Balancing Russia's touRism deficit: a RepoRt on ... - Hilton Worldwide

<strong>Balancing</strong> Russia’stourism <strong>deficit</strong>:A report on thefuture of theindustrySummer 2012

2Hilton Moscow Leningradskaya

3ForewordTourism in Russia has grown rapidly. Fuelled by the country’sstrong economy, rich history and vast geography, bothoutbound and inbound tourism have flourished. Russia hasone of the biggest outbound travel markets in the world,registering over 40 million outbound tourists last year, withgrowth predicted to continue. Inbound tourism has alsobeen on the rise with over 22 million international touristarrivals in 2011, an increase of 11% on the previous year. Russiais therefore an important market and has been identifiedas a key growth area by Hilton Worldwide, with more hotelopenings planned in Russia over the next few years thananywhere else in Europe.But while there is steady growth in travellers to and fromRussia, those visiting the country spent US$9.9 billion in2011, compared to Russian outbound travellers who spentUS$32.4 billion, more than triple that of inbound travellers.Government investment in tourism development and majorsporting events such as the Winter Olympics and the WorldCup will of course attract many more visitors to Russia, butthe discrepancy between outbound and inbound expendituresuggests more can be done for travellers visiting the country.In doing so, Russia could derive greater benefit from tourismand the positive impact it can have on job creation, GrossDomestic Product (GDP) and capital investment.In order to better understand this important opportunityin the context of Russia‘s wider tourism industry, wecommissioned Euromonitor International, world leadersin strategy research, to explore recent and future trends ininbound, outbound and domestic tourism in Russia. Theresult is ‘<strong>Balancing</strong> Russia’s tourism <strong>deficit</strong>: A report on thefuture of the industry’ which makes a timely and significantcontribution to understanding the long term potential oftourism in Russia, what challenges the industry faces, and themeasures that need to be undertaken to make the country’stourism business more competitive.Hilton Worldwide is committed to playing an active role insupporting Russian tourism over the long term. Across thecountry we plan to open 28 hotels over the next few years,with brands including Hilton Hotels & Resorts, DoubleTreeby Hilton, Hilton Garden Inn andHampton by Hilton. Ourgrowing presence will also help create over 3,000 jobopportunities.Working closely with the travel and tourism industry, andgovernment organisations, we will continue to drive Russia’stourism agenda forward.We hope you find this report informative and engaging.Simon VincentArea President, Europe, Hilton WorldwideHilton Garden Inn Perm

4About this reportThis report was commissioned on behalf of HiltonWorldwide by Euromonitor International - anindependent organisation and a world leader instrategy research for consumer markets.In this report, Euromonitor International providesan in-depth analysis of Russian tourism in order toprovide context to the penetration and prevalence ofoutbound, inbound and domestic tourism.Through a combination of primary and secondaryresearch, the report investigates and addressesquestions about Russian travellers such as: the numberof Russian inbound, outbound and domestic travellers;main geographical areas of interest; growth driversand barriers constraining inbound tourism; tourismexpenditure; and traveller groups. The report alsoanalyses tourism trends amongst the BRIC nations(Brazil, Russia, India and China).Experts have given their opinions and perspectiveson key trends, developments, drivers and areas ofpotential focus.Hilton Moscow Leningradskaya

5table of contentsExecutive Summary 6 – 11Industry Overview 12 – 13Inbound Tourism 14 – 18BRIC Analysis 19 – 20Outbound Tourism 21 – 26Domestic Tourism 27Tourism Expenditure 28 – 30Traveller Segments 31 – 33Methodology and References 34Hilton Dalaman Resort & Spa

6executive summaryInbound tourism is in its early stagesIn 2011, the total number ofoutbound tourists reached40.8 million, increasing by11% in 2010 and indicatingan overall trend towardsgrowing outbound travel.Over 2011-2016, outboundtourism is expected to growby 7%. Russian outboundtourists spent US$32.4billion on their travels in2011, up 21% on the previousyear. Outgoing touristexpenditure is expectedto grow by 8% over theforecast period (2011-2016).The total number of inbound tourists reached 22.4 million in 2011, with anincrease by 11% in 2010. It is expected to show a growth rate of 5% over 2011-2016.In 2011, inbound tourists spent US$9.9 billion, up 9% on the previous year with anexpected increase of 2% over 2011-2016.While there is steady growth in travellers to Russia and growth in travellerspending in Russia (US$9.9 billion in 2011), Russian outbound travellers spentUS$32.4 billion – more than triple that of inbound travellers. This indicated morecan be done to cater the inbound market and that Russian inbound tourism is inits early stages.In 2011, the total number of domestic tourists reached 96.4 million, an increaseof 2.5% on 2010 and a predicted growth of 4.3% over 2011-2016 due to increasesin disposable income. Domestic tourists spent only US$21.1 billion in 2011 anddomestic tourist expenditure is to see a moderate 4% increase to 2016.Russian outbound tourists mainly seek beaches and the sea, opting for Turkey,Egypt and Thailand as well as historical attractions in European cities in Italy,Spain and France. Shopping tourism is popular and convenient in Finlandresulting in 3.8 million of outbound tourists in 2011. China is the third largestcountry for outbound tourism due to business trips to the country. In 2011, Russiawelcomed 6.6 million tourists from Ukraine, 2.6 million from Kazakhstan, 1.1million from each Uzbekistan and Finland.Hilton BeijingConrad IstanbulRome Cavalieri, Waldorf Astoria Hotels & Resorts

7executive summaryRussians spending moreon leisure & tourismMid-income groups are starting to redefinepriorities in lifeInstead of focusing on advancing in their careers, forsaking holidaysand forgetting about recreation, mid-income groups are seekinga more balanced life-work combination and thus spending moretime on leisure and tourism. This is especially true of mid-incomeconsumers in large cities.Beach vacations most popular in RussiaThe primary choice for Russian tourists is a beach vacation in Turkey,Egypt, Greece, the United Arab Emirates or Thailand. The secondmost popular destination is Europe, with the leading countriesincluding Spain, Italy and France due to these countries offeringhistorical attractions, food and wine and shopping, combined withbeach holidays.Internet retailing is on the increaseGrowing internet household penetration, as well as tourists seekingcheaper prices, boosted internet retailing. Sales reached US$4.9billion in 2011, of which 45% stemmed from airfare bookings, 25%from hotel bookings, 14% from railroad tickets and 16% from packagetours.RUSSIA’S LARGEST CITIES ARE THE MAINTOURIST ATTRACTIONMoscow and St Petersburg are the main destinations attractingtourists, offering historic buildings, theatres and museums. In 2011,historic buildings held a 22% share of tourist attraction sales, whiletheatres accounted for 19% and museums for 17% share.

8executive summaryGovernment initiativesto stimulate tourismThe government is investing in developing tourisminfrastructure in order to improve the country’s economicsituation. The new federal tourism developmentprogramme was agreed by the Russian Parliament and isexpected to be one of the main industry drivers over theforecast period. The programme’s US$11 billion budget willbe invested in infrastructure and promotional activitiesuntil 2018. Moscow also plans to spend US$2 million ona city advertising campaign via Facebook, Twitter andRussia’s largest local social network, Vkontakte, by the endof 2012.The simplification of Russia’s visa system will also contributeto the growth of tourism in Russia. Although negotiationsaround the removal of visa requirements are still ongoing,some restrictions have already been lowered. For example,all foreign visitors can now stay three days without a visa inSt Petersburg if arriving by ferry or cruise ship.Tourism growth in Russia is also expected to be boosted byupcoming events. In 2014 the Winter Olympic Games willbe hosted by Russia in Sochi. This destination is already apopular summer resort but after the Winter Olympic Gameswill become an attractive place for holidays or businessmeetings throughout the year. A modern transportationsystem will be created, along with the construction ofnew hotels and attractions for active summer and winterholidays, while old sanatoriums will be remodelled into spahotels. The FIFA Football World Cup in 2018 is also due to behosted in Russia, which will help to improve the country’simage and to attract new foreign visitors.Russia continues to prosper on the back of commodities,with incomes and consumer demand rising strongly asa result. This led to growing and more sophisticatedconsumer demand for vacations while also encouragingconsumers to travel more during holidays.Hilton Sanya Resort and Spa

9executive summaryChallenges for Russian tourismVisa regimesAlthough the Russian authorities are focusing on visaregime simplification, travellers still encounter difficultiesin obtaining a visa when travelling to or from Russia. Theease of obtaining a visa varies significantly depending onthe other country. In 2011, Belgium led visa refusals with 13%of applications being rejected. However, the main problemwith existing visa regimes is not a high refusal rate butinstead the long period of time needed to obtain a visa aswell as the high price of it.Perceived security concernsTerrorism is another crucial factor impeding inboundtourism in Russia. Southern regions, including the ChechenRepublic, North Ossetia and Karachay-Cherkessia, haverich tourism potential. However, these are still amongthe most dangerous territories in the world and are notrecommended for visits by either domestic or internationaltourists. In recent years, some terrorism attacks have alsotaken place in Moscow.Cash remains the most popularpayment methodDifficulties with Russia’s payment systems also constraintourism growth. Cash is the most popular method ofpayment in the country. Merchant acceptance of majorfinancial card operators VISA and MasterCard is close to50%, while in developed card payment system countries thisratio is close to 100%.Travel transportation andaccommodation infrastructureDomestic tourism in Russia suffers from the poordevelopment of the country’s tourism infrastructure,including a shortage of accommodation and entertainmentresources and the poor state of local attractions and roadnetwork. The infrastructure is also poorly adapted forpeople with disabilities as well as for foreign tourists due toa lack of supporting information in English. Accommodationin Moscow is among the most expensive in the world, whichalso negatively influences domestic tourism. Moreover, thequality levels of accommodation are very inconsistent.Lack of tourist imageRussia lacks a consistently attractive image as a traveldestination, as it has not built a tourism brand forinternational tourists. Russia has invested little in creatingan attractive image for itself in comparison to many othercountries.Problems with travel agenciesThis erodes the trust of travellers. As a result, some touriststravel independently while others stick to one trustedoperator that they have had experience with, therebylimiting their tour choices.

10executive summaryOpportunities for growthGrowing online retailOnline sales in travel and tourism are demonstrating rapidgrowth in Russia. Tourists increasingly use the internetto search for inexpensive options of package holidaysand flights. As a result, a growing number of companiesare offering online booking in their range of services.Furthermore, online sales are being boosted by the risinghousehold penetration of internet enabled computers andchanging business models. As air companies increasinglycancelled service fees, travel retailers sought to boostother areas of income. As a result, Russian online sales fortravel services in 2011 reached US$4.9 billion. The furtherdevelopment of online booking systems should increasethe number of independent tourists. Mobile applicationsand social media is under development stage in Russia andstill lacks improvements. Only some Russian companiesuse this channel as an opportunity for business purposes,however Russians are getting more familiar with it,although in small stages.Development of event tourismThe advantages of event tourism include all-seasoninterest and high profitability. Russia will be the hostcountry for global events such as the Winter OlympicGames in Sochi in 2014, 2018 FIFA World Cup and APECSummit in 2012. It is important to attract tourists notonly during these events but also to make Russia moreappealing during these events, thus potentially attractingmany millions of international tourists after the eventshave ended. Event tourism in Russia requires seriousdevelopment, however, as many previous events did notbecome economically profitable due to a lack of promotionand advertising.low-cost air carriersLow-cost carriers would increase the number of travellersin Russia within all consumer groups. The current presenceof low-cost air carriers is very low due to high airporttaxes, tight competition with Russian airlines and longdistances between Russian cities which influence theoverall cost of the flight.Investment in travel transportationand accommodationFrom 2011 onwards, the Russian authorities started toimplement a special programme: Available Environmentfor the Disabled. This resulted in changes in variousareas, including city infrastructure, tourist attractions,transportation and others.The South of Russia meanwhile has a five year investmentplan focused on development in the southern regions ofthe country, including renovation of the road and tourisminfrastructure.Small-scale unconventional tourismThere are opportunities to develop regional small-scaleunconventional tourism, such as event-based, ethnic,ecological and extreme tourism building on the Russianregions’ unique natural sites and historical heritage. TheKarelia and Baikal regions could for example attractoutdoor lovers of hunting, fishing, kayaking and raftingamong other activities.London Hilton on Park Lane

11executive summaryRecommendationsInternet as the main sourceThe internet will become the main source of information forpotential tourists. It is therefore important to increase theonline presence and online promotion of tourism offers availablein Russia.Event tourismAs Russia will be the host country for global events such as theWinter Olympic Games in Sochi in 2014 and the 2018 FIFA WorldCup, it is important to focus on infrastructure development for bothtransport and accommodation in the cities where these events willtake place.China-Russia Tourism Year 2012With the tourist flow from China growing rapidly, it is importantto establish a greater physical and digital presence in China.Information about Russia should be made easily available in Chineseto potential tourists in China, while improving the information onChina available to Russians in their own language.Development of affordable accommodationRussia is one of the most expensive countries in terms ofaccommodation, which constrains inbound as well as domestictourist flow in Russia. As a result, it is crucial to developaffordable and user-friendly accommodation for low- and midincometourists.Development of new productsIn order to improve the experience for travellers, the developmentof new products such as tours, tour packages and organised visitsto places of interest is crucial. Tourists prefer pre-set services andpackages and want to travel smoothly, see a large number of placesand enjoy good quality service.Infrastructure developmentInfrastructure development is needed to improve tourists’experience, including roads, airports, intercity links, road and citysigns, shuttle buses and historical attractions. This includes makinginformation available and understandable for foreign travellers.Regional administration’s roleA strong enthusiasm for tourism development on a regional basisis important to ensure the future development of tourism in Russia.No federal programme will be successful unless the local authoritiesalso see tourism development as their goal.

12Industry OverviewIncreasing consumerexpenditureConsumer income and expenditure perhousehold in Russia, 2007-2016 (US$ ‘000)US$ ‘000 per household$40$35$30$25$20$15$10$5$012.5$11.8 $10.12007$0.6$21.3$34.6$29.99.5 9.3$19.0$1.020122016$1.61412108642$0Saving ratio %Annual disposable income per householdConsumer expenditure per household on leisure and recreationConsumer expenditure per householdAnnual savings ratioAlthough the Russian economy was affected by the globaleconomic crisis over 2008-2009, annual disposable incomeper household grew by 13%, with consumer expenditurealso rising by 13% over 2007-2012. In Russia, the estimatedaverage income per household in 2012 was US$21,300,which is very low compared to countries such as Germany(US$61,200) and the UK (US$55,600). On the other hand,Russia has one of the world’s highest number of billionaires.Therefore, the growth of consumer expenditure was highlyrelated to increased expenditure by these super-wealthyhouseholds.Consumer expenditure on leisure and recreation is expectedto account for 5% of total consumer expenditure perhousehold in 2012. Expenditure on leisure and recreationis mostly driven by increased expenditure on packagedholidays, which grew by 16% over 2007-2012. Due toincreased disposable income levels, Russians became morewilling to spend on vacations and tourism.Increased foreign investments, domestic consumptionand political stability in Russia significantly influencedconsumer expenditure and annual disposable income afterthe economic downturn. As the Russian economy recovers,annual disposable income per capita is expected to witnessan increase of 11% and consumer expenditure to continuerising by 12% over 2012-2016. These trends, alongsideincreasing globalisation and growing opportunities to travelabroad, will have an impact on the tourism industry. Theywill also support a 12% growth in consumer expenditure perhousehold on leisure and recreation over 2012-2016.

13Industry OverviewEconomic stabilityboosts the numberof holiday takersTotal number of holiday takers inRussia, 2007 – 2011 (mn of people)Number of people82807876747270686671.780.72007 2011According to the Russian Labour Code, there are 28calendar days of annual paid leave that should be providedby employers. For two of the four weeks of this annualleave, the employer is able to divide leave according to thecompany’s needs, while the remaining two weeks are nondividable.Moreover, the annual 12 days of public holidays aredistributed differently into working and non-working dayseach year.dThe number of holiday takers is increasing year-on-year,from 71.7 million people in 2007 to 80.7 million people in2011. The establishment of the Convention of InternationalLabour Organisation in 2010 along with improved economicstability and rising living standards were the main drivers ofthe growth.Russians prefer to go on holidays during warmer periods ofthe year. As a result, the most popular months for takingholidays are July and August. However, many Russians travelduring the public holiday period in January and May.Russian online sales for travel services in 2011 were US$4.9billion, of which 45% were airfare bookings, 25% hotelbookings, 14% railroad tickets and 16% package tours. Onlinesales in tourism are predicted to grow much more rapidlycompared to sales via regular sales channels, growing by27% for the next several years.DoubleTree by Hilton Qingdao

14INBOUND TOURISMGREATER POTENTIAL FORinbound tourismThe number of inbound trips to Russia remains much lowerin comparison to outbound trips. The global recessionwas the critical reason for a decline in arrivals. In addition,international tourists continue to prefer other destinationsto Russia, due to high prices, the uneven quality of tourismservices and a lack of information about the country andits tourism opportunities.The majority of international travellers perceive Russia asa mysterious and closed country with visa barriers andthe threat of terrorism. Visa negotiations could last for upto 10 years before visas are abandoned. Many Europeancountries are not yet ready to open their doors to Russiafor fear that Russians will use these open orders toemigrate from Russia.Terrorism is a key factor impeding inbound tourism toRussia. Southern regions, including the Chechen Republic,North Ossetia and Karachay-Cherkessia, have a richtourism potential. However, these remain among themost dangerous territories in the world and are notrecommended for visits by international or domestictourists. In recent years Moscow also became a citywhere terrorist attacks take place.The federal target programme Domestic and InboundTourism Development 2011-2018 is expected to boost thenumber of inbound arrivals. As a result of this programme,investments in tourism infrastructure development and thecountry’s promotion as an attractive tourism destinationwill follow.Global events expected tostimulate inbound flowA positive effect on inbound tourist numbers is expecteddue to events such as Summer Universidad in Kazan in2013, the Winter Olympic Games in Sochi in 2014, the FIFAFootball World Cup in 2018 and the APEC Summit in 2012in 13 different cities. These events are expected to improvethe country’s image and to attract new foreign visitors.Preparation for these major events will include dramaticimprovements in transportation and accommodationinfrastructure, which will help to develop tourism in theseregions in the long-term.Moscow is traditionally the most visited Russian city amongboth inbound and domestic tourists. The city has a welldevelopedtransportation network, including three ofRussia’s largest airports, as well as offering a wide range ofluxury hotels and shopping malls. Furthermore, Moscowis the financial centre of Russia, where many professionalconferences are organised and the headquarters of majorcompanies are located.The second most visited Russian city is St Petersburg,which is often called the cultural capital of Russia. Thecity is also attractive to international visitors due to its seaconnection (the new passenger port was opened in 2011), asall foreign visitors can stay for three days without a visa in StPetersburg if they arrive by ferry or cruise ship.The third most popular destination for foreign tourists isthe Golden Ring of Russia, which is located to the northeastof Moscow and forms a circle including Suzdal, Rostovand Vladimir. These towns feature unique monuments ofRussian architecture from the 12th–18th centuries, includingkremlins, monasteries, cathedrals and churches.Hilton Adana

15INBOUND TOURISMMost popular modes of transportfor arrivals are still land and railLand arrivals by car and bus remained the most popularamong inbound arrivals, accounting for 9.8 million trips in2011. Neighbouring countries such as Ukraine, Kazakhstan,Finland and Uzbekistan are easily accessible by car or bus.For Estonians, Lithuanians, Finns and Latvians, the bus is aninexpensive and comfortable way to travel to Russia.Transportation by rail accounted for 27% of total arrivals in2011. Rail is popular due to a well-developed rail networkbetween all CIS countries and Baltic States for affordableprices as well as developed high-speed rail network fordomestic travel. In addition, new and comfortable trainsconnect Moscow and St Petersburg with European capitalssuch as Paris and Berlin.Inbound arrivals by air are growing thanks to the rapiddevelopment of local air carriers and improving airportinfrastructure, as well as the entry of new low-cost carriers.Moreover, the Russian authorities plan to significantlymodernise existing airports.Leisure trips dominate, accounting for 76% of total arrivals in2011. The majority of leisure tourists visit friends and family inRussia and only a minority have the sole purpose of leisuretourism. The most popular means of visiting Russia are ingroups and families. Families usually come from formerSoviet countries, while group visitors usually arrive fromcountries outside the Soviet block. They choose organisedgroups as this guarantees a good level of safety, along witha certain level of service quality. Visitors from former Sovietrepublics are meanwhile generally familiar with Russia andprefer travelling individually.The number of business trips to Russia reached 5.4 millionin 2011, representing 24% of inbound trips. These travellersmainly come from Ukraine, Finland and Poland. Events attractthousands of international business tourists, with the largesttraditionally taking place in Moscow and St Petersburg.However, cities such as Kazan, Yekaterinburg, Kaliningrad,Sochi and Perm are also increasingly attracting businesstravellers to professional conferences and workshops.Ex-Soviet countries remainthe key inbound sourceCIS countries remained the key inbound source countriesin 2011. The leading positions are occupied by Ukraine,Kazakhstan and Uzbekistan. Citizens of former Sovietrepublics visit their friends and family in Russia or comefor temporary jobs, a better standard of living and highersalaries. Many face high unemployment and low salaries intheir own countries.Tourists from the Baltic states travel to Russia to visitfriends and family. Furthermore, these tourists tend totravel to Moscow and St Petersburg as they are beautifulcities. In addition, due to close business relations, many visitRussia for business purposes. Although visa barriers remainan issue, it is easier for these travellers to obtain one incomparison to travellers from the US or Western Europe.The largest number of arrivals from Asia are from China,reaching 685,000 trips in 2011. China was the seventhlargest source country in terms of tourism inbound flow.Chinese travellers mainly visit Russia for temporary jobs inagriculture or lumbering in Siberia or the far east of Russia.Western European countries do not often choose Russia asa travel destination mainly due to visa barriers. Obtaininga visa takes time and money. Consequently, for short andspontaneous trips Western Europeans are more likely toopt for Paris, London, Berlin or another easily accessibledestination.Finland is a neighbouring country and is easy andcomfortable to travel to by car, bus or rail. Finns go to Russiabecause it is cheap as well as for business purposes.Arrivals by country, 2011(% of total arrivals)Ukraine Ukraine 29.3% 29.3%Kazakhstan Kazakhstan 11.8% 11.8%Uzbekistan Uzbekistan 4.8% 4.8%Finland Finland 4.7% 4.7%Azerbaijan Azerbaijan 4.0% 4.0%Other Other 45.3% 45.3%

16INBOUND TOURISMVisiting friends andfamily the mainreason forinbound tripsUkraine was the leading country for inbound trips to Russiain 2011, accounting for 29% share. Ukraine is a neighbouringcountry, most Ukrainians speak Russian and the two countriesshare common history and culture.Many people from Ukraine visit their relatives and friends inRussia every year, making Russia a popular travel destination.In addition, the absence of visas between the countries boostsinbound tourism flow from Ukraine.Close behind is Kazakhstan, from where inbound tripsare expected to grow by 6% over 2011-2016. The ongoingpopularity of Russia owes much to the two countries’ closeproximity, making Russia accessible by car and coach as wellas by the Trans-Siberian and Trans-Kazakhstan trunk railways.The two countries also share similarities in terms of languageand religious affiliation.Moreover, many Kazakhs choose to travel by air to Russia dueto well-developed air connections, rather than take a holidayat home. This is because internal flights are expensive inKazakhstan. Visiting friends and family, as well as temporaryjobs, remain the most popular reasons for travelling to Russia.Uzbekistan was the third largest source country in 2011 withgrowth of 7% predicted over 2011-2016. Inbound tourist flowis high due to citizens of Uzbekistan visiting friends andfamily in Russia or travelling for temporary jobs due to highunemployment and low salaries in their own country.In addition, visa-free travel for Uzbeks to Russia as well asdirect flights between Russia and Uzbekistan contributed toeasier and faster travel to Russia.Finland was the leading country (excluding ex-Sovietrepublics) for inbound trips in 2011. The number of travellersfrom Finland is expected to grow by 4% over 2011-2016. Growthwill be fuelled by a new high-speed rail connection, which waslaunched at the end of 2010. The Helsinki-St Petersburg routenow takes 3.5 hours, down from 5.5 hours, with St Petersburgthus being the main destination for tourists from Finland.Russia is also an important business destination for Finns aswell as a cheap destination for leisure travel.Hilton Bodrum Turkbuku

17INBOUND TOURISMChina-Russia TourismYear 2012 expected toboost tourist flowChina was the ninth biggest country in terms of inboundtourists in 2011, registering slightly less than 0.7 million oftourists. Chinese travellers are typically mid-income coupleswithout children, aged 40-years-old and over and used totravelling within large groups of 50 people or more.The number of Chinese who can afford international travelis expected to increase and Russia is expected to grow inpopularity as a destination due to the China-Russia TourismYear 2012. Over the first quarter of 2012, there was a 25%increase of Chinese inbound tourist flow, with 80% visitingMoscow and St Petersburg and 12% visiting the border zone.Russia is a relatively popular destination for US travellers,as many visit relatives and families left in the country aftertheir own migration. As a result, 0.3 million of US touristswent to Russia in 2011.The remainder mainly see popular attractions such asMoscow, St Petersburg and Golden Ring or venture ontoriver cruises. A small number explore remote attractionssuch as the Baikal and Caucasus mountains.dAccording to Grand Circle Corporation, 51% of Americanbookings to Russia are made by those aged 55-years-oldand over.In 2011, 0.2 million UK tourists visited Russia, with inboundvolume expected to see a 4% increase over 2011-2016. Thesetravellers are mainly aged 30-years-old and over and areexperienced tourists travelling in small groups with familiesor friends. These tourists are mainly focused on sightseeingand are attracted by historical and cultural attractions suchas the Kremlin and Hermitage in Moscow and St Petersburg.Another important group is younger tourists aged 20-yearsoldand over, with these tourists travelling on their ownand seeking new experiences such as local transport, rockfestivals and Moscow night life.Growth over the forecast period will be constrained by highcosts and by difficulties in getting visas for individual tourists.There was slightly less than 0.2 million inbound trips fromTurkey in 2011. Tourists come from Turkey to visit theirfamilies in Russia, while some business visitors use touristvisas in order to simplify the paperwork required. All Turkishcitizens benefit from a simplified visa regime and can visitRussia for up to 30 days without a visa.Besides Moscow and St Petersburg, Kazan is a populardestination for Turkish travellers due to its Muslim heritage.However, inbound tourist flow is constrained by high pricesfor airfares and accommodation.

19BRIC AnalysisBrazil leads investmentin tourism developmentBRAZIL• The direct contribution of travel and tourism to BrazilianGDP in 2011 was the highest among BRIC countries at 3%.• The Brazilian tourism industry was the sixth largest in theworld in 2011 with a projected growth rate of 9% expectedover the next decade.• Investment in tourism development reached 5% of GDP in2011, the highest among BRIC countries.• The Brazilian authorities aggressively secured sportingevents such as World Cup 2014 and Olympic Games 2016.• Brazil has the longest visa-free list among BRIC countries,with this also constantly expanding.• Implementing the 2007-2010 National Tourism Plan, 65national tourist destinations were selected. These wereimproved to reach international standards and adapted tosuit foreign tourists’ demands.• Poor road infrastructure, high crime rates and languagebarriers remain the key challenges deterring tourists fromvisiting Brazil.• Brazil attracts tourists due to its world-famous attractionssuch as Christ The Redeemer, Copacabana beach andthe Amazon river, with the carnival in Rio being the maintourist attraction.RUSSIA• The direct contribution of travel and tourism to RussianGDP in 2011 was 1%, with this being the lowest level amongBRIC countries.• The absolute value of the Russian tourism industry in 2011was 13th in the world with a growth rate of 4% expectedover the next decade.• Investment in tourism development reached 3% of GDP in2011, with this being the lowest level among BRIC countries.• Visas to Russia cost up to US$150 and the process ofobtaining a visa can take up to one month depending onthe home country of the inbound tourist.• In 2011, new federal target programme Domestic andInbound Tourism Development 2011-2018 was launched. Themain goal of this programme is to increase the number ofinbound arrivals and the number of domestic tourists.• Poor infrastructure, in terms of both accommodation andtransportation, remains the main challenge for Russia,as well as a lack of branding for the country as a touristdestination.• Russia will be the host country for sporting events such asthe Winter Olympic Games 2014, FIFA World Cup 2018 andAPEC Summit.• The low contribution of tourism to GDP combined with alack of investment in tourism signals that tourism is not atop priority at a governmental level.

20BRIC AnalysisChina generates the largest tourismvalue among BRIC countriesINDIA• The direct contribution of travel and tourism to IndianGDP in 2011 was 2%.• The absolute value of the Indian tourism industry in2011 ranked the country 12th in the world, with growthprojected at 8% over the next decade.• Investment in tourism development reached 5% of GDPin 2011.• The promotional campaign Incredible India startedin 2002. This promotes India as a travel destination inEurope, the US, Canada, Latin America, the Middle East,China, Russia and the CIS.• Tourists can receive a single entry visa for 30 days in anyinternational airport, with this boosting the number oflast minute casual travellers.• India has many historical attractions, spiritual sites andunique medicine and healing traditions to attract tourists,while remaining a relatively inexpensive place to visit.• Underdeveloped basic infrastructure in terms of watersupply, electrical grid, sewage and garbage removalremains a challenge. The country’s infrastructure thushas to be improved in order to ensure better memoriesamong inbound tourists.CHINA• The direct contribution of travel and tourism to ChineseGDP in 2011 was 3%.• The absolute value of the Chinese tourism industry in 2011was second in the world, with growth projected at 9%over the next decade.• China National Tourism Administration (CNTA) has 18offices in 14 different countries. These promote Chinaas an attractive destination for inbound tourists as wellas investing in domestic tourism development, makingChinese tourism more accessible to low- and mid-incometravellers.• Domestic tourism is the main source of revenue fortourism in China, bringing more than 88% share oftourism revenue.• Increased inbound tourism is being driven by acombination of active promotional activities by CNTA andthe improving image of China as a travel destination.• There are ongoing heavy investments in domestic air,railways and highways in order to meet increasingdemand from travellers, both inbound and domestic.• The tourism industry is still tailored to servepredominantly wealthy travellers, while sustainableenvironment and language barriers constrain thedevelopment of tourism.• Online travel information portals and booking systemsare still nascent and their further development will helpto improve tourists’ experience.

21OUTBOUND TOURISMDespite constraints,outbound tourismregisters confidentgrowthRussia is currently one of the world’s fastest growing in termsof outbound travel expenditure and is leading the recovery inexpenditure abroad (up 26% in 2010).Growth in outbound trips resulted from a growing local economyand the wide availability of special promotions to the most populardestinations. Due to rising average annual incomes in Russia anddeclining unemployment rates, outbound tourism expenditureis expected to grow 8% over 2011-2016. However, the majority ofoutbound tourists continue to be from large cities, with rural areassuffering from high unemployment and low salaries.In terms of the development of outbound tourism, importantconstraints include visa barriers. Russian authorities arecontinuing negotiations with the EU to remove visa requirementsor to make visa rules easier. However, this process is expected totake 8-10 years.Charter airlines play an important role for outbound tourismin Russia since package holidays are a very popular way oftravelling abroad.

22Outbound TOURISMCHANGES INOUTBOUND TOURISMTravelling by land is most popular, accounting for 46% share in2007 and 42% in 2011. However, travelling by air is expected toincrease by 11% over 2011-2016 to reach 45% share. The growingshare of air travel within outbound trips can be explained bythe widening choice of low-cost carriers and destinations andincrease in marketing promotions due to greater competition.However, compared to other countries, the number ofinternational low-cost air carriers is still quite low in Russia.Also, reduced plane import taxes open the opportunity forairlines to renew their plane base and become more attractivefor consumers.Leisure tourism continues to dominate in Russia. Over 2007-2011, leisure trips saw a growth of 7% and the forecast period isexpected to post the same growth. This category constituted96% share in 2011.However, business tourism is expected to outperform leisuretourism in terms of forecast growth with a 10% increase.This will mainly be thanks to the development of businessrelationships with other countries.According to the European Travel Commission report,Russian luxury travellers tend to be active (mainly Moscowcitizens), with an average age of 44-years-old. They tend togo abroad a few times a year with family and friends andopt for exclusive services in everything , including chauffeurdrivencars, personal shoppers and guides. Their favouritepastimes are watching sports, shopping, gambling and goingout. Russian tourists also like to shop and to visit historicbuildings (churches, castles, monuments and houses), parksand gardens, museums and art galleries, as well as visiting thecountryside and coastline.

23Outbound TOURISMNEIGHBOURINGCOUNTRIES ATTRACT THEMOST RUSSIAN TOURISTSThe most popular countries for Russians to visit withinAsia Pacific are Azerbaijan, China, India, Kazakhstan andThailand. These destinations accounted for 18% of the totalnumber of Russians travelling abroad in 2011. The region ispopular among Russian tourists as a holiday destination aswell as for visiting family and friends.The most visited countries in Eastern Europe are the CzechRepublic, Estonia, Latvia, Lithuania, Poland and Ukraine.These countries welcomed 29% of outgoing Russian touristsin 2011. The majority of these countries are ex-Sovietrepublics, some of them offering Russian tourists visa-freetravel as well as lower prices compared to Western Europe.The most popular Western European countries accountedfor 26% of total outbound tourists from Russia in 2011,namely Finland, France, Germany, Greece, Italy, Spain,Turkey and the UK. This region attracts aspirational Russiantourists for a variety of activities, from coach tours for firsttimetravellers abroad to short city breaks, sun and beachholidays and touring holidays.Egypt and the United Arab Emirates d are the leadingdestinations of Russian tourists to the Middle East andAfrica. The total number of Russian visitors in thesecountries reached 5% in 2011. These countries are attractiveas holiday destinations, providing well-priced all-inclusivepackages for sun and beach holidays.Departures by country, 2011(% of total departures)Ukraine Ukraine 20.8% 20.8%Finland Finland 9.2% 9.2%Kazakhstan Kazakhstan 7.8% 7.8%Turkey Turkey 7.7% 7.7%China China 5.7% 5.7%Egypt Egypt 4.2% 4.2%Estonia Estonia 3.9% 3.9%Other Other 40.7% 40.7%

25OUTBOUND TOURISMFUTURE GrowthOpportunitiesCHINA• In 2011, 6% of outgoing Russian tourists chose China as adestination, and this is expected to grow by a further 6% over2011-2016. Business trips are the major purpose of Russian tourists’visits to China and contributed strongly to growth. Since 2010, theprocedure of obtaining a tourist visa to China became easier andfaster for Russians, fuelling growth. Furthermore, both 2012 and2013 have been announced as China-Russia Tourism Years. 2012is the year of Russian tourism in China, while 2013 is the year ofChinese tourism in Russia. These projects will promote the tourismresources of both countries as well as encouraging the sharing ofcultural and social experiences.• 80% of Chinese tourists mainly visit Moscow and St Petersburg,while 12% visit border areas. The main aim of the tourism initiativesis to attract tourists to cities such as Krasnoyarsk, NizhnyNovgorod, Kazan and Yekaterinburg. As a result, an increasednumber of Russian tourists are expected to visit China in 2012.EGYPT• Egypt was the sixth most popular destination for Russian touristsin 2011, accounting for 4% share and ranking second after Turkeyin Russian tourist visits during the summer period. Egypt saw adecline of 30% from 2.4 million departures in 2010 to 1.7 million in2011 due to political instability in the country. However, Egypt isexpected to see the fastest growth over the forecast period at 18%.• Egypt is a traditional summer beach resort for Russian tourists and ispopular due to offering all-inclusive, mid-priced vacations. Moreover,the government in Egypt decided to cancel the visa fee of US$15 forsummer 2012 in order to attract new tourists to the country.• However, political unrest in Egypt might negatively effect growthin the number of Russians opting for vacations in Egypt and thusconstrain growth in incoming tourists to the country.UK• In 2011, 0.3 million, or almost 1%, of outbound tourists chose the UKas a vacation destination. However, the number of departures tothe UK shows one of the fastest growth rates with an increase of14% expected over 2011-2016, giving way only to Egypt and Thailandwith growth rates at 18% and 15% respectively.• Russia is one of the UK‘s priority source markets. As a result,the UK plans massive promotional activities in Russia to attracttourists. There is also a signed cooperation agreement betweenthe UK and Russian tourism authorities to increase tourism flowsbetween the two destinations.• Although the UK is an expensive destination and getting a visacan also be complicated, many mid-income travellers choose thecountry for cultural and historical sightseeing.Hilton Shanghai

26OUTBOUND TOURISMUS remains a nichedestination forRussian touristsUSA• Despite its position as one of the most visited countriesin the world, according to ROSSTAT only 0.1 million ofRussian tourists went to the US in 2011. These tourists areattracted by world-renowned attractions in New YorkCity, Washington, Los Angeles, Hollywood and Las Vegas,and more rarely by skiing in Colorado and Utah. Moreover,affordable shopping also attracts Russian tourists.• Although, there is low visa rejection from the USA Consulate,the procedure of getting a visa is complicated and requiresa large number of documents. Since 2011, the USA visaapplication form can be filled out online.• However, the country’s share of outbound tourist flowremains low due to expensive airfares and long trans-Atlantic flights as well as expensive accommodation inpopular destinations.• The USA attracts young Russians via the Work and Travelprogramme while the remainder are mid- and high-incometourists who have already visited Europe and want to seenew places.Hilton Dalaman Resort & Spa

27DOMESTIC TOURISMMoscow andSt Petersburgare keydomestic tourismdestinationsIn August 2011, a new federal target programme Domesticand Inbound Tourism Development in 2011-2018 waslaunched. The main goal of this programme is to increasethe number of inbound arrivals six-fold and to increase thenumber of domestic tourists by one and a half times.Domestic business tourism registered a negative dropof -0.2% over 2007-2012 and accounted for 14% of totaldomestic tourism flow in 2011. This decline was due to therecession, which forced companies to cut costs on businesstrips and business events such as conferences, workshopsand incentive trips.In Russia, business tourism is most developed in Moscowand St Petersburg, due to the presence of the necessaryinfrastructure and transport access in these cities. Kazan,Yekaterinburg, Rostov-on-Don, Nizhny Novgorod, Samara,Chelyabinsk, Novosibirsk, Krasnoyarsk, Irkutsk andVladivostok are however becoming increasingly importantcities.As a result, the majority of the headquarters of large localand multinational companies are located in Moscow andSt Petersburg. Furthermore, these cities lead professionalconferences and exhibitions, as they offer well-developedconference halls. Decline in domestic business tourism over2007-2011 was caused by economic turmoil, with companiescutting back on expenditure and reducing the number ofbusiness trips.Leisure tourismleads the industryDomestic leisure tourism held an 86% share of totaldomestic tourism trips in 2011.Russians are attracted by health and wellness tourism.Sanatoriums and recreational facilities are popular indifferent regions of the country, including KrasnodarskyTerritory, Astrahan Region and Karelia Republic. Thiscategory was not strongly affected by the recession, due toRussians’ long tradition of visiting those resorts.Domestic tourists are also attracted by cultural andhistorical tours. These typically include excursions tohistorical and cultural attractions, including ancientcitadels, churches, museums and fortresses. Most of theseattractions are located in the central region of the country.Beach tourism is also popular amongst domestictourists. Russians prefer coastal resorts in Krasnodarterritory, as well as Baltic beaches in KaliningradOblast and resorts on the Sea of Japan.Domestic leisure and business travellers usually stay in 2-or3-star hotels or rent inexpensive apartments. Domestictourists also spend less on shopping in city centre storesand prefer mid-priced restaurants and cafés. This pricesensitivitywas further encouraged by the recession,when many people became more concerned about theirexpenditure.One area of domestic tourism expected to develop in thenear future is industrial tourism, including visits to factoriesand companies such as the Yekaterinburg industrial citytour. This type of tourism is expected to develop leisuredomestic tourism for those holidaying at home in Russia.Hilton Molino Stucky, VeniceHilton Sharks Bay Resort

28Tourism ExpenditureOutgoingexpenditure is threetimes bigger thanincoming receiptsTourism balance of payments in Russia,2007- 2016 (US$ bn)US$ bn0-5-10-15-20-25-30-35-402007-9.32011-22.52016-37.4The tourism balance of payments will remain negative over2007-2016. Despite a negative growth rate of -3% in incomingtourist receipts over 2007-2011, an increase of 2% indicatesincreasing numbers of incoming tourists over 2011-2016. Inboundtourism will be stimulated mainly by the Sochi 2014 event, theRussia-China Tourism Year project and federal developmentprogramme Domestic and Inbound Tourism Development 2011-2018. The value of outgoing tourist expenditure registered anincrease of 12% over 2007-2011. However, growth is forecast toslow down over 2011-2016 to 8%.There is a negative image of Russia among internationaltourists, due to a high level of red tape, lack of properinfrastructure, high accommodation prices and unpredictablequality of services. This constrained the developmentof inbound tourism. New federal tourism developmentprogramme Domestic and Inbound Tourism Development 2011-2018 is directed towards correcting all of these issues.Russian tourism has a strong potential due to the country’sunique natural sites and recreations, historic and culturalattractions of national and global importance as well as itssports and entertainment facilities. However, the country’sresources are not used to their full extent. Participation of thestate in tourism development is required in two directions:investment and creation of a favourable financial environmentfor tourism to grow, along with education and training in orderto achieve quality improvements in tourism services.Russian tourists are well known as brand-conscious andfocused on premium services. Families and friends were themain groups in terms of spending abroad over 2007-2011.Stable annual income growth across the country encouragedthe growth of outbound tourism as well as a rise in outgoingexpenditure.

29Tourism ExpenditureDomestic touristsspend most on travelwithin countryOver 2011-2016, domestic tourist expenditure is expectedto grow by 4%. A growing economy as well as an increasein international and domestic routes launched by Russianairlines will boost tourism, offering more options to travelboth domestically and to foreign countries.Travel within country is the category where domestictourists spend the most. In 2011, the category accountedfor 39% of total domestic tourist expenditure. In Russia,accommodation expenditure level is low because Russiantourists typically visit destinations where they have friendsand family, thus saving on accommodation.Moscow is for example one of the most expensive cities inthe world and also leads in terms of prices. Although pricesreduced during the economic crisis, in 2010, they returnedto previous levels. Furthermore, when visiting Moscow,travellers have to pay more for transportation, food serviceand shopping compared with other Russian regions.In 2011, the most popular method of payment in Russiawas cash, which accounted for 84% value share. However,the use of debit and credit cards grew by 17% and 16%drespectively over 2007-2011. This is due to Russian banks andglobal payment systems offering discount campaigns forflights, hotels and even for some attractions when payingvia card.Hilton Moscow Leningradskaya

30Tourism ExpenditureUkraine and Finland lead inincoming tourist expenditureUkraine and Finland were the leading countries inincoming tourist expenditure, with 24% and 13% of totalincoming tourist receipts respectively. Chinese touristsspent US$591.3 million or 6% of total incoming touristreceipts in 2011 and their spending is expected to grow by5% over 2011-2016.Turkey registered the biggest growth in incoming receiptswith an increase of 5% over 2007-2011 and is expected tosee double-digit growth of 11% over the forecast period.The growing share of business tourists from Turkey willcontribute to growth in spending from this country.Although UK tourists accounted for only 1% of totalincoming receipts in Russia in 2011, the UK is expected tosee the second highest growth rate at 9% over 2011-2016.This will be due to an increasing number of arrivals as wellas increasing average spending rates.Food accounted for the largest share of incoming touristexpenditure in 2011 with a value share of 26%, followed byshopping with almost 26% share. In 2011, accommodationaccounted for only 20% value share but is expected to seethe highest growth at 4% over 2011-2012.Incoming tourist expenditure per capita is expected toincrease by 9.2% from US$69.0 to US$107.00 over 2011-2016. Growth will be driven by new federal programmeDomestic and Inbound Tourism Development 2011-2018,the main purpose of which is to increase the number ofinbound arrivals by over six-fold, thereby also increasingincoming tourist expenditure.Russian outbound tourists spendmost in China and UkraineChina and Ukraine were the leading destinations foroutgoing spending in 2011 and each accounted for 7% of totaloutgoing tourist expenditure. Although Ukraine remains theoutright leader in terms of number of departures with 21%share, the average spend in this country is low. MeanwhileChina is the leading destination for business trips.Outbound tourism expenditure is expected to increaseby 8% over 2011-2016, with growth driven by an increasein outbound trips rather than by increases in expenditureper capita. Outgoing tourist expenditure is expected togrow most strongly in Turkey with an increase of 17% over2011-2016, due to the greater number of departures to thiscountry as well as increasing average spending rates.Most outgoing tourists tend to spend their money whereit is tax free while travelling. Shopping accounted for over31% of all outgoing tourist expenditure in 2011. Shopping isextremely popular in Finland, where shopping is tax-freefor Russians and the products are of high quality. Moreover,shopping expenditure is expected to see the highest growthat 9% over the forecast period.Accommodation was the second largest expenditure typefor outgoing tourists at almost 31% value share in 2011,followed by food with 13% share.Overall, outgoing tourist expenditure per capita is expectedto rise by 15.7% from US$226.6 to US$469 over 2011-2016.Growth will be due to an increasing number of holidaytakersas well as an increase in average expenditurewhile travelling, with this caused by a prospering Russianeconomy and rising annual disposable income levels.Conrad Hong Kong

31TRAVELLER SEGMENTSRussia faces ageing anddecreasing populationRussia has one of the largest populations in the world, withmore than 142 million people estimated in 2012. However,low birth rates and high death rates are expected to drivethe population down 0.2% by 2020. As a result, the potentialfor Russian tourist numbers is forecasted to remain stableand will depend on consumer income levels over 2011-2016.Russia also faces the problem of an ageing population. Theshare of the population aged 65 years-old and over is rapidlygrowing due to low birth rates and the increasing migrationof youth. The 75-79 years-old age group is expected to bethe fastest growing, with a growth rate of 7% over 2012-2020. This trend will result in increasing interest in tourismamong the elderly population and boost the demand forwellness tourism.Most Russian tourists are highly educated and affluent intheir 30s and early-40s. Moreover, as the decreasing birthrate suggests, individuals of this age increasingly focus ontheir careers and independence, rather than on settling downand parenthood. They like to socialise, dine out, buy designerclothing and accessories and to go on exotic holidays. Thisconsumer group is a key focus for the tourism industry inRussia, as the 30-34 years-old group is expected to have thehighest average gross incomes of US$13,565 in 2012.Group travellers include widestrange of inbound touristsEXPERIENCEDThis group includes active adults in their 30s, 40s and 50sfrom Europe and the US who want to learn about Russia.This group may travel in organised groups or may build acustomised travel itinerary with the help of a travel agent.Experienced travellers have a genuine interest in Russiaand want to see if propaganda or stereotypes are true. Thisgroup has certain expectations when visiting Russia, asmany read blogs and feedback from other tourists beforetravelling and also have previous experience visiting otherlocations with an underdeveloped tourist infrastructure.These travellers seek the best opportunities to learn aboutRussia and enjoy heritage and cultural attractions.GROUP TRAVELLERSThis is the widest group of inbound tourists, with grouptravellers coming from all over the world including Europe,the US and Asia. This group is mainly constituted fromretired couples and single tourists travelling in large groups.Russia is often only one of the destinations they visit duringthe vacation and they enjoy being able to tell a story abouttheir holidays when they return home. This group is usuallyvisiting all popular tourist sites according to plans offered bytravel agencies or suggested in guide books.RELATIVESThis group of travellers typically left families and relativesin Russia when they migrated in the 1990s and 2000s andwant to keep ties with them as well as with their country oforigin. Relatives do not buy tourist trips and are more likelyto travel on their own after receiving an invitation, buildingtheir itinerary around visiting relatives while also spendingsome time in tourist spots.

32TRAVELLER SEGMENTSCitizens of large Russian citiesare the biggest outbound marketMIDDLE CLASSThe main group within outbound tourists is made up ofmid-income families aged 30 years-old and over withchildren and generally dual incomes, with these travellerstypically living in large Russian cities. Sun and beach or thehistorical and cultural attractions of Europe are typicallythis group’s main purpose for travelling. Shopping is usuallyincluded as a part of the vacation. This group travels atleast once per year, seeking new destinations and newexperiences. Mid-income travellers are willing to stay atgood hotels and pay extra for attractive upgrades. They alsotypically know what they want from their trip.STATE EMPLOYEESLow-income families are also a significant group, with thesetravellers typically aged 30 years-old and over with childrenand employed by state organisations such as hospitalsfrom large and smaller towns of Russia. This group typicallytravels once per year and opts for mainstream destinationsdue to these locations’ affordability. Price is the key criteriafor this group when buying travel products. As a result,last-minute offers are very much appreciated and there is noevident brand loyalty among this group.YOUNG EXPLORERSThis group is made up of independent travellers from largerRussian cities, including singles and families without childrenin their 20s. These travellers seek economy or mid-pricedvacations. They are attracted by freedom and interestingdestinations when deciding where to go for vacation. As aresult, this group’s geographical coverage is wide, includingEuropean cities such as Paris and Amsterdam, the Holy landin Israel, forgotten temples in South East Asia or Mexico, kitesurfing in Cambodia or sport events in any city of the world.This group travels on average once per year, seeking themaximum amount of experience on a low budget. They arethus willing to stay at hostels or to use couch surfing. In orderto save money, young explorers typically book everythingonline, asking travel agencies only for help with visas.

33TRAVELLER SEGMENTSRegional citizens are maindomestic travellersFAMILIES WITH KIDSThis group is made up of regional families of different ageswith children in low- and mid-income groups. This groupoften opts for affordable beach vacations within the countrysuch as on the Black Sea. Due to their limited budgets,they travel once per year by train and stay in affordablesanatoriums for the sake of better rates or rent privateaccommodation during the summertime. This group oftenreturn to the same resort and sanatorium for several years ifthey are satisfied with its price-quality ratio.SCHOOL CHILDRENADVENTURERSThis group includes travellers of different ages, fromteenagers to those aged 50 years-old and over, who lovebackpacking, rafting, fishing, hunting and/or other active orextreme leisure pursuits. These travellers are usually fromlow- and mid-income groups and enjoy outdoor activities,such as wandering into the wilderness with their own tentand fishing rod. They travel in small groups with friends orfamily members, planning vacations themselves and spendingmainly on sports activities such as paragliding or rafting.This group often prefers to visit new places in order to havenew experiences.This group includes school children from small and mediumregional Russian cities from all income groups. This grouptravels in organised groups to Moscow and St Petersburgand less often to other large cities in Russia during schoolbreaks, being accompanied by a teacher or two. Groupsusually travel by bus or by train, with the main purposeof the tour being to visit museums and other historicalattractions. Destinations are usually selected by teachersand parents.

34Methodologyand ReferencesThis report was prepared by using the following researchmethodology:Analysis from existing Euromonitor International research ontravel and tourism markets (http://www.euromonitor.com/passport) and international trade body releases. The growthfigures quoted are average annual growth rates.Trade interviews with key Russian travel and tourism industryplayers – tour operators, travel agencies, industry associations,government agencies and independent consultants – to accessreal market opinions and insights from major industry playersin an effort to test, adjust, and/or confirm any calculatedestimates and industry trends and provide industry consensus.This dialogue enhanced understanding of the local market andalso served to eliminate bias (intentional and unintentional)from any single source, thereby increasing the validity of theanalysis.Secondary desk research from trade press, business press,industry experts to analyse, interpret and reconcile informationacross multiple different sources.Combined, these multiple sources and perspectives provideda rounded assessment of the current and anticipatedopportunities and challenges facing the Russian travel industry,and recommendations on what steps could be taken byrelevant industry players to overcome challenges and capitaliseon identified opportunities.http://www.euromonitor.comDoubleTree by Hilton NovosibirskKEY INDUSTRY SOURCESEuromonitor International‘s global marketanalysis platform Passporthttp://www.euromonitor.com/passportRussian Federation Federal State Statistics Servicehttp://www.gks.ruAssociation of Tour Operators of Russiahttp://www.atorus.ruFederal Agency for Tourism in Russiahttp://www.russiatourism.ruRussian Union of Travel Industryhttp://www.rstnw.ruMoscow Tourist Information Centrehttp://www.moscow-city.ruElectronic newspaper of the Russian Unionof Travel Industry RATA Newshttp://www.ratanews.ruTourism news portal Tourpromhttp://www.tourprom.ruTourism news portal Travel.ruhttp://www.travel.ru

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For further information contact:Dan Corfield at Hilton Worldwide+44 (0) 207 856 8547 / dan.corfield@hilton.comParveen Johal at Hilton Worldwide+44 (0) 207 856 8667 / parveen.johal@hilton.comVisit www.hiltonworldwide.com for more informationand connect with Hilton Worldwide atwww.facebook.com/hiltonworldwidewww.twitter.com/hiltonworldwidewww.youtube.com/hiltonworldwidewww.flickr.com/hiltonworldwidewww.linkedin.com/company/hilton-worldwide