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Irina Smirnova
Analyst,
Centre for Strategic Research "North-West"

Today tourism is one of the world economy's growth sectors ¹. The turnover in tourism is higher than that in the automobile industry, the electronics industry or in the agriculture sector. The comparison is inspiring, but are Russian regions really prepared to use this resource?

A round table dedicated to prospects for development of outbound tourism in Northwest Russia in the situation of the growing globalization of the tourism market was held in St. Petersburg. The event was organized by the Northwest regional branch of the Russian Union of Tourism Industry and the Center for Strategic Research «North-West». Although the discussion was focused mainly on regional aspects of tourism the issues raised by participants of the round table apply to all Russia?s regions that develop tourism.

Below you will find some of the thesis discussed by participants of the round table.

A globalizing market

The tourism market has become globalized. Russia?s regional tourism markets are rapidly losing their isolation and are becoming part of all-Russia, macro regional and global tourism markets. Russian outbound tourism sector has already entered the global market and Russian citizens have a real opportunity to choose tourist products offered by Russian or foreign companies. For Russian companies it means the emergence of the growing number of new competitors.

An overview of the situation as exemplified by the Northwest Russia:

Type of tourism	Regions	Competitors of Northwest at the tourism market
		2007	2012—2015	2020—2025
Cultural tourism	St. Petersburg, Leningrad, Kaliningrad, Novgorod, Pskov, Vologda oblasts	Eastern European capital cities Budapest, Prague)	Baltic capital cities (Tallinn, Riga), Kiev (Ukraine)	Non-capital cities in Europe and in the European part of the CIS (Krakow, Lvov)
Ethnotourism*	Arkhangelsk Oblast, Karelia	Scandinavian countries	Baltic and Southeast Asia countries, Russia’s south, Siberia’s south	—
Fishing Hunting	Karelia, Murmansk Oblast	Scandinavian countries, Astrakhan	Canada, African countries, Tver Oblast, Siberia	North America, Africa
Active and extreme tourism	Karelia; Pskov, Murmansk, Leningrad, Arkhangelsk, Novgorod, Vologda oblasts; the Komi Republic	сScandinavian countries	The Urals, Russia’s south, Siberia, Mongolia	American continent, Africa
Recreational tourism	Leningrad, Kaliningrad, Novgorod oblasts; Karelia	Baltic countries	Moscow agglomeration; Ukraine	—
Congress tourism	St. Petersburg, Kaliningrad	Moscow, Baltic countries	Sochi, Yekaterinburg, Kazan	—

*today practically non-existent in Russia

At the same time globalization of the tourism services market opens new opportunities for establishing partnership relations, giving new impulse to consolidation processes in the industry. The question is: would Russian regions take advantage of the opportunity and what kind of services would they be able to offer to this new and highly competitive market?

Emergence of new tourist destinations and shift to new territories

Tourism is a fast growing industry that tends to spread to new regions. World Tourism Organization (WTO) predicts that in the next 15 year the highest growth rates will be demonstrated by markets of the «new tourism development» countries in Asia Pacific region, in the Middle East, in South Asia and in some of politically stable countries of Africa. Vietnam, Tibet, Tanzania have established themselves on the world tourism map, and even Pakistan is making first attempts to attract tourists. These changes result in global redistribution of world tourist flows.

The tendency is reflected in the Russian market although the intensity of changes is somewhat smaller. The regions like Baikal, the Urals, and Altai are making first steps in positioning themselves on the tourism market. Tourism as a priority development of economy has received a government-level support. The seven tourism and recreational zones created in Russia (Kaliningrad and Irkutsk oblasts, Krasnodarsky, Stavropolsky and Altaisky krais, the Republic of Buryatiya and Altai) are expected to become new tourism destinations due to availability of rich natural recourses and as well as to rapid growth of the infrastructure. Another landmark government project in the tourism sphere for the next 10 years is creation of the infrastructure in the Krasnodarsky Krai for the Olympic Games to be held in Sochi.

New tourism regions will be competing for tourist flows with traditional destinations like Moscow, St. Petersburg, and the Golden Ring cities, which, in their turn, declare intentions for strengthening their positions. According to the General Plan for the Development of Moscow the tourist flow to Russia?s capital city is expected to reach 20 million a year by 2025. Currently about 3,8 million tourists come to Moscow a year. The northern capital city also has its plans. According to the Program for Development of St. Petersburg as a Tourism Center the city is expected to attract 5 million tourists a year by 2010.

According to statistics on the country-wide scale the tourist flow has been increasing, but its distribution is uneven. For example, the growth rates of the tourist flow to Russia?s Northwest are slower then Russia?s average. If this tendency stays unchanged there is a high risk that Northwest regions would shift to the periphery of the tourism market.

Consolidation of players

Big western players that enter the Russian market with their standards and high level of services have strong impact on the market situation in the industry.

Thus, the entrance on new airline and cruise-line operators to the Russian market implies introduction of new standards of work, brought about by foreign companies from highly competitive markets. To stay competitive national carries have to adapt to global standards.

They confront a choice: they may attempt to outstrip competitors or they may perform some of the functions of foreign companies fitting into their chains. A good illustration of the situation is the global cruise market where Russia occupies a couple of one-hundredths of one percent. The current state of national sea cruise infrastructure (most ships were built in the 1970s), absence of modern passenger terminal facilities with adequate passenger capacity etc), as well as insufficient financial recourses, make competitiveness of Russian sea companies questionable. There are two possible variants for development of the situation: either they will be overtaken by Western companies or they will have to leave the market and change specialization.

Many international hotel chains and tour operators realize their projects in Russia creating a highly competitive environment. This process is beneficial for foreign partners as well as for Russian regions which get a pass to the world of big tourism: hotels with international names (like Radisson, SAS, Park Inn, Marriott International) guarantee quality to potential clients and create an additional motivation for their «own clientele» to visit the country. At the same time, creation of Russia?s hotel chains is underway.

Shopping is an important part of any tour. Therefore, the state of retail business services plays an important role in development of the tourism market in Russia. In the mean time, organized retailing has finally emerged from the shadows of unorganized retailing and is rapidly growing, while new retail formats are actively introduced on the Russian market. The entrance of foreign retailer chains has contributed greatly to development of the market.

Modern retail markets dynamics

The tourism market expansion leads to the enlargement of business. A significant tendency is the emergence of an «integrated travel plant» a company that unites air carriers, hotel chains, tour operators and tourism services. The tours are getting more sophisticated, new programs are created and inter-regional tours are launched.

Russian tourism business is also going though unification processes. Tour operators (like Geliopark Group) and hotel owners combine and merge. Russian business starts investing in tourism projects: in creation of ski-resorts (Sheregash, Gladen'kaya etc.), in development of recreation zones around large cities, in particular, around Moscow and St. Petersburg, in construction of sports and leisure complexes (Moscow region is experiencing a real boom in this sphere). Investments are made in hotel business. At the same time, large-scale projects can be realized only by large-scale investors, often by those for whom tourism is not a core business. So, tourism industry experts predict further strengthening of the tendency for consolidation at the Russian tourism market and emergence of vertically integrated holdings.

Although these processes reflect the global trend towards consolidation, Russian travel market players? attitude to them is ambiguous.

Tourism clusters in regions

New technologies are being introduced in tourism business management. Some of Russia?s regions
are planning and establishing tourism clusters — networks of compatible interrelated companies and organizations working together to strengthen tourism industry.

Projects of this type are being developed in Russia as well as in Kazakhstan and Ukraine (Crimea), while Turkey already has some experience in implementation of such projects.

Table 2. New technologies in tourism business management

Unification of tourism services

Along with changes in tourism management the industry undergoes qualitative changes. Most significant is the tendency towards unification of tourism services and introduction of a networking product.

Unification implies introduction of new internationally accepted standards. The key process is creation of a recognizable tourism product that guarantees a certain quality of services.

• Tourism networks win their own consumer audience which in the choice situation selects familiar service with a familiar price.
• Tour operators networks and travel agencies franchise networks introduce unified standards in a number of spheres — from document processing to company image and quality of services in different network representative offices.
• Global hotel chains guarantee their clients a certain quality level and a set of additional services thus setting the pace for hotel business.
• Creation of interregional routes that combine tourist attractions on a network principle, i.e. in the unified format. For example, Paris suburbs, Baltic seaports combined in a cruise etc.²
• Establishment of networks of cultural attractions and historic monuments. For example, the Association of Castles and Museums around the Baltic Sea incorporates 50 castles in 9 countries. (Russia is represented only by the Vyborg castle). In addition to research work the association members organize cultural events that attract additional tourist flows.

In present-day Russian tourism industry the unsegmented market with traditional forms of conducting business is gradually becoming a thing of the past. Experts believe Russia has entered the early stage of travel business unification and in the next 5—7 years Russian travel market will be segmented and will become more specialized. Regional tourism industries face a challenge: to adopt Western quality standards or to leave the market.