The Russian travel market was given two slots at yesterday’s PhoCusWright@ITB session mostly because of the huge growth figures the sector is experiencing.
The figures, quoted by online hotel specialist Oktogo, are worth mentioning especially given that so little of the market is online so which brings its own set of complications.
The total travel market is worth an estimated $60 billion a year and that figure is expected to double in the next five to 10 years.
Online was worth $6.2 billion last year, a figure expected to double this year as transition to online is rapid according to local players because of changing consumer behaviour, improved infrastructure and investment is beginning to fuel growth in the market.
Then, there’s hotel market which is said to be worth $8 billion a year with 10,000 hotels which are 95% independently owned and less than 10% of the properties are online.
More than once the companies present, including Oktogo and the likes of Ostrovok and Ozon.travel, emphasised how safe a bet the market is for investors because:
- there is no sign of a crisis
- Russia is Europe’s largest internet audience with 51 million adult internet users last year
- consumers have a higher disposable income
- the market has unique travel cycles with peaks in January and May
- and, are higher spenders than than the rest of Europe
- high level of technical talent for recruitment purposes
A number of international companies including global distribution giants and hotel specialists such as GTA have made inroads into the market in different ways such as opening an office, partnering with a local company or building a Russian service from international offices.
Partnering seems to be the preferred route and Oktogo recently integrated TripAdvisor into its service providing its outbound customers with review content while simultaneously helping the reviews giant build up a database of Russian hotels.
And, then there are the hurdles:
- about 40% of people are using a variety of different cash payments and limited use of credit cards
- people prefer to deal with a person when booking
- visa requirements for both inbound and outbound – Israel quadrupled visitors from Russia when it dropped visa requirements
Despite these, current players maintain the destination is easier to do business in than other emerging destinations such as China and that international investors are beginning to take notice.Â
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About Linda Fox
With yet another rigged election in Russia, I’m not sure how ‘safe’ the country is as an investment destination. #GoBrooklynNets
Glenn, did you visit election in Russia or trust the buzz around?
I am not a election monitor and was not in Russia for the election. But when a half dozen or so reputable news organizations report the same thing I tend to trust the collective judgement. “Buzz” on the other hand is what Putin generates when he takes off his shirt for pictures. But perhaps I have been misled by the elite western media.
Mostly I just hope Mikhael Prokhorov is able to trade for Dwight Howard and make the (soon-to-be) Brooklyn Nets a successful NBA franchise.
It’s not a barrier for investment in Russian online travel ))) Some western grands (Hotels.com, tripadvisor, etc.) are already here and they are not Russian companies