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14 Nov, 2014

It’s the geopolitics, stupid: ETC reports analyse impact of Ukraine standoff on Russian travel

Russian outbound travel to Europe has taken a hit in the wake of the geopolitical standoff over Ukraine and is likely to end the year with 1.2 million fewer visitors than last year. At the same time, travel from Europe and the United States to Russia has also suffered, according to a report by the European Travel Commission.

The report breaks new ground by clearly analysing the impact of a major geopolitical crisis on travel & tourism, and the consequences of deteriorating relations between countries, especially the major powers. The report will put further pressure on travel industry events to start factoring geopolitics into their discussions and on travel & tourism leaders to become more accountable over the lack of a policy agenda to address these supposed “external shocks”.

It is widely recognised now that geopolitics are interlinked with economic problems and natural disasters as major determinants of global travel & tourism trends. Geopolitical standoffs such as those between India-Pakistan and Israel-Palestine, are creating serious impediments to travel & tourism and artificially thwarting some of the potentially greatest people movements on the planet.

This year alone, geopolitical tensions between China and Japan/Vietnam/the Philippines led to declines in visitor flows between those countries. As yet, no major industry travel organisation has done a serious analysis of that impact, similar to that just done by the ETC on the geopolitical crisis over Ukraine.

The ETC report should become a new yardstick in terms of measuring and quantifying the impact of geopolitical events on visitor arrival flows. Further analysis of the direct impact on jobs and economies should give the reports added value.

According to the “European Tourism – Trends & Prospects” report, “After a good start in the first quarter of the year, travel from Russia fell by an estimated 6% between March and June, as a consequence of geopolitical tensions in the area. Year-to-date data point to a recovery in demand over the summer, which shall be interpreted as the effect of longer travel lead times for major holidays rather than an early sign of recovery. If no changes occur, Russian outbound travel to Europe is expected to grow still in 2014, albeit by a modest 3%, which is 1.2m short of the volumes predicted for 2014 before the crisis.”

The ETC has also issued a more detailed report headlined, “European Tourism amid the Crimea Crisis”. The Foreword to that report says that “the escalation of the crisis between Ukraine and Russia over Crimea is abruptly changing trends in travel from this market in the short term.”

It adds, “While the European tourism sector is not a direct target of international sanctions introduced in response to the crisis, it does suffer indirectly. The weakening Rouble, partly a by-product of deteriorating trade relationships, has progressively reduced outbound travel from Russia. The climate of economic uncertainty, fear of hostile attitudes towards Russians and deteriorated visa processing, amplified by media coverage, contribute to diverting travel from Russia to non-European destinations.

“National Tourism Organisations can play a crucial role in containing the negative impact of this crisis by addressing the information needs of travellers and all industry stakeholders in an efficient, timely and responsible manner.”

This is the Executive Summary of the report:

(+) Over the past decade, Russia has become a key contributor to tourism growth in Europe. In 2013, European destinations received nearly 32 million arrivals from Russia, becoming Europe’s 3rd largest market (6% of Europe and 4% of ETC destinations’ total inbound travel). Russia is also Europe’s 3rd fastest growing market (+13% in 2013).

(+) Over the past decade, Russian outbound travel to Europe has grown by an average of 11% per year, a pace faster than the market average (9%). As a result, Europe has strengthened its position, attaining a share of 60% of all outbound travel from Russia in 2013.

(+) The underlying fundamentals for outbound travel from Russia remain strong, although deteriorated economic conditions and uncertainty – partly a by-product of the conflict over Crimea – will necessarily affect travel from this market. According to the IMF, geopolitical tensions are slowing the economy, which is already weakened by structural bottlenecks. Russian GDP is expected to grow by only 0.2% in 2014 and 0.5% in 2015, thus having a negative impact on consumption.

(+) Travel demand from Russia dropped as the year progressed. After a good start in Q1, travel from Russia fell during Q2 by an estimated 6%. Air bookings point to a recovery of demand in Q3, although values remain below 2013 level. Q3 performance shall be interpreted as the effect of longer travel lead times for main holidays rather than as an early sign of recovery. If no changes occur, Russian outbound to Europe will grow by a modest 3% (+500.000 visits). This is 1.2mn short of the volumes forecast for 2014 before the outbreak.

(+) A fall in leisure spending is also expected. Inflationary pressure is expected to erode incomes and spending power even further. This may impact modestly on travel, but will certainly affect leisure spending and choice of destinations. Overnights have moved broadly in line with arrivals in data to date, giving no evidence for changes in the length of stay.

(+) For better or for worse, the crisis will be felt most by destinations with a strong presence of Russian travellers in their guest mix. Finland, Lithuania, Switzerland and Czech Republic are threatened by this year negative performance of the market. At the other end of the spectrum, Cyprus, Turkey – who adopted a neutral position in the conflict- and Latvia -host to a large Russian diaspora- report growth in line with, or even exceeding, expectations.

(+) The crisis will hit most in 2015. For next year, inbound travel from Russia to Europe is expected at some 10% lower than what it would have been, had the crisis not occurred. Some faster growth can be expected for 2016, under the assumption that more normal trends resume. Spain, Czech Republic, Poland Finland, Germany and Turkey are the destinations expected to shoulder the largest burden over the period 2014-2016.

Here are the links to download the two reports:


European Tourism – Trends & Prospects