CALL US NOW:   +372 (5) 4472960

Ukrainian tourism in 2014: Stagnation or Sanitation?

By Alexander Faynin

As is known, predictions are a thankless task. Nevertheless, a solid experience in the tourism and hospitality of Ukraine helps me to predict certain trends occurring in the industry quite successfully. In this article I want to predict the situation that prevailed in the domestic tourism industry in 2014 and find ways out of the crisis.

Mihailovsky

The world tourism industry is constantly evolving, despite the economic crisis. To start, here’s an example of the development of tourism as an economic sector worldwide (recent figures, taken from the report of the World Tourism Organization):

2012 2013
Industry’s contribution to global GDP 2056 billion USD Growth of 4,5%
Number of people employed in the industry 101 million Growth of 2%
Global revenues from tourism 1243 billion USD Growth of 3,5%
Investments in the sector (4.7% of total world investment) 765 billion USD Growth of 4,2%

Over the past three years in the Ukrainian tourism formed positive growth trend. According to the State Statistics Committee, in 2011, Ukraine was visited by 21.4 million foreign tourists, in 2012 – 23 million, and in 2013 – 24.6 million. Payments to the state budget from tourism activities, according to the Ministry of Income and Fees, in 2012 amounted to more than 1.5 billion UAH, which is 19.5% more than in 2011. In 2012, the volume of services provided to domestic tour operators increased by 21% compared to 2011 and amounted to 11.9 bln. UAH.

Ukraine takes the leading position in the rankings of destinations that leading experts offer to visit. Kyiv takes the 1st place in Europe and 3rd in the world in 2012 (portal TripAdvisor). Lviv takes the 2nd place in Europe by Lonely Planet rating “The best cities for the weekend in Europe”. Crimea, according to the magazine National Geographic, takes 1st place in the world rating of “20 places to see in 2013”. According to the rating of the World Council of Tourism and Travel, tourism’s contribution to GDP in Ukraine in 2012 amounted to 3.6 billion USD (or 2.2% of GDP). This fact gives to Ukraine to be ranked 60th in the world rankings of the tourism contribution to GDP.

lviv_Svobody_Avenue

So it was last year… The current tourist season in Ukraine is a special. From the beginning, it is marked by a revolution in Kyiv, Crimea occupation, military operations in the east of the country. Whether Ukraine will lose tourists from other countries? Definitely, yes.

Let’s count… The average annual tourists visiting Ukraine is 23 million, 4 million of them are foreigners who visited Crimea. Crimea was occupied, so we have 19 million. 63% of the total number of foreign tourists in Ukraine are Russians. We know that, thanks to the information blockade, 95% of Russians believe that go to Ukraine is very dangerous because of rampant neo-Nazis, although it is not true. The remaining 5% will not get to Ukraine because of the limitations of entry quotas established by Ukrainian border guards. 7 million remains. But that’s not all. Many tourists from China, India, Western Europe, Latin America will not go to us because of the unstable political and economic situation. This is 50 % of the last figure. So, my prediction is only 3.5 million foreign tourists in 2014, or 15% from last year’s numbers of tourists. Basically, it will be tourists from neighboring European countries, primarily from Poland, Romania and Hungary, who will visit the border regions again, less dangerous areas of Ukraine: Galicia, Bukovina and Transcarpathia, and possibly Kyiv. Crimea this year will lose up to 80% of the tourists, ie receive 1.2 million instead of 6 million last year. And exclusively tourists from Russia.

On the background of the crisis in the inbound tourism outbound does not look so depressing. In 2013, residents spent for travel abroad by 15% more than in 2012. If in 2010 the cost of Ukrainians outbound tourism amounted to 3.8 billion USD, in 2011 – 4.5 billion USD, then in 2013 this figure reached almost 6 billion USD. According to the State Statistics Committee , in 2007 0.3 million tourists went abroad, in 2010 – 1.2 million, in 2012 – already 1.9 million, and in 2013 – already 2.5 million. My prediction is the following: demand for travel abroad by Ukrainians will be reduced for 20-25% from last year (1.9-2 million), ie the level of 2012. The reduction in demand is influenced by several factors. First, it is a crisis of non-payments: many Ukrainian companies now can not provide constant and uninterrupted payment of salaries to its employees. Secondly, it is the citizens of Ukraine boycott of goods and services provided by Russian companies. During the last two or three years there has been expansion of Russian tour operators in the domestic market, they offer a product similar to a product Ukrainian tour operators, but for a much lower price. Since March 2014, our citizens are boycotting services such as operator Tez Tour, TUI, News Travel, Natali Tours, etc. Well, and, finally, the third factor in the crisis is the failure of Ukrainian tour operators who had trusted our countrymen. For example, a “monster” as a company “Hamalia” is now on the verge of bankruptcy: one-third of employees compared to 2013 remained there, the skill level of them is too low, as they do not receive a salary since October last year.

odesa-arcadia

Anyway, the development of e-tourism segment (GDS, TATE, online booking), which is developing by leaps and bounds, including Ukraine, the role of outbound tour operators starting in the last few years has considerably decreased and will continue to decline in the future. Small agencies offering clients who do not have access to the Internet, online services package, including charter flights, transfers, hotel accommodation and other services are most prospective.

Can the industry to return to previous levels? Of course, it can. Positive trends are evident now. Signing of association with the European Union in the near future will give some preferences: the abolition of visas for Ukrainian citizens, lighter conditions promoting Ukrainian tourist product on the European market and, most importantly, cheaper loans for small and medium businesses that will improve the situation in the hospitality and transport sector.

The country has a great opportunity to break old patterns of power and for the first time in 23 years to build a new model of cooperation between the government and entrepreneurs. In the first place, it is necessary to establish a governing state body capable of independent decision-making at all levels, having an adequate budget and consisting of new professionals not holding previous positions in the power. This Office should initiate embodied in the lives of three strategic objectives of the tourism industry:

1. Streamlining legislation for tourism, e-commerce and data protection in accordance with EU requirements;

2. Measures to improve the investment climate and better development of small and medium enterprises in the tourism and hospitality through concessional lending and other bonuses for companies, which create of new jobs;

3. Conducting services categorization of tourist activities (not only accommodation facilities, but also transportation companies, restaurants, tour operators, etc.), which will enable a clear structuring of the market and will facilitate fair competition and improve the customer service of the tourist product.

K-Podilskyi01

In addition, special attention should be paid to the development of recreational areas in the Black Sea regions of Odeska Oblast, Mykolayivska Oblast and Khersonska Oblast, which are able to be a substitute for the occupied Crimea. For this, I propose to establish point free recreational areas with the provision of benefits not only the subjects of tourism, but also other businesses related to tourism, such as transportation companies, manufacturers of food and drinks, souvenirs, etc. In my opinion, because the global crisis the industry, in order to attract  segment of VIP tourists to Ukraine, it is advisable to adopt a law on the legalization of gambling, which can be placed in these free recreation areas or several in major cities in the country.

It is also imperative to pay particular attention to the competent promotional campaign of Ukraine as a tourist destination that is not based on the traditionally corrupt scheme, and on the creation of real sites and printed materials relevant realities of our time. The main emphasis during the promotional campaign should be made of the fact that Ukraine is a welcoming and safe country for all guests, without exception.

The way of the Ukrainian tourist industry to out of crisis is long and thorny. The new government and entrepreneurs have to work hardly  to reach the level of 2013 within three-five years, especially in the inbound tourism, which gives the country more foreign currency earnings. But be optimistic – we will succeed!

Share "Ukrainian tourism in 2014: Stagnation or Sanitation?" via:

Alex Faynin

1. 23 years experience in travel, hospitality & IT business. Author of the concept of creation of Free Economic Zones - Inter Ports in Ukraine (1994), concept of the youth hostels in Ukraine creation (1999-2000) as well as concept of the national Eco lodges network (2010). Co-author of the concept for youth tourist infrastructure development in Ukraine for Euro 2012. Author of the project for the National Camping Network development (2012). 2. Working languages - English, Russian, Ukrainian. Hebrew is on the beggining level 3. Developer of IT technologies in travel sphere. Author of a number of tours in Ukraine and other countries. 4. Global consulting for foreign and locsl businessman, hotels, restaurants and land owners to start /develop a travel, hospitality or restaurant business in Ukraine, Israel and other countries. Specialties: - Competitive analysis - Business planning & development - IT-management & marketing - Startup management

No comments yet.

Leave a Reply