Russian Toursim Market Report July 2013

Russia Outbound TourismMarket Report

July 2013by

Unique Hotels Marketing

2013Moscow, Russia

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ContentsOverview...........................................................................................................................4SWOT................................................................................................................................5

Strengths............................................................................................................................5Weaknesses........................................................................................................................5Opportunities.....................................................................................................................5Threats...............................................................................................................................5

Macroeconomic Data......................................................................................................6GDP Growth.......................................................................................................................6Export And Import.............................................................................................................6Industrial Production.........................................................................................................8Retail Sales.........................................................................................................................8Unemployment Rate..........................................................................................................9Population Income Structure...........................................................................................10Top 50 Outbound Tourism Destinations — 2012.............................................................13Top 50 Outbound Tourism Destinations — 1st Quarter 2013..........................................14

Market News by Trend..................................................................................................15Russian Airports Reach Capacity Limits..........................................................................15

Domodedovo Delays Flights........................................................................................................................15Vnukovo And Domodedovo Raise Rates......................................................................................................15Chelyabinsk Airport Expands......................................................................................................................15St Petersburg Pulkovo Airport Optimizes Passenger Flows ........................................................................16

Tour Operators Bankruptcies Continue...........................................................................17Sinyaia Ptitsa Stops Operations.................................................................................................................17Ascent Travel Announces Stop Of Operations.............................................................................................17

Changes of Visa Regime...................................................................................................18Pilot Project Of Passports With Fingerprints Launched In Moscow............................................................18Fiji Abolished Visas For Russian Tourists...................................................................................................18The Hungarian Consulate Will Reduce the Number Of Accredited Tour Operators ....................................18Poland Changed Visa Issuing Rules............................................................................................................19Kosovo Announced Visa Regime For Citizens Of Russia..............................................................................19Italian Visa Will Be Easier For Citizens Of St. Petersburg...........................................................................19Italy Announces Annual Multivisas ............................................................................................................19Visa To Bulgaria Becomes More Expensive ................................................................................................20First Results Of Croatia New Visa Regime..................................................................................................20Russian Debtors Released Abroad..............................................................................................................2015 Days Maximum Stay Without Visa In Vietnam Re-Confirmed...............................................................20Portuguese Visas Are Issued One Day Before Departure.............................................................................21

Announced Flights...........................................................................................................22Sunrise Tour Wins Airflot Winter Flight To Innsbruck................................................................................22Transaero Airlines Opens Regular Flights To Turkey..................................................................................22TUI Russia Announced Skiing In Czech Republic........................................................................................22Biblio Globus Extended Charter To Jamaica...............................................................................................23Mahan Air Starts St. Petersburg - Tehran Flights.......................................................................................23Biblio Globus Introduced New Czech Republic Destinations.......................................................................23Pegas Touristik Returns To Sales Of Sardinia. ...........................................................................................23Pegas Touristik Launches Direct Flights To Vietnam From St. Petersburg..................................................24

RUSSIA OUTBOUND TOURISM MARKET REPORT, © Unique Hotels Marketing, July 2013, [email protected]

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Transaero Received Permission To Fly To Dubai From Eight Regions.........................................................24Low-Costers Enter Russian Market..................................................................................25

Wizz Air Will Launch Flights To Budapest..................................................................................................25Aeroflot Will Create Its Low-coster ............................................................................................................25

Growing Destinations......................................................................................................27Increasing Flow Of Russian Tourists To Georgia ........................................................................................27Cyprus Arrivals From Russia Continue To Grow.........................................................................................27The Russians Show Record Growth For Abu Dhabi ....................................................................................27Biblio Globus Arrivals To Rhodes Grew By 58% .........................................................................................28Tourist Flow To Crete Grows By 49%..........................................................................................................28Tourist Flow To Spain Increased by 34% ....................................................................................................28

General News...................................................................................................................30Russian Travel Agents Prefer Social Media Marketing................................................................................30Workshop By Mauritius Tourism Promotion Authority In Moscow.............................................................30Flight Rates Don't Decrease Despite The Increasing Number Of Carriers...................................................31Biletix And Svyaznoy Travel Became Partners............................................................................................31St. Petersburg Tour Operators Cancel Charters .........................................................................................31Siberia Notes Supply And Demand Balance In Greece................................................................................32Transaero And UTair Became Strategic Partners........................................................................................32Development Of the Aviation Industry Until 2015 ......................................................................................32Yandex Launches Tours Search...................................................................................................................33


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OverviewCrisis and recession in Eurozone consequences are seen now in slowdown of Russian economy due to lowered demand for hydrocarbon resources estimated at 70% of export of the country. Considering the influence Russia has on the neighboring economies it's obvious that it will be negative for the region in the whole, however for the countries rich in natural resources, such as Turkmenistan, Kazakhstan and Azerbaijan, the impact will be less.

The slowdown is not only caused by the external market situation, but also by the internal economical flaws, main being infrastructure limitations, low production efficiency and expensive financial instruments. Current development programs signed by the Government have their goal to relaunch the transport infrastructure of the country.

In terms of local aviation, the main processes approved by the Government are modernization of the airports to eliminate current capacity limits (reconstruction of airports in Saratov, Vladivostok, Chelyabinsk, St Petersburg, Samara, Irkutsk, Lipetsk, Moscow Air Hub development), liberalization of the flights approving legal measures for the low-cost transportation.

In the same time to reduce transportation costs increasing economical efficiency of internal processes the authorities continue development of land transportation infrastructure: high-speed railways and road network.

For the outbound tourism industry these processes seem to be a cure for the problem of drastically centralized flight routes with very limited offer of outbound flights from major cities except Moscow. Also the development of Moscow Air Hub and local transportation will serve for increase of choice of flight routes and destinations for the regions of Russia.

Other major trend affecting the outbound tourism is the changes in visa regime with number of countries. Although current political situation between Russia, US and European Union doesn't lead directly to abolition of visas that could drastically affect the incoming tourism of currently visa countries, the simplification of visa procedures for Russian citizens is an obvious trend.

In general the tourism industry in Russia follows the consolidation trend, with continuing bankruptcies of tour operators, other tour operators leaving the industry due to new legal regulations (e.g. Tourpomosh' mandatory participation), or focusing on FIT sales. With the growing penetration of internet sales via OTAs or direct sales by the hotels and air carriers, the overall market volume for tour operators seems stagnating if not shrinking.

Outbound tourism for the country seems to continue growing as despite the general economy situation, the incomes are still growing, the unemployment rate is declining and share of savings and currency purchase in private expenses is lowering showing general confidence.


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SWOT

Strengths• Large domestic market

• Political stability with strong parliamentary majority of the government

• Economical stability with large resource base as a key factor

• Declining foreign dept, high reserve holdings, current account surplus

Weaknesses• Country dependence on the oil export and international hydrocarbon market

• Corruption making barriers for business and causing low production efficiency

• Growing state influence over business

• Development disparity between Moscow and other parts of Russia

• Underdeveloped and expensive local transportation

• Infrastructural limitations to transportation

• Visa regime with multiple countries complicating transits and limiting the choice of travel routes

Opportunities• Reform turn to non-oil economy

• Bank sector actions making financial instruments more affordable

• Support and liberalization of small and medium sized business

• WTO accession improving operational transparency

• Priority of fighting corruption declared by the government

• Modernisation of airports, railways road network, infrastructure investment

• Simplification or elimination of visa regime with partner countries

• Regional development

Threats• Continuing world market recession affecting hydrocarbon market and export

income of the country

• Change of economical course to investment causing challenges to stability

• Tough foreign policy causing tension in visa negotiations


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Macroeconomic Data

GDP GrowthRussia's economic growth is expected to slow to 2,4% in 2013 in comparison with 3,4% annual growth in 2012 following decline of hydrocarbon prices. According to Federal State Statistics Office and Ministry of Economic Development data year on year growth in first two quarters slowed down to 1,6% and 1,2% respectively.

Export And Import


2008

M1

2008

M4

2008

M7

2008

M10

2009

M1

2009

M4

2009

M7

2009

M10

2010

M1

2010

M4

2010

M7

2010

M10

2011

M1

2011

M4

2011

M7

2011

M10

2012

M1

2012

M4

2012

M7

2012

M 1

0

2013

M 1

2013

M 4

-60-40-20

020406080

100

Exports, Imports, % chg y-o-y

Export Import

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

2013

Q2

-15

-10

-5

0

5

10

15

GDP, % chg y-o-y

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2008

M1

2008

M4

2008

M7

2008

M10

2009

M1

2009

M4

2009

M7

2009

M10

2010

M1

2010

M4

2010

M7

2010

M10

2011

M1

2011

M4

2011

M7

2011

M10

2012

M1

2012

M4

2012

M7

2012

M 1

0

2013

M 1

2013

M 4

0

20

40

60

80

100

External Turnover and Merchandise Trade Balance, USD bn

External Turnover Merchandise Trade Balance

2008

M1

2008

M4

2008

M7

2008

M10

2009

M1

2009

M4

2009

M7

2009

M10

2010

M1

2010

M4

2010

M7

2010

M10

2011

M1

2011

M4

2011

M7

2011

M10

2012

M1

2012

M4

2012

M7

2012

M 1

0

2013

M 1

2013

M 4

0

20

40

60

80

100

120

140

Urals Oil USD/barrel

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Industrial Production

Retail Sales


2008

M1

2008

M4

2008

M7

2008

M10

2009

M1

2009

M4

2009

M7

2009

M10

2010

M1

2010

M4

2010

M7

2010

M10

2011

M1

2011

M4

2011

M7

2011

M10

2012

M1

2012

M4

2012

M7

2012

M 1

0

2013

M 1

2013

M 4

-20

-15

-10

-5

0

5

10

15

Industrial Production, % chg y-o-y20

08M

1

2008

M4

2008

M7

2008

M10

2009

M1

2009

M4

2009

M7

2009

M10

2010

M1

2010

M4

2010

M7

2010

M10

2011

M1

2011

M4

2011

M7

2011

M10

2012

M1

2012

M4

2012

M7

2012

M 1

0

2013

M 1

2013

M 4

-15

-10

-5

0

5

10

15

20

25

Retail Sales, % change y-o-y

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Unemployment Rate


2008

M1

2008

M4

2008

M7

2008

M10

2009

M1

2009

M4

2009

M7

2009

M10

2010

M1

2010

M4

2010

M7

2010

M10

2011

M1

2011

M4

2011

M7

2011

M10

2012

M1

2012

M4

2012

M7

2012

M 1

0

2013

M 1

2013

M 4

0,01,02,03,04,05,06,07,08,09,0

10,0

Unemployment Rate %

2008

M1

2008

M4

2008

M7

2008

M10

2009

M1

2009

M4

2009

M7

2009

M10

2010

M1

2010

M4

2010

M7

2010

M10

2011

M1

2011

M4

2011

M7

2011

M10

2012

M1

2012

M4

2012

M7

2012

M 1

0

2013

M 1

2013

M 4

-8,0-6,0-4,0-2,00,02,04,06,08,0

10,012,0

Consumer Services Total, % chg y-o-y

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Population Income Structure


2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

0102030405060708090

Private Expenses Structure

Products and Services Mandatory Payments Savings Currency Purchase

2,20%3,70%7,00%

12,10%

18,80%

25,30%

13,30%

17,00%

Population by per capita income

110$ and less110$ — 150$150$ — 210$210$ — 300$300$ — 450$450$ — 750$750$ — 1060$1060$ and more

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1 - 5,20%

2 - 9,80%

3 - 14,90%

4 - 22,50%

5 - 47,60%

Population groups by income 20%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0,36

0,37

0,38

0,39

0,4

0,41

0,42

0,43

Gini Index

Gini Index

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1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

02468

1012141618

Income Disparity Index

Income Disparity Index

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Top 50 Outbound Tourism Destinations — 2012


1 TURKEY 26 CROATIA2 EGYPT 27 NETHERLANDS3 CHINA 28 KOREA, REPUBLIC OF4 THAILAND 29 LATVIA5 SPAIN 30 CUBA6 GERMANY 31 QATAR7 GREECE 32 POLAND8 ITALY 33 BELGIUM9 UAE 34 KAZAKHSTAN10 FINLAND 35 MEXICO11 CYPRUS 36 HONG KONG12 BULGARIA 37 ARMENIA13 CZECH REPUBLIC 38 MALDIVES13 UKRAINE 39 AZERBAIJAN15 FRANCE 40 LITHUANIA16 AUSTRIA 41 HUNGARY17 ISRAEL 42 NORWAY18 TUNISIA 43 ESTONIA19 MONTENEGRO 44 PORTUGAL20 SWITZERLAND 45 INDONESIA21 UNITED KINGDOM 46 MOLDOVA, REPUBLIC22 VIETNAM 47 SWEDEN23 DOMINICAN REPUBLIC 48 DENMARK24 UNITED STATES 49 SERBIA25 INDIA 50 JAPAN

2 516 136 108 7151 906 637 93 2081 328 850 92 417

885 113 92 185792 084 62 162713 096 53 906690 412 48 855570 764 43 475549 382 43 411512 547 43 407404 741 40 927389 424 40 509379 723 39 153315 843 35 831299 313 33 458219 408 33 423219 019 30 703207 545 30 337192 382 29 902177 508 29 647163 964 29 437149 711 28 978141 177 25 933134 536 25 746109 338 24 778

1995 2000 2005 2010 20110

2000

4000

6000

8000

10000

12000

14000

16000

Total Outbound Tourism Travels, thousand

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Top 50 Outbound Tourism Destinations — 1st Quarter 2013


1 EGYPT 26 LATVIA2 THAILAND 27 HONG KONG3 FINLAND 28 CUBA4 CHINA 29 MALDIVES5 UAE 30 QATAR6 GERMANY 31 GREECE7 ITALY 32 ESTONIA8 TURKEY 33 MONTENEGRO9 CZECH REPUBLIC 34 POLAND10 SPAIN 35 BELGIUM11 FRANCE 36 INDONESIA12 INDIA 37 SWEDEN13 AUSTRIA 38 HUNGARY13 VIETNAM 39 JAPAN15 SWITZERLAND 40 ARMENIA16 DOMINICAN REPUBLIC 41 AZERBAIJAN17 ISRAEL 42 DENMARK18 UNITED STATES 43 SINGAPORE19 UNITED KINGDOM 44 NORWAY20 UKRAINE 45 SERBIA21 BULGARIA 46 KAZAKHSTAN22 KOREA, REPUBLIC OF 47 PORTUGAL23 NETHERLANDS 48 SLOVENIA24 MEXICO 49 MOROCCO25 CYPRUS 50 MOLDOVA, REPUBLIC

575 312 19 454379 825 17 805259 089 17 056227 627 15 558218 092 15 535202 939 14 121150 038 11 110106 718 10 191101 933 9 995101 766 9 242

88 702 8 91884 098 8 83979 446 8 80461 958 7 59460 907 6 92556 631 6 02752 419 5 93538 683 5 76736 439 5 56734 347 5 38831 275 4 82730 000 4 41425 374 4 34921 782 4 06821 261 3 874

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Market News by Trend

Russian Airports Reach Capacity Limits

Domodedovo Delays FlightsMoscow Domodedovo airport faced deviation from the flight schedules in June. The reason for the delay of flights was an increased load on the airport because of high holiday season, which coincided with failures of the catering production and logistics system software.

Operation of the system has been fully restored, but the cumulative adjustment in the schedule shipment of food, which coincided with the peak period of the airport traffic before the weekend in the summer season, have led to the total deviation from the flight schedules.

Flight schedule was generally normalized and the airport continued to work in normal mode, in full compliance with the schedule. The management of Domodedovo reports to take all necessary measures to prevent the occurrence of such in the future.

Vnukovo And Domodedovo Raise RatesThe Federal Tariff Service has agreed to increase airport charges at Domodedovo and Vnukovo. They will grow by 8,8% in Domodedovo, and by 7,8% in Vnukovo. Domodedovo was requesting a 15 percent increase but received only 8%.

Sheremetyevo airport is content with the existing rate. Thus, right now it is the cheapest airport of the Moscow aviation hub.

According to experts, the rate increase is not likely to significantly change the flight rates.

Chelyabinsk Airport ExpandsChelyabinsk airport plans to open a new departure hall of the international lines by September. Construction and finishing works are completed, the airports tests equipment and prepares documentation necessary for the start of operation.

The measures will increase the space by 600 square meters, renovated hall can fit 500 passengers.

All rooms will be equipped with modern air conditioning and ventilation, with enclosed smoking area. Duty Free shopping area will grow to 210 square meters.

As a result of the reconstruction, the hall will be more comfortable for passengers with reduced mobility due to new ramps, dedicated dressing room, special seating.

The renovation will complete the first phase of the reconstruction of the international sector of the Chelyabinsk airport. The second phase is planned to update the arrival hall of


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the international airlines.

St Petersburg Pulkovo Airport Optimizes Passenger Flows

While the St Petersburg Pulkovo airport is finishing the new centralized passenger terminal, old Pulkovo-1 and Pulkovo-2 are being optimized to fit the requirements of high season.

The airport added ten passport control booths and self check-in terminals, thus, compared to the previous season, now Pulkovo-2 serves up to 600 people per hour more and Pulkovo-1 has increased its capacity by 400 people per hour.

Commercial area was reduced in both terminals, and gave space to 2 additional gates.

Pulkovo-2 now has a temporary 600 square meter lounge where passengers who just arrived can wait for their turn for the passport control. It is equipped with seats, air conditioning and drinking water coolers with maximum capacity of 500 passengers.

Pulkovo-1 mounted two interactive navigation stands in the registration hall showing location of all services of the terminal.

The number of vans plying between Pulkovo-1 and Pulkovo-2 has risen for comfort of transit passengers .

Also Pulkovo has increased the number of staff that helps passengers navigate the airport services.

The new terminal of Pulkovo is designed as a complex of buildings: a three-story main building, North Landing Gallery, tiered parking ramp exit to the terminal, pre-terminal rink, hotel and business center.

Total area of these buildings will be 150,000 square meters exceeding five times the area of Pulkovo-1 and Pulkovo-2 together.

It is expected that the first passengers will be able to take advantage of the new Pulkovo in December of this year.

After the launch of the centralized terminal Pulkovo-1 will be closed for reconstruction. On its completion the airport will re-open, not as an independent entity but as a part of the new terminal. Over time, the same will be done with Pulkovo-2.


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Tour Operators Bankruptcies Continue

Sinyaia Ptitsa Stops OperationsAbout 600 tourists affected as a result of the stop of operations of Sinyaia Ptitsa (“Blue Bird”) tour operator. According to market players, it is a small company, and insurance coverage is enough for all travelers involved. The tour operator was specializing in medical tourism to nearby Belarus.

Ascent Travel Announces Stop Of OperationsThe group of companies operating under Ascent Travel brand suspended its activities by technical and economic reasons on July 22, 2013.

Financial liability of the company is insured by Alfa Insurance and Insurance Company Pomosh' for the total amount of 167 million rubles. According to Ascent Travel, to the moment of suspension 1342 tourists of the company stayed abroad.

The company worked in the travel business since 1992. During 2012 the company has served more than 100,000 tourists. Ascent Travel had its branches in St. Petersburg, Yekaterinburg, Novosibirsk, Kazan, Nizhny Novgorod and representative offices in Croatia, Montenegro, Italy, Austria, Finland. The main summer destinations were Croatia, Montenegro, Italy, France, as well as fishing trips to Finland and Norway, and medical tourism on European lakes in Austria, Italy, Switzerland and Slovenia.

Until the spring 2012 Ascent was a member of the Swiss Hotelplan Group, that sold its share to a Russian investor. According to unofficial information, the shares were purchased by one of the Russian banks.

Experts consider several reasons for the stop of operations acting simultaneously. The main destination of the company was Croatia, which required visa for Russian citizens since April 2013, that limited the demand instantly.

In the same time, tour operators working on the destination held the same amount of accommodation following quite stiff contract conditions with Croatian hotels.

The same year, Biblio Globus tour operator, one of the biggest in Russia, launched the sales of Croatia.

All this caused the rates to go well below the profitability limits, and the situation became worse due to low rates in nearby countries due to economy crisis.

Strict destination specialization of the company is noted to be the main risk factor.

Experts believe that the market share previously occupied by Ascent Travel won't be consolidated but will be split between the market players.


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Changes of Visa Regime

Pilot Project Of Passports With Fingerprints Launched In MoscowAlong with launch of passports with fingerprints the Federal Migration Service announced that the State Duma is planning to approve the bill requiring fingerprints as mandatory additional biometric information for passports starting from January 1st 2015.

Head of the Federal Migration Service Konstantin Romodanovskiy comments: «It provides additional protection. We understand that the document can not in any way be transferred to another person.

…

We are moving to the same standards with the EU. We go to the United States, the United Kingdom, we are all to be fingerprinted, we have to move in a single echelon."

The head of the Federal Migration Service also reported that Russian citizens will be able to get passports with fingerprints from age of 12 which corresponds to international requirements.

Fiji Abolished Visas For Russian TouristsPrime Minister of Fiji, Mr Bainimarama Voreke personally visited tourist presentation of this island nation in Ararat Hyatt Moscow for over two hundred tour operators and journalists. He informed that the countries confirmed a mutual visa-free regime for up to 90 days.

Tour operators note that there was almost a visa-free regime before, but this decision shows the interest of the island state to increase the number of Russian tourists.

The Republic of Fiji receives more than half a million tourists yearly, mostly from Australia, New Zealand and the United States, accounting the Russian tourist flow a few hundred tourists mostly because of difficult travel route. Fiji Airways informs that the recent changes in the company, probably will make the flight to Fiji more enjoyable.

The most convenient flight options from Russia in Fiji to date are via Hong Kong or Seoul with about 19 hours in flight.

The Hungarian Consulate Will Reduce the Number Of Accredited Tour Operators The Hungarian consulate has 70 travel companies accredited in Russia but plans to reduce the number in the near future, said the Head of the Consular Section of the Embassy of Hungary Andras Jacob.

The purpose of the consulate is to reduce the number of applicants for Hungarian visa, who do not plan a vacation in Hungary, and to increase the number of actual visitors.

The number of requests for Hungarian visa in 2012 has increased by 30%. This year is


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expected to grow at 20-25%, which is about 80,000 visas. At the same time, the Consulate notes, about 20% of applicants for a tourist visa are not really planning a vacation in Hungary.

The consulate will closely trace the visa story of a tourist and will deny visas to those who have already received the visa of any of the Schengen States, but did not actually travel to them. The consulate requests tour operators to closely monitor the application of such tourists and deny them a visa service. Сompanies failing to do so may lose accreditation. This measure is likely to be applied to small tour operators with low volume of documents.

In addition to reducing number of accredited operators, the consulate sees the solution to the problem of increased load in the opening of the visa center in Moscow.

Poland Changed Visa Issuing RulesAccording to Poland visa application center in Kaliningrad, under the new rules, which came into force on July 1, multiple tourist visa for a period of six months to a year will be issued to citizens who have had at least two Schengen visas past two years, including one Polish. In addition, applicants will need to provide proof of payment for the Polish hotel for 6 days at least during the last two years.

Kosovo Announced Visa Regime For Citizens Of RussiaKosovo announced that citizens of 87 countries will have to obtain visa to Kosovo, including such countries as Russia, Moldova, Belarus, Ukraine, Egypt, India, China, Indonesia and Pakistan.

Italian Visa Will Be Easier For Citizens Of St. PetersburgDue to start of the Year of Italy Tourism in Russia, Consulate General of Italy in St. Petersburg and visa center announced that if a resident of St. Petersburg has a Schengen visa, the person may request a multiple-entry visa to Italy for a year, or a two-year visa if a person has two Schengen visas.

It should be noted that the procedure is simplified for the citizens of St. Petersburg in particular due to location near Finnish border and their regular travels to Finland.

Italy Announces Annual Multivisas Italian Ambassador in Russia informed that Russia currently provides more than half of Italy granted visas and diplomatic services are doing everything they can to keep this popularity.

With the approval of the Ministry of Foreign Affairs of Italy, Russian citizen already having at least one Schengen visa will be granted a multivisa for a year automatically. For frequent travellers two or three-year visa can be issued.


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Visa To Bulgaria Becomes More Expensive As reported on the official website of the visa application center of Bulgaria, the cost of the visa fee will grow by 10%.

Russians can visit Bulgaria not only on the national Bulgarian visa, but also using open multiple-entry Schengen visa. Bulgarian consulate has promised to issue six-month or one-year multiple-entry visa for tourists who previously visited the country, but it is not happening always.

First Results Of Croatia New Visa RegimeCroatia officially joined the European Union on July 1st. It resulted in requirement of visas for Russians, which affected the tourist flow of Russian citizens in the country.

According to statistics from the Ministry of Tourism of Croatia, during the first half of the year the number of Russian tourists in the country amounted to 51.1 thousand, with a 12% decrease compared to the same period in 2012.

According to the Minister of Tourism of Croatia Darko Lorenzin, statistics shows that countries introduced a visa regime lose about 20% of the tourists, thus the situation was expected.

Croatian authorities have made a small step towards the simplification of the procedures. Starting July 8th, Russian citizens can fill out an application for a visa on the website of the Ministry of Foreign Affairs of Croatia.

The system allows unlimited number of times to edit the data. However, the final version of the questionnaire still needs to be printed and provided to consulate or visa center.

Russian Debtors Released AbroadPresident Vladimir Putin signed a law allowing Russian citizens to travel abroad, even with debt. The restriction will be imposed on departure only if the amount of the debt exceeds 10 thousand rubles (300USD approximately).

Also, now at imposing travel restrictions, it is necessary to specify the place of birth of the debtor. This item has been added in order to avoid mistakes identifying a possible deptor on the border.

15 Days Maximum Stay Without Visa In Vietnam Re-ConfirmedThe Vietnamese government has decided to keep the Russians visa-free regime for a period not exceeding 15 days, regardless of the purpose of the visit. The flow of tourists to Vietnam from Russia reached nearly 200,000 people by the end of 2012.

Experts note that the previously planned increase in the period of visa-free stay to a month would contribute to the development of tourism in this country for tourists combining sightseeing and beach holidays.


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Portuguese Visas Are Issued One Day Before DepartureTour operators working with Portugal, anxiously point out that recently the time needed to receive visas has grown significantly. However, they are not linking the delay to the increased tourist traffic, but with the opening of the visa center of Portugal.

Before the discovery of visa center documents were issued in four to five days. Now, however, tour operators have to wait for several weeks. The visas are issued exactly one day before the flight, not before.

Experts believe that the problems are caused by the fact that the visa center was opened at the high season and the interaction between them and the consulate is not flawless.


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Announced Flights

Sunrise Tour Wins Airflot Winter Flight To InnsbruckSunrise Tour tour operator took part in open electronic trading in blocks of seats by Aeroflot for the winter season of 2013-2014 and won a lot to Innsbruck. This Austrian destination will be exclusive for Sunrise Tour as the auctioned full board Airbus 320.

"We are fully satisfied with the result: our company has the category of clients who are interested in this transportation, so we focus on it. We actively promote our programs “Sunrise Tour Premium” and “Ski & More. More than skiing”, as well as a network of children's mini-club in the Alps,” - announces the tour operator.

Sunrise Tour flights to Innsbruck will be the Saturday scheduled flights SU2360/2361 from 21 December 2013 to 29 March 2014.

Transaero Airlines Opens Regular Flights To TurkeyThe Interdepartmental Commission for the admission of carriers to international air transportation Transaero Airlines has now the right to perform seven scheduled flights a week between Moscow and Antalya, Moscow and Istanbul.

Until now, Aeroflot was the only Russian carrier entitled to operate regular flights to Turkey. All charter flights had to be confirmed with the major carrier. Designated carrier from the Turkish side was Turkish Airlines. Now Transaero Airlines was accredited as second Russian carrier, Onur Air, Atlasjet and Pegasus are to fly to Moscow from Istanbul and Antalya.

Transaero Airlines has become the first Russian air carrier performing charter flights to Antalya, opening the Turkish Mediterranean resorts for Russian tourists. For ten years, the airline has transported nearly 6 million passengers between Russia and Turkey. The share of Transaero Airlines of all charter flights between Moscow and Antalya is more than 85%. Now the airline operates flights to Antalya from three Russian cities - Moscow, St. Petersburg and Yekaterinburg. It also operates flights from Moscow to the Turkish cities of Bodrum and Dalaman.

TUI Russia Announced Skiing In Czech RepublicTUI Russia tour operator announced that in addition to Andorra, France, Austria, Bulgaria and Italy, the company begins offering tours to ski resorts in the Czech Krkonoše region: Shplinderuv Mlyn, Pec pod Sněžkou, Harrachov, Mlada-Buki.

Tours will be sold on the basis of weekly Sunday flights Moscow - Pardubice - Moscow of Kolavia Airlines, and in high season additional flights will also be organized.

Experts are skeptical about the prospects of destination, and refer to the fact that now it is a FIT destination, without the mass market and with a fairly high price compared to


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similar resorts of neighboring countries.

Biblio Globus Extended Charter To JamaicaDirect flights to the island declared to last till end of October 2013, are now extended until mid-March 2014. The charter will be carried on Transaero flights once in 10 days.

For the first half of this year, Jamaica has received about 6000 tourists of Biblio Globus tour operator , despite the fact that regular number of Russians visiting the island was 2000 per year.

The increase was also caused by launch of visa-free regime for citizens of Russia, started March 7, 2013. Russian tourists are not required to make Jamaican visa upon arrival, the cost of which was previously around $ 20.

According to Biblio Globus tours to Jamaica are preferred by young people from 18 to 30 years as well as couples.

Experts note that as a result of this charter, the demand for Jamaica grew at the expense of the other Caribbean mass-market lines for other tour operators also. However, it's not so about actual sales, as other tour operators can not offer a comparable price without money loss. In addition the market fears transformation of Jamaica to a cheap destination losing luxury travelers.

Mahan Air Starts St. Petersburg - Tehran FlightsIranian Mahan Air started to operate flights to Tehran from St. Petersburg on 21st July, 2013. Charter flights will be carried out once every two weeks until 15 September 2013 on Airbus A300 and A310.

Biblio Globus Introduced New Czech Republic DestinationsBiblio Globus expanded the range by introducing destinations new for Russian tourists: Belograd Lazne, Lazne Bohdanec and Trebon with direct Transaero flight from Moscow, St. Petersburg and Yekaterinburg to Pardubice, where it is more convenient and faster to get to these resorts.

Departures from Moscow is carried out every day, two times a week from Saint-Petersburg and every Friday from Yekaterinburg. Tours are designed for a period of 7 to 21 nights.

Pegas Touristik Returns To Sales Of Sardinia. The company has already tried to sell tours to the island in 2011. Now the tour operator adjusted the volume of transportation, making it more moderate. Previously, Pegas Touristik was flying to Cagliari from five Russian cities, including Moscow, St. Petersburg, Ufa, Yekaterinburg and Rostov-on-Don, this year they consider only three (Moscow, St. Petersburg, Yekaterinburg), with ten-day chains. Ground handling is built on the same concept as in Turkey and Egypt: Pegas has its DMC and his own hotel Dessole Arbatax Park Resort Telis 4 * operating on an ultra all inclusive. The island considered to be FIT


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destination with above the average budget , is being provided with mass-market type of holiday.

The volume of transportation for the destination is considered adequate by tour operators with not a lot of changes. PAC Group and Karlson Tourism took a block of seats on Utair flights. Jet Travel took limited blocks of seats on Gazpromavia. The volume of traffic remained at the same level as a year ago. Italian Meridiana Fly continues to make weekly direct flights from Moscow to Olbia with blocks taken by Karlson.

Pegas Touristik Launches Direct Flights To Vietnam From St. Petersburg

Pegas Touristik announced the charter chain to Nha Trang from October 23. Flights will be operated by Nord Wind on Boeing 767-300 with 13 nights intervals. According to plans, the flight will run until May 18, 2014.

For a long time, tour operators offered programs to Vietnam with connections, for example, via Bangkok and Dubai.

Transaero Received Permission To Fly To Dubai From Eight RegionsTransaero received permission to operate regular flights to Dubai from Yekaterinburg, Krasnoyarsk, Novosibirsk, Rostov-on-Don, Samara, St. Petersburg, Tyumen and Ufa with a frequency of 7 flights a week. The carrier has already operated charter flights from all these regions (plus Kazan, Perm and Chelyabinsk) in winter season 2012/13.

Other airlines including foreign ones also expand the presence in Russian regions . Flydubai adds three more cities to current five, including the ones where it intersects with the Transaero and other competitors. Novosibirsk and Rostov will be served by Flydubai as well as Air Arabia, plus Russian airlines.


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Low-Costers Enter Russian Market

Wizz Air Will Launch Flights To BudapestEuropean low-coster Wizz Air announced the launch of regular flight from Moscow Vnukovo airport to Budapest on September 23. Flights will be operated five times a week, on Monday, Wednesday, Thursday, Friday and Sunday.

Wizz Air flight rate starts from 40 Euros one way including taxes. Tickets are now on sale at the official website of the carrier.

After the bankruptcy of Malev airlines in 2012 there was only Aeroflot operating the destination.

Wizz Air also expects to launch second Russian route between Budapest and St. Petersburg. Currently St. Petersburg - Budapest - St. Petersburg flights are operated by UTair twice a week - on Wednesdays and Sundays.

Wizz Air fleet currently consists of 45 Airbus A320, each of which is designed for 180 passengers. Wizz Air has an extensive network of routes in 36 countries around the world. Passenger traffic in 2011 was 10.7 million pax, and 12 million in 2012.

Aeroflot Will Create Its Low-coster The Board of Directors of Aeroflot has approved the concept of a low-coster. The airline reports that cost-effective business model, including the rejection of a number of amenities that many passengers consider insignificant, will allow to achieve discount of 20-40% compared to traditional carriers.

The airline plans to start operations in 2014. The first two years it will develop the most profitable routes in the European part of Russia, gradually expanding the area of activities to Russian regions and abroad, including the countries of the CIS. The company is considering one of the airports of Moscow as the base airport. The investment in this project are considered around $100 million. Initially the flights will be operated from Moscow to eight Russian cities: St. Petersburg, Samara, Yekaterinburg, Makhachkala, Krasnodar, Ufa, Kaliningrad and New Urengoy. Over the next five years, the park of the low-coster is to increase from eight to 40-50 planes.

It is known that Transaero is also exploring the possibility of establishing the budget carrier. Transaero considers budget flights from Moscow to Central and Southern Russia, as well as to St. Petersburg.

Earlier this year it was reported that UTair, the third airline of the country, has been allowed to base it's low-coster at the Ermolino airport in Kaluga region, 80 km from Moscow.

This summer there were reports that Red Wings can resume flights after the transition to the new owners.


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By 15 September, the Government of the Russian Federation should decide on the establishment of the airport for budget carriers , according to the instructions given by Vladimir Putin at a meeting on the development of Moscow air hub. The considered options are Ostafyevo, Klin and Ermolino.

Experts note that the success of this project depends partially on development of laws regulating aviation industry in Russia and development of airport infrastructure. However majority believe that all key decisions are already made and the government will be involved both financially and legally. Tour operators assume that the creation of this low-coster will push direct sales of flights due to usual business-model of such carriers.


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Growing Destinations

Increasing Flow Of Russian Tourists To Georgia According to statistics of information-analytical department of the Ministry of Internal Affairs of Georgia, for the first half of this year Georgia was visited by 260.6 thousand Russians, which is 68.6% more than the same period in 2012.

Due to dense relationships between the countries, this ex-USSR country was not a popular tourist destination last years. However, this year the Russian-Georgian cooperation in the tourism sector has intensified, which affected the growth of arrivals of Russian citizens to the neighboring country.

In June, the number of tourists from Russia increased by 51% compared with June of last year to 76.3 thousand. Russia ranks fourth on the number of visits following citizens of Turkey, Armenia and Azerbaijan.

In total Georgia was visited by 2,189,000 foreigners in January-June this year which is 29.2% more than in the first half of 2012. Of these 813.9 thousand people were tourists, 410.6 thousand visited the country in transit , the remaining 964.2 thousand business visitors, relatives visiting and alike.

Cyprus Arrivals From Russia Continue To GrowAccording to the Statistical Service of Cyprus,44.2 thousand Russian touristsvisited Cyprus in first four months of 2013 which is 7.5% more than the same period last year. At the same time, the total number of received tourists during this period decreased by 12.2% to 339,600. Last year Cyprus was visited by 42% more Russian tourists than in 2011.

According to forecasts of Moscow office of Tourism of Cyprus Russian tourist flow to Cyprus will increase to 550,000 tourists or by 15% this year.

Tour operators note the excessive amount of flights to the destination leading to certain margin decrease, however the figures are not critical for the profitability of destination.

The Russians Show Record Growth For Abu Dhabi In general Abu Dhabi shown a 12 percent increase in the number of tourists who stayed in 145 hotels and apartments of the emirate for the first half of 2013 .

Department of Tourism and Culture of Abu Dhabi notes that the average length of stay of visitors to the emirate also increased, which has a positive impact on the workload (+8%) and revenues of hotels (16%). For the first six months of 2013 hotels in the emirate received 1,330,000 people who spent a total of 4.23 million nights here, a 25% increase compared with the figures for 2012.

The average length of stay in the emirate was 3.17 nights, which is also a positive growth of 12% compared with last year.


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Tourists from Russia are still in the lead for the duration of stay in Abu Dhabi, with the average more than six nights. As compared with 2012 for the first six months, the current flow of tourists from Russia increased by 46% and amounted to 13.1 thousand people, and the number of nights spent reached 79.7 million, up 54% over last year.

Biblio Globus Arrivals To Rhodes Grew By 58% According to statistics of Biblio Globus tour operator, Rhodes was the most popular Greek island for Russian tourists in the summer season of 2013 . Overall growth in tourist traffic to the island from Moscow, St. Petersburg and Yekaterinburg was 58% compared to last year's summer season.

The growth in tourist traffic to Rhodes explained not only by increase of flights, but also by changed policy of hoteliers who shifted from the European to Russian market focused on tourists from Russia.

Many hoteliers have switched to work on an "all inclusive" basis, considering the interests of Russian tourists. The spa centers are run by Russian-speaking specialists, also there's a lot of Russian-speaking employees in hotels in all positions - from animation to the reception managers. In addition, each restaurant at the hotel now offers a menu in Russian.

The company expects plans to send about 270-300 thousand tourists to Rhodes this summer.

Tourist Flow To Crete Grows By 49%In June Crete received 94,512 visitors from Russia, which is 49% more than in June 2012 and the majority of the island's visitors, leaving behind Germans (69,744) and British (58,975). Ukraine showed a 76-percent increase with 18,895 tourists.

According to experts, the dynamics was achieved by massive discounted sales, which was a result of the huge oversupply of transportation. The increase in tourist traffic in the area planned for 30-40%, while transport was increased by 70-80%.

Tourist Flow To Spain Increased by 34% According to the Institute of Tourism Studies of Spain, during the first half of 2013 587.9 thousand Russian tourists visited Spain, which is 33.6% more than the same period in 2012. According to the Federal State Statistics Service data for the first quarter of this year, Russian tourist flow to Spain was up 27%. Tour operators predict further increase in demand for the destination of about 25-30% compared to last year.

Tourists from Russia amounted to 2.2% of all foreign travelers who visited Spain during this period. First by the number of arrivals are British tourists (23.6% of all foreign tourists).

Despite the increase in the transportation by 30% and the outflow of tourists to


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drastically cheapened Greece, Spanish market this season is balanced. Experts generally predict positive business results for the destination in the season.


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General News

Russian Travel Agents Prefer Social Media MarketingAccording to survey by tourprofi.ru web portal, 67% of respondents regularly use social media promotion, including 22% those who consider it the main platform for promotion of their company's services.

49% of respondents regularly use other types of web promotion: banners, context advertising.

47% regularly use outdoor advertising (including bilboards, branded transport, etc.)

52% use the targeted mailing and sms campaigns, 15% use TV advertisement, 33% use print media advertisement, and only 12% use BTL activities on regular basis to promote their services.

63% of the respondents estimate the number of clients attracted by the advertising campaigns to be not more than 25% of total quantity.

The survey also shows that the most popular subject of promotion is the product by itself: interesting offers, news, popular tours (26%). Early booking bonuses, discounts, additional services are promoted by 18% of respondents, and 14% of the companies are making their company itself the subject of advertising.

Workshop By Mauritius Tourism Promotion Authority In MoscowMauritius tourism workshop, organized by the representative of Mauritius Tourism Promotion Authority was held in Moscow following the similar events in St. Petersburg and Yekaterinburg. It was attended by leading tour operators and hotels of the island.

According to the Mauritius Tourism Promotion Authority, the island was visited by 5113 tourists from Russia from January to March 2013. During the same period, Mauritius was visited by 627 guests from Ukraine and 136 from Lithuania. Total number of visitors from Russia in 2012 was 19,429.

Growth of interest in the island was mainly caused by direct flights of Transaero. Experts note that for the same reason the structure of the visitors change. Despite the image of Mauritius as an expensive destination, today there is more and more requests for accommodation in 4 and 3-star hotels with high season for Russian market in May, New Year period and November. In addition to a beach holiday, the Russians are engaged in fishing, diving and hunting.

It is expected that starting October 25th, when Transaero relaunches direct flight to Mauritius, the number of tourists will rise, as according to experts, the absence of reasonable cost and convenient flights inhibits the growth of tourist arrivals to Mauritius.


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Flight Rates Don't Decrease Despite The Increasing Number Of CarriersAviasales metasearch engine conducted research of flight rates before and after the appointment of the second air carriers in a number of routes.

The study included Paris, Barcelona, Rome, where Transaero began to fly since last summer, and London (easyJet began to fly from London to Moscow in March) and Nice, with added Rossia flights.

According to Aviasales, additional air carriers did not affect the rates and the average ticket price remains the same. The cost of flights from Moscow to Nice decreased by only 2.2%, and the flights to Barcelona went up by 10%.

The company suggested that after the new carriers approved by Federal Air Transport Agency for flights from Moscow to Istanbul, Dubai (Transaero), Chisinau and Ljubljana (UTair) rates will remain the same.

The experts believe that rising dollar just leveled the entire visible difference in price, however noted that existing carriers slightly improved their rate policy in regards to group bookings and the decrease of rates can be expected.

Biletix And Svyaznoy Travel Became PartnersOnline-Travel-agency Biletix, b2c-project of Russia's largest consolidator, Vipservis holding and Svyaznoy Travel, a tourism project of the largest independent mobile retailer, announced a strategic partnership. Biletix IT booking solution will be integrated into Svyaznoy Travel in WhiteLabel format.

Svyaznoy Travel used to offer its clients a wide range of air and rail tickets, hotel reservation services and tours. Start of cooperation with Biletix allowed the company to have a substantial difference on Airfare offer. Now, users of the Svyaznoy Travel have access to a range of tariffs of more than 500 airlines.

Tickets and other services of Svyaznoy Travel are available on the project website as well as at any of the 3,362 Svyaznoy stores in 892 cities of Russia.

Biletix is the only service in the Russian market, conducting online sales of regular and charter flights, which are now also available on the portal Svyaznoy Travel. The solution is already integrated in the online services of Alfa-Bank, Russian Standard bank, Malina loyalty program, Oktogo hotel service, Workle employment service .

St. Petersburg Tour Operators Cancel Charters Companies involved in outbound market in St. Petersburg are making active efforts to stabilize the situation in July, canceling mass-market summer flights to destinations with up to 5 thousand seats per week.

Tour operators have adjusted the traffic of almost all mass-market directions (Bulgaria, Greece, Tunisia, Cyprus, Turkey, Italy, Egypt).

Especially significant are the changes for two leading countries, Turkey and Greece (2,000


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seats and 1,300 seats).

According to some experts, it is critical to adjust the volume on Greece, which amounts to 40% of the St. Petersburg market. Tour operators expect that at least August tour rates will be adequate and will stop dumping. The experts link the difficult situation on the market due to actions of Biblio Globus, which, combined with other market players, increased the volume of transportation twice in comparison with the previous year.

Siberia Notes Supply And Demand Balance In GreeceThe participants of the tourism market of Siberia ascertain the absence of specific proposals on the major areas where the European part of Russia is actively dumping, especially Greece. In some areas, in the absence of dumping has been a marked decline in rates to a reasonable minimum. Another trend is the consolidation of competitors, which was ultimately successful. Labyrinth and Coral Travel have put the combined flight to Rhodes with the frequency of twice a month. Sales are going smoothly, with good profitability.

Transaero And UTair Became Strategic PartnersTransaero and UTair signed an agreement on strategic cooperation. It is aimed at the development of the Russian domestic and international markets for passenger and cargo air transportation.

Parties will consider proposals for agreements of interlining, special prorate agreements, agreements on the transfer of passengers in case of errors, as well as an agreement on the joint operation. Partners are to take steps to synchronize schedules, the frequency of flights in order to ensure the most convenient connections, as well as frequent flyer programs.

The companies also consider mutual training and staff development, maintenance and repair of aircraft, monitoring of compliance with quality standards, improvement of on-board and ground service.

This step is following the agreement signed in December 2012 of transfers and tariffs for Vnukovo airport traffic.

According to the international rating of tourist traffic flow, published by the Airline Business edition, Transaero is the sixth largest in the world by number of passengers carried. Operating since 1991, the company has the largest fleet of long-haul wide-body aircraft in Russia, the CIS and Eastern Europe. Constantly growing and renewing the company's fleet consists of 99 planes. The route network covers more than 190 destinations in Russia and foreign countries in Europe, Asia, America and Africa.

Development Of the Aviation Industry Until 2015 Prime Minister Medvedev approved a plan for the development of the aviation industry until 2015. According to the program, 78.3 billion rubles will be allocated from the budget


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in 2013 for the implementation of measures for the development of the aviation industry, in 2014 the figure will grow to 107 billion rubles, and to 123.5 billion rubles in 2015.

This plan is a part of the state program "Development of the aviation industry in the years 2013-2025", which was approved by the Government in December last year.

As a result of the government program, it is expected to increase the share of Russian manufacturers of aeronautical products on the world market by 2025 to reach 3.6% and 11.9% in the civilian and military sectors, respectively. In the aircraft industry, these shares are targeted 3.2% and 10.9%, helicopters - 12% and 16.5% of the market respectively.

Yandex Launches Tours SearchYandex search engine launched a publicly available beta version of a new search platform called Islands. As stated, the interface shows search results, combined with interactive features that simplify everyday tasks. For example, a search query "tickets online" returns not just a list of the various services, but finished blocks that allow you to not leave the Yandex to start the process of ordering your ticket. Entering the parameters is followed by transition to the website of the operator or travel agency for the booking.

At the moment, Islands are in the test regime, and the final version will be introduced in the end of 2013. Experts believe that Islands may lead to an increase in direct sales as airlines and tour operators will be able to easily get direct clients without reservation systems and agent portals.


Russian Toursim Market Report July 2013

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Transcript of Russian Toursim Market Report July 2013