Major Russian tourism group OTI is diversifying and building up domestic holidays to counter the slump in foreign travel which could result in a market consolidation, according to a senior executive.
Russian outbound travel has dropped dramatically this year on account of the devaluation of the rouble and the country’s weak economy, impacting on tour operators, travel agents and hoteliers alike. The next stage could be mergers and takeovers among weaker Russian travel businesses, Coskun Yurt, vice chairman of OTI Holding and head of its main tour operator Coral Travel, told fvw in an exclusive interview.
“For the market, we expect a drop of 40% in visitors to European destinations, especially Spain and Greece, and of 10-15% for Egypt. The situation has slightly improved for Turkey and we now expect a fall of only 20%,” he said. “For our tour operator Coral Travel, however, we predict a fall of only 5-10% in total, because we are strongly expanding domestic tourism within Russia.”
Looking ahead, Yurt predicted: “We expect next year to be better than this one. It’s difficult to estimate whether we will reach the level of 2014 again.”
OTI will definitely further expand its domestic holidays business, with packages to the Crimea and the Black Sea coast. The number of Russians holidaying on the Black Sea coast is likely to rise about 30% this year on the figure of 15 million in 2014, he said. “We began with domestic holidays two years ago and are expanding this business, including charter flights, strongly.”
Coral Tours, founded in 1994, is one of three Russian tour operators with over two million customers, followed by two others with more than one million, and 5-6 other larger tour operators, according to Yurt. “Some of the smaller firms have problems. It’s quite possible that there might be mergers between smaller operators,” he predicted. Similarly, many small travel agencies are closing and there could be a consolidation trend among the 25,000 agencies, he added.
Apart from the tour operator, OTI also has more than 1,400 travel agencies in Russia and Ukraine, has a charter airline Royal Flight, various incoming agencies and operates eight hotels, five in Turkey and three in Sharm El-Sheikh in Egypt. The group’s Turkish hotels have seen an 80% rise in Turkish visitors after reducing prices, he pointed out.
In addition, OTI is expanding in several Eastern European markets. It hopes to further grow on the Polish market, where it expects some 200,000 customers this year. But its third-largest source market Ukraine is “in a difficult situation” and the company has reduced its programme substantially. In contrast, it is expanding in Turkey and Georgia.
Moreover, the group is investing in incoming agencies and hotels in various destinations. “In the long run, the Russian market and also the Turkish market still offer large customer potential,” Yurt declared.