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European Travel Commission

Crimea crisis threatens tourism to Europe

Travel from Russia has grown massively over the past two decades and Europe has been a major beneficiary. With 18.1m tourist arrivals in 2013, Russia has grown to become Europe’s1 3rd largest source market.

Economic research released by the European Travel Commission (ETC), the organisation responsible for promoting Europe as a destination, shows that the escalation of the Crimea Crisis in March coincided with a noticeable slowing in the growth of tourism from Russia to many European countries but travel to Cyprus, Greece and Turkey has surged in the same period. At the start of the year, arrivals from Russia to Europe1 were expected to grow by around 10% in 2014 but now the forecast has been revised down to 3%.

Eduardo Santander, Executive Director, ETC, said: “Whilst growth in outbound tourism from Russia to Europe1 has slowed; it has slowed from a very healthy rate and it is still expected to be positive this year, despite the Crimea Crisis.”

Travel from Russia has grown massively over the past two decades and Europe has been a major beneficiary. With 18.1m tourist arrivals in 2013, Russia has grown to become Europe’s1 3rd largest source market.  Increasing prosperity in Russia has been spurred by a growing economy, freed up by market reforms and fuelled by the rising price of oil. Consequently more and more people are exceeding the US$20,000 income threshold, identified by Tourism Economics, an independent advisory firm, as the point at which international travel becomes affordable.

However, with the political crisis in Crimea, a weakening of Russia’s domestic economy, a decline in the value of the rouble to an all-time low against the euro and the imposition of sanctions, there has been a marked change in the choices made by Russian tourists. Destinations experiencing the most painful falls include Germany, Italy, Poland and Spain. In contrast, Cyprus, Greece and Turkey have all seen a rise. The Turkish surge is most significant because it represents 11% of the whole Russian outbound travel market, and received over 4m visits in 2013.

There are several possible explanations for this trend. First, Cyprus, Greece and Turkey offer good value-for-money due to a comparatively low cost of living and, in the case of Turkey, favourable exchange rates and no visa requirements. Second, they have a long track record of welcoming tourists from Russia. Third, unlike many other destinations, they adopted a lackadaisical view to imposing sanctions against Russia after the annexation of Crimea.

Looking ahead, the ETC envisages three possible scenarios, benchmarked against what it was expecting for the next three years had there been no crisis in the Crimea, which is referred to as the counterfactual scenario.

Prior to the crisis, the Russian outbound travel market to Europe1 was expected to grow by over 4m visits between 2014 and 2016. It now forecasts that, if no changes occur, the market will grow by only 2.5m over the three years.

The other scenarios are more threatening. If the political situation deteriorates and sanctions against Russia are increased, ETC forecasts that inbound tourism from Russia will fall by 5% in 2014, a loss of 1m visitors, and fall further by 1.3m visitors in 2015. Despite a recovery of 1.2m visitors in 2016, the crisis would cost destinations in Europe1 over 1m visits overall.

Should things spiral into outright conflict, the forecasts are bleak: 2014 and 2015 will see a loss of 2m visits from Russia and in 2016 the market would be down by nearly 5m compared to 2013. Furthermore, a conflict would produce indirect impacts that could jeopardize the Eurozone’s economic recovery and negatively affect travel within Europe’s1 internal market.   

“The underlying fundamentals of outbound travel from Russia remain strong and the market is expected to deliver pent up demand in the medium to long term, especially to those destinations which maintain their presence in the market”, said Valeria Croce, Head of Research, ETC. In the past, the European tourism sector has proved remarkably resilient to different types of shocks, including political unrest, economic recessions and even terrorism.  Despite the challenging landscape, the tourism sector is expected to confirm its role as key driver of Europe’s economy, growth and employment.

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