian OTAs, July 2007 Online visits to Russian OTAs by country, August 2007 OTA sector leaders in terms of site visitors, July 2007 Value of the OTA market in Russia, 2002-2012F Breakdown of OTA sales by sector Breakdown of Yandex and Aport OTA sales by sector, 2007 Value of sales by traditional intermediaries, 2005-2012F The 65 key players in the Russian tourist industry, 2006 Russian Internet penetration, 2004-2007 Regional analysis of Internet users by frequency of use, January – June 2007 Volume of Internet users by city, 2006 Internet access location of Russian consumers Influential sources of information for Russian travel consumers, 2005
Section 2: CEE Overview Figure 54 Figure 55 Figure 56 Figure 57 Figure 58 Figure 59 Figure 60 Figure 61 Figure 62 Figure 63 Figure 64 Figure 65 Figure 66 Figure 67 Figure 68 Figure 69 Figure 70
Internet Usage in CEE European Union Members Bulgaria - Internet users by age, 2006 Bulgaria - Internet connections, 2006 Czech Republic - Internet users by type of activity, 2006 Czech Republic - Internet purchases by product, 2005 Estonia - Internet penetration, 2000-2007 Poland - Breakdown of Internet users by frequency of use for travel purposes, 2006 Poland - Consumers preferred method for obtaining travel information, 2005 Slovakia - Breakdown of Internet users by frequency of use for travel purposes, 2006 Gender differences in Internet use in Ukraine, 2006 Air passengers travelling between Estonia, Latvia, Lithuania and the UK, 2000-2004 Value of total travel market, 2002-2010F Forecasted travel market growth rate: CEE vs. other European regions, 2006-2010F New EU-12 travel market distribution - online vs. offline, 2002-2010F New EU 12 - Size of the total travel market & breakdown by sector, 2006 Total travel market split by sector: 12 new EU vs. total Europe, 2006 Airline sector - gross market value in Eatern EU, 2002-2010F
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List of Figures
Travel Distribution Russia & CEE Report Edition 1
53 53 56 57 57 57 58 58 60 60 61 61 62 62 63 64 68 69 69 70 70 70
82 84 84 86 86 88 94 94 97 100 101 102 102 103 104 104
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List of Figures
Figure 71 Figure 72 Figure 73 Figure 74 Figure 75 Figure 76 Figure 77 Figure 78 Figure 79 Figure 80 Figure 81 Figure 82 Figure 83 Figure 84 Figure 85 Figure 86 Figure 87 Figure 88 Figure 89 Figure 90 Figure 91 Figure 92
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Low cost airlines – gross market value, 2002-2008F Eastern European LCC sector - online vs. offline sales, 2002-2010F Volume of air passengers – geographical split by CEE country, 2002-2005 Volume and value of package tour market, 2002-2006 Trips of Bulgarian residents abroad by purpose of visit and by destination, 2002-2007 Czech Republic - Numbers of guests at accommodation establishments, residents vs. non-residents, 2004-2007 Domestic and outbound tourism of Czech residents: by type of trip and average expenditure, 2003-2006 Outgoing visitors served by Estonian travel agencies and tour operators by destination, 2006-2007Q2 Hungary - Domestic guest nights by type of accommodation, 2005-2006 Hungary - Domestic guest nights by tourist region, 2005-2006 Hungary - Top 10 most popular destinations for main leisure trips abroad (%), 2005 Mode of transport used for domestic trips around Latvia, by purpose of trip (%), Q2 2007 Latvia - Percentage of the population taking trips inland and abroad, by purpose of trip, Q2 2007 Volume of Latvian travellers crossing the state border for outbound travel, 2005-2006 Lithuania - Outbound tourist trips by country of destination, Q1 2007 Lithuania - Expenditure of outbound tourists – breakdown by type of product spend, Q1 2007 Poland - Domestic holidays (at least 5 days) by purpose of trip (%), 2003-2006 Poland - Outbound tourist trips by country, 2002-2006 Average expenditures of Polish tourists travelling abroad pre-trip and during the trip, 2002-2006 Trips made by Polish residents - Forecasts of short breaks, long trips and outbound tourism, 2001-2013F Slovakia outbound and domestic tourism data: volume of tourists; average length of stay; volume of tourism establishments, 2005-2006 Ukraine - Volume of domestic, inbound and outbound tourists, 2000-2006
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105 105 106 106 107 111 112 114 115 115 117 118 118 119 120 121 122 122 123 123 125 127
Executive Summary
Travel Distribution Russia & CEE • Section 1 Russia
Section 1: Russia Executive Summary & Key Trends This report examines the travel distribution trends in Russia. It aims to fill a gap in travel industry knowledge, as information on this region in terms of travel distribution is fairly limited. The report identifies and analyses individual markets in terms of their stages of development regarding travel distribution and the population’s propensity to travel. The report is intended for various travel industry sectors such as airlines, hotels, travel agents, online intermediaries and tourism boards. It provides information necessary to back up distribution and marketing strategies and ultimately reach the consumer in a more informed way. It will be of interest to both foreign companies looking to invest in the market and capitalise on the travel spend of the residents (domestic and international travel) as well as local companies looking to understand the market in which they operate. The report examines the role of the Internet in terms of travel distribution in Russia, combined with a study into traditional channels of distribution, which at this stage still play a dominant role in Russia. The report covers the following key areas: • Country overview - macroeconomics, demographics, government policy, internet penetration, broadband penetration, credit card / e-payment card penetration • Domestic and outbound tourism information and statistics – volume and value • Outbound tourism trends e.g. destinations, volumes and trends • Travel distribution trends: total market values, transportation, accommodation, intermediaries, online and offline / direct vs.. indirect bookings. This includes an indepth look at the airline, hotel and package tour market • Russian consumer travel research and buying habits • Marketing activity, including how travel companies are successfully marketing to the Russian consumer • Going about doing business in the Russian Federation The report focuses exclusively on the market for domestic and outbound travel and tourism. It does not count the inbound contribution to the Russian tourist economy, so as to avoid any global double counting.
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9
Executive Summary
Key Trends/Highlights • All the current predictions for the Russian economy are positive, based on a healthy macroeconomic environment and expectations of large scale government investments in the economy. Russia is seeing a steady growth in infrastructure investment and earnings are rising steadily. • All the trends in domestic and outbound travel predict significant increases in all sectors, with airline travel benefitting particularly from the growth. • Russian government investment into the tourism infrastructure is developing, with the designation of a number of Special Economic Zones dedicated to tourism. These zones offer highly favourable tax conditions and are attracting interest from Russian and international players in the travel market. The programme reflects the commitment to exploiting the huge potential resources for tourism in the largest country in the world. • The decision to hold the 2014 Winter Olympics at Sochi has stimulated further investment pledges from both the government and private sector. Sochi is at the heart of the Krasnodar region, where around 50% of Russian tourists go every year. • The hotel market is ripe for expansion and investment; one of the key factors holding back domestic tourism in Russia is the lack of mid-range hotels in both the major cities and tourist destinations in the regions. In 2004, the US Department of Commerce highlighted this sector as particularly favourable for international investors. • In 2006, the World Travel and Tourism Council presented a report for the Russian Government and the Federal Tourism Agency forecasting Russia to regain the role of a leading tourist attraction before 2015. The Russian tourism industry will be developing twice as fast as in the European Union, according to the Council’s prognosis. According to Russian travel industry experts, this level of growth will be hard to achieve, but the forecast is a powerful indicator of Russia’s potential as a tourist destination. • Russia is currently seeing unprecedented growth in ICT development, particularly mobile technology. Internet access and broadband facilities are being steadily expanded, with significant government and private investment. Online bookings in all sectors of the travel industry are now beginning to take off, with forecasts of growth up to 15% by 2012.
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