Strategy for the tourism industry

Strategy for the tourism industry

Expert Reports  

The task set up for the Russian tourism industry is reaching the self-sufficiency, and by 2030, the tourist flow in domestic tourism should double to 140 million trips per year. The strategic development of tourism areas was discussed at the FTT-2023 (Forum of Tourism Territories-2023) in the Sochi mountain resort area. Over 1,000 participants attended the forum, including the representatives of businesses and government authorities from Russia, Turkey, China, Armenia, Kazakhstan, Uzbekistan, Belarus and many other countries.

Hotels, parks and mountain ski resorts

The demand for domestic tourism in Russia is growing. According to the Russian Ministry of Economic Development, the tourism industry reached the 2019 benchmark indicators, and also exceeded it by one and a half times in terms of revenues. In 2022, the investment growth in the tourism industry was 36 percent, one of the highest figures in the tourism industry. In the first six months of 2023, it increased by another 23 percent.

“One of the most important indicators is the number of hotel rooms commissioned; in the first half of 2023, it is 60 percent higher than for the same period in 2022. This suggests that business is really actively investing and supporting demand with new supply,” said Dmitry Vakhrukov, Deputy Minister of Economic Development of Russia.

Today, the number of tourist trips in the country is 73 million per year, and the potential of the travel industry is twice as much, up to 140 million trips by 2030. The hotels and tourists will leave the ‘gray’ zone, which will help achieve such figures, and additionally over 50 million people per year will start traveling.

“We mainly see an increase in the number of those tourists who do not travel for various reasons, and those who travel 2-3 times during the year, this is the potential for short weekend trips. The trend is evident. A significant factor in increasing the tourist flow is involving those Russians who previously traveled abroad; in this context, we rely on private businesses, on large attractions that should be competitive in the global tourism market. We keep on our active work on a strategy for the development of inbound tourism. 17 priority countries have been identified, and a strategy for promoting the Russian tourism brand abroad will be launched next year,” added Dmitry Vakhrukov.

Today, the state provides an active help to the tourism industry. As part of the support mechanisms for the national tourism development, over 100 large projects are under implementation in 38 regions of the country, including mountain ski resorts in the Caucasus, Sakhalin, Kamchatka, Sochi, multifunctional hotel complexes, theme parks, as well as the water, road, and cruise tourism infrastructure. The creation of special economic tourist and recreational zones is among the most effective mechanisms. There are 10 of these special economic zones, and two more will be added in the near future, they are located in the Stavropol Territory and in Sheregesh mountain ski resort, the Kemerovo Region. In these areas, the state provides tax benefits, preferential lease of land with the subsequent right to buy the land plot during the implementation of the project. In return, the businesses guarantee investments and building the infrastructure.

“We have truly dynamic growth in the tourism industry, but it is not yet possible to say that these are great achievements of the government authorities and our support efforts. Those mechanisms that have been working for 1.5 to 2 years have not yet gave results; so far, the result we obtained is the increase in domestic demand associated with external restrictions, the fact that vacations in Russia are more affordable than traveling abroad. The growth is dynamic, but it will certainly be limited due to the lack of hotel rooms and insufficient infrastructure; the key task is to understand how to increase the hotel room number and improve the infrastructure quickly and effectively,” emphasized Dmitry Vakhrukov, Deputy Minister of Economic Development of Russia.

According to statistics, there are a million hotel rooms in the country today. But their average occupancy is 39 percent. Taking into account that the basic infrastructure exists, it is necessary to prolong the season, bringing the number of rooms to 50 percent occupancy per year, this indicator allows the tourism industry to work profitably.

“Taking into account that we expect 53 million new travelers per year by 2030, it is necessary to build 238 thousand hotel rooms. The construction of 28 thousand hotel rooms is financed under the programs covering the hotels working on preferential terms, the plans are to extend the program to include another 20 thousand hotel rooms so that 48 thousand hotel rooms could be built under the state support program. Inertial growth - without government support mechanisms - amounts to 12 thousand hotel rooms per year; support measures do not cover the deficit of 70 thousand hotel rooms. Taking all this into account, the Ministry of Economic Development will offer new support measures; the current level of profitability prevents the investments in the travel industry,” emphasized Dmitry Vakhrukov.

One of the priorities of the tourism industry in Russia is the development of existing and creation of new points of attraction. Great attention is paid to mountain ski resorts; now, only 3-4 percent of the Russians visit them, while this figure reaches 17 percent in Europe. Given the long mountain ski season in the country, there are many potential locations for new mountain ski resorts, not only large ones, but also small ski centers that are rather popular for short trips.

“Understanding that the infrastructure of mountain ski resorts is a large capital expenditure requiring a very long time to be paid off in the framework of a simple economic model or does not pay off at all, the decision was taken on the instruction of the President of Russia to include a mountain ski infrastructure in the program of preferential crediting for hotels. The program will cover quite large-scale mountain ski resorts able to host minimum 450 thousand visitors a year,” said the Deputy Minister of Economic Development of Russia.

Preferential crediting will also apply to theme parks as additional attractions. The key indicator is providing services to minimum one million tourists per year.

Tourism industry is booming

A manufacturing industry will help in developing the Russian tourism. The difficult geopolitical situation has had the greatest impact on the mountain ski industry as almost all the equipment used in mountain resorts is manufactured abroad.

“Today, a number of landmark projects of mountain ski resorts are under implementation in Russia, including Three Volcanoes in Kamchatka, the projects in Manzherok (the Republic of Altai), Sheregesh and others. As for cable cars, I would like to mention that out of 160-odd cable cars launched in our country over the past five years, only 50 percent were manufactured in Russia. We are aware of the fact that we do not have the required competence to manufacture the most advanced products - gondola lifts and detachable chairlifts. The task of the industry is to provide the opportunity to repair the existing cable cars and to develop our own competencies. To repair the equipment, parallel imports were introduced last year, and a preferential import mechanism was launched allowing the companies to receive loans in foreign currency for purchasing the required components. This forced measure made it possible to have time to develop our own competencies,” said Mikhail Ivanov, Deputy Minister of Industry and Trade of Russia.

The first step to manufacture Russian cable cars and develop own competencies in this industry was to carry out research& development (R&D) work. Last year, 600 million rubles were allocated for these purposes, and soon, prototypes of modern cable cars should appear in Russia.

This year, we will hold a competition for R&D to master the production of pulleys and a number of other critical components for modern cable cars; any engineering company can take part in it. Last year, we launched a new facility to provide a grant support for reverse engineering projects. To date, the total amount of the support has amounted to more than six billion rubles to be used for 160 projects in both the oil and gas industry and the agricultural machinery. We are waiting for relevant projects regarding the equipment for mountain ski resorts,” Mikhail Ivanov emphasized.

The development of a market for a particular product is impossible without a modern system of standards. In terms of cable cars, they have already been formulated. So, we can guarantee that the Russian products will not be inferior to the imported ones in terms of quality and technical characteristics. In addition to cable cars, the Ministry of Industry and the Russian manufacturers are considering the production of other equipment for mountain ski resorts, including ratracks and snowmaking equipment.

Vacations in the Azov region

The Azov region is one of the main destinations for the tourism industry and for the entire Russian economy. Considering that the Sea of Azov has become a Russia’s inland sea, the strategy for the development of this region as a tourism center considers a 15 million tourist flow by 2040, the creation of more than 60 thousand hotel infrastructure facilities and more than 170 thousand jobs in 15 tourism clusters.

“The Sea of Azov is the most productive sea in the world. The most important priority task of the strategy is to restore the Azov region brand as the main sturgeon supplier in Russia and a producer of delicious black caviar. The strategy assumes that by 2040, the official sturgeon harvest in the Azov region will be 1.5 thousand tons, and the production of black caviar will be 80 thousand tons. These figures are based on the study of commercial sea stocks and the observations of the migration routes of valuable commercial fish. The Sea of Azov is a center of the beach, children’s, health, vacation and sports tourism. This is a unique water body not only in Russia, but also on the planet, featuring a fairly long season of above-zero temperatures from May to October with water heating up to plus 33 degrees. This is the shallowest sea in the world, its nice weather and a unique microelement composition of the sea water make it a center for a good family beach vacations and health resort treatment and rest,” said Denis Pushilin, Head of the Donetsk People’s Republic.

The Azov region development strategy has several stages. Stage 1, from now until 2026, involves the assessment of accumulated environmental damage and working out priority measures to eliminate it. Stage 2, from 2027 to 2030, is aimed at the large-scale work on the contaminated land rehabilitation, the disposal of accumulated industrial and construction waste, the launch of new fish breeding facilities, the optimization of conditions for the expansion of commercial fishing, the creation of the necessary shipbuilding facilities, as well as the development of new tourism and health centers, including yacht infrastructure tourism and water sports. Stage 3, from 2031 to 2040, is aimed at a transition to high environmental standards, the creation of a developed fishing and fish processing complex, and the construction of high-quality tourism infrastructure and providing tourism services.

“The current environmental situation in the Azov region is difficult; the outdated energy-consuming technologies used for processing the resources and a low level of industrial waste disposal are typical for the industry of the Lugansk People’s Republic, Donetsk People’s Republic and the Rostov Region. The key problems of agriculture in the Krasnodar Territory, Rostov Region and the Kherson and the Zaporozhye Regions are the cultivation of moisture-loving plants and excessive water intake, which ultimately results in a decreased fresh water flow into the sea and a change in its composition,” Denis Pushilin emphasized.

As part of the implementation of the strategy, scientific goals have been set for the large Azov region aimed at restoring its former glory as a center for scientific research and scientific development. The strategy involves the cooperation between scientific institutions, educational organizations and businesses in setting up a coordination center for studying the ecosystem of the Azov Sea with the participation of the leading Russian universities. Restoring the full flow of rivers by clearing river beds and eliminating shut down hydraulic facilities, the development of the environmentally-friendly agriculture and industry, as well as the nature restoration will make the Azov region an environmentally favorable area, and this will result in improving the sea water quality, increasing the biodiversity of sea inhabitants, and enhancing the recreational attractiveness of the Azov region.