THE WAVE BLOG

Overseas upheavals hit Russian travel business

The euro zone crisis is creating problems for Russians planning to vacation abroad. For a carefree vacation this year, Russian tourists may need more than a bit of luck with their travel agencies. As fear of the European debt crisis spreads, the ruble is also coming under increased pressure, forcing many agencies to raise ticket prices by as much as 20 percent.

Two weeks ago, the ruble dropped to its lowest level since April 2009, as the market reacted to a combination of falling crude oil prices and the euro zone crisis. Since the end of April, the U.S. dollar, Russians’ preferred foreign currency, gained 13 percent in value, while the euro dropped by 7 percent, Vedomosti reported last week. But as the buck gained value against the ruble, so did the price of travel packages, jumping by 20 percent over the past week alone, a senior manager at the Nizhny Novgorod travel agency Odyssey, Lyubov Martynyuk, told the paper.

With regular tourists already put off by the high prices this summer, the falling ruble is putting an added burden on tour operators, who are already struggling to make rates commercially viable. Travel agencies often have to block-book hotel rooms in dollars or euros far in advance of the travel period, meaning that as the ruble falls, the agencies must raise ruble prices to keep afloat.

“Price rates in the contracts with the airlines are fixed in foreign currencies, but are calculated in rubles,” said Dmitry Gorin, the CEO of VIP Service, a major distributor of air and railway tickets. As a result of the unstable ruble rate, ruble fares for regular flights are now reviewed weekly, while fares for leased or chartered flights are reviewed daily, Gorin said.

© Photo / Olga Kirsanova

Prices of trips abroad can become more expensive as the ruble falls

Even before the contagion from the euro zone, many Russian tour operators have been having a rocky year, with some trying to shed debt and unprofitable operations. In January, about 3,000 tourists were stranded around the world after Lanta-Tur Voyage suddenly declared bankruptcy. The problem was serious enough to warrant intervention by then-Prime Minister Vladimir Putin, who gave orders to set up an emergency fund to help financially strapped tourists abroad.

But that was hardly the first sign of looming trouble for the tourist industry. In 2010, leading tour operator Capital Tour went bankrupt, leaving more than 8,000 clients stranded abroad. And since the beginning of the Arab Spring, six Russian tour operators have gone underwater, Kommersant reported.

With uprisings in the Middle East making summer tourist destinations like Sharm El-Sheikh in Egypt and Aleppo in Syria off-limits, Russians looking for fun are turning to Europe. But the cost-satisfaction ratio has been letting many of them down, travel agents said.

“Costs for tour packages abroad have not changed much if you buy them in foreign currencies,” said Anna Podgornaya, spokeswoman for the Pegas Touristik agency. “The problem is when you want to get tickets in the national currency.”

Even with Libya pacified and a new government in place in Egypt, Russian tour operators said they are still reeling from the aftershocks of the revolutions, which caused a 32-percent slump in their businesses. Last month, Europe’s second-largest tour operator, Thomas Cook, reported seasonal operating losses of £10.4 million ($16 million) from its Russian business with travel agency Intourist, which in turn suffered heavy losses as a result of the Arab Spring. German travel group TUI said earlier that it had lost up to £13 million pounds ($20 million) in Russia. This summer, many travel agents have been hedging their bets, and most say they hope to cash in on relatively safe destinations like Turkey.

But despite the crisis, some Russian bargain-hunters are intent on going places like Crete or Rhodes, where tour packages sometimes cost as little as $314, tourist agencies said. Against the backdrop of economic and political crises in Greece and its probable withdrawal from the euro zone, local hoteliers are faced with a sharp drop in demand from European markets and are forced to cut prices, the operators said. As demand for Egyptian resorts drops, other Russian tour operators are also focusing on Thailand. The number of Russians who visited the Southeast Asian country in February 2011 increased by 80 percent in March, rising to 126 percent in April, said Irina Tyurina of the Russian Tourism Union.