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Russia's tourism crisis is an opportunity for the Chinese lodging giants.
Wednesday, 7th October 2015
Source : Joseph Fischer ~ Exclusive for 4Hoteliers.com

Exclusive Views:¬†Last week was another low-point in Russia's deepening tourism crisis, Transaero Airlines ‚Ä" Russia's 2nd¬†largest airline is on the verge of bankruptcy, practically bankrupt;¬†

Just two weeks ago Easy Jet ‚Ä" Europe's 2nd¬†largest low-cost airline announced that it is suspending its flights between London and Moscow, blaming a slump in demand.

According to publications in Turkey the number of visitors from Russia to Turkey in 2015 (until Augusts) dropped by 700,000 tourists.

According to Russia's Federal Agency for Tourism, the total number of trips Russians made abroad in the first half of 2015 dropped by 24% compared to the corresponding period in 2014. At the same time, official Russia is keeping its 'business as usual' façade.

Two weeks ago, on September 18th. Russia celebrated 1,000 days milestone until the 2018 FIFA World Cup. This event was celebrated in style in Moscow trying to show that Russia is not affected by the growing international sanctions imposed by the west and the growing economic melt-down.

However, in a very rare and rather unusual statement quoted on Associated Press on September 29th.   Russia's Sports Minister Vitaly Mutko said that lack of hotel accommodations for the teams and officials is a major problem facing 2018 World Cup organizers.

Minister Mutko said: "the most severe problem is related to accommodating guests of the World Cup, with the Hotels,"

"Four of the 11 host cities ‚Ä" Volgograd, Rostov-on-Don, Saransk and Nizhny Novograd ‚Ä" are behind on plans to increase hotel accommodations in time for the tournament. The issue concerns hotels for players, sponsors and FIFA officials". Also Russia's readiness to house the general football fans is been called into question.

It is almost impossible to believe that just 3 years ago, the Russian Federation was a hotbed for international hotel development. Global brand hotel groups such as: Hilton, IHG, Accor, Rezidor as well as other smaller brands were focusing their efforts in developing budged and first class hotels in Russia's large provincial cities. According to TopHotelProject publication in March 2012 Russia had nearly 160 new upcoming hotels.

Nowadays, the situation isn’t promising. Development of some hotels was stopped in mid construction by the developers due to lack of bank funding. Other developers decided to hold their plans and wait for improvement in the economy and the local currency.

On top of the above, hotel specialists from Western Europe or the US ‚Ä" developers, Architects, Engineers, find it increasingly difficult to get business visas to come to Russia. Working permits for those specialists are very difficult to come-by.

It is logical to assume that the economical situation in Russia is not going to improve any time soon. Economical sanctions, the situation in Ukraine, Russia's military intervention in Syria and the tensions with the Baltic States will not go away any time soon.

So what is the solution? Yes. I do believe that Russia has options when it comes to the lodging industry. The solution is 'GO EAST".

Drawn by its communist past and visa-free regime, Chinese tourists are flocking to Russia in droves.

According to the Russian Federal Tourism Agency nearly 410,000 Chinese tourists visited Russia in 2014, putting them at the top of the list of foreign tourists visiting Russia.

According to recent estimates Chinese tourists spent some $1 billion in Russia in 2014.

Russia is practically 'next-door' neighbor and the ways of doing business (the "red-tape") is similar in a lot of ways.

Chinese hotel groups are eager to grow beyond China.

Chinese lodging/real-estate investors have a rather unique opportunity to enter Russia in a big way, taking over the place of local developers or entering JV's with privet and government companies - Hotel giants such as Jin Jiang/Planeto, Home Inn, Green Tee Inn and New Century.

The opportunities for Chinese companies aren't just limited to the actual management of the hotels. Chinese construction companies could also be a part of the development. Chinese banks and insurance companies could provide project development financing.

Now, all we have to do is to wait and see who will be the first Chinese group to make a bold & strategic move on the Russia's lodging market.    

This is strictly an exclusive feature, reprints of this article in any shape or form without prior written approval from 4Hoteliers.com is not permitted.

Joseph - Yossi - Fischer the CEO of Vision Hospitality & Travel - international lodging & Travel Solutions

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