Meeting on travel business in Russia



Dmitry Medvedev: This is a good exhibition. I recommend to those who have not seen it, to do so.

As is clear to everyone here, this meeting will focus on tourism, its development potential and the possible problems. I remember chairing a similar meeting in 2008, which some of those here attended. Things have changed since then, but we cannot say in all honesty that we have developed a modern travel industry. According to the experts at the World Economic Forum, the travel and tourism sector accounts for one job in 11, and the key thing is that travel agencies are mostly small and medium-sized businesses. Moreover, the travel sector has proved that it can survive even amid a global recession.

I won’t repeat the platitudes about Russia’s tourism opportunities, which are rooted in our history and also Russia’s unique place in the world. But I suggest we discuss ways to use our competitive advantages to attract foreign tourists and to promote domestic tourism.

According to expert estimates (it would be good if they came true), by 2020 Russia may become one of the world's top ten tourist destinations. These estimates won’t come true by themselves – either we will work to achieve this result or we will lag behind.

Competition on the tourist market is high. Service standard requirements are constantly growing. We are still far behind the leaders of the tourist industry, although the state and private investors have done much to upgrade the tourist infrastructure in this country in the past few years. We have two federal targeted programmes – on domestic and foreign tourism to 2018 and the South of Russia. Last December we adopted a state programme Culture and Tourism Development, 2013-2020.

We are fond of ratings. Although I’ve said more than once that we shouldn’t exaggerate their importance, they are still indicators. Despite all we have done, Russia went down by four points to 63rd place in the rankings of the most attractive countries for tourism. This was not because we failed to do something, but because our rivals are very strong. We must understand what we need to do apart from investing into tourist facilities, important as this is. We should also delimit powers and adopt more normative acts if need be. It is also important that not only Russians choose to spend vacations at home, although this is an obvious indicator, but that foreigners also come here. We have achieved some good results in domestic tourism in the last three years – its flow increased by 10% to reach about 35 million in 2012. This is a tentative estimate.

Most of our people visit a sea coast, but it is very important to develop other types of recreation and tourism – active recreation and sightseeing linked with domestic history and culture; we have just seen examples at the exhibition.

Obviously, we must raise the service standard to the international level (vacationers are more demanding now) and create normal conditions, not only for those who perform an active lifestyle but also for people with disabilities – and we still have problems here.

Hotel ratings also matter. Judging by the materials that I have, only a little over 600 hotels have been rated in this country. Two-thirds of them, are, of course, in Sochi. All others are not certified. People are certainly basing their decisions on hotel grades. Perhaps we need to apply things that we have in Sochi in other parts of the country as well. I hope that the major events that will take place in different Russian cities over the next five years will help us to do so. Government policy is important, but private companies are still the major players on the tourist market; therefore, we need both private investors and well-trained professionals in this area. There is an idea to establish a government award for achievements in the field of tourism. I believe it’s a valid idea, so let's discuss it. In any case, this will be a kind of recognition by the government.

Summer is coming, and many of our citizens will go on holiday, including abroad, even though there are many domestic tourist destinations now. We should do our best to protect them against potential insolvencies of travel agencies. In late February, the Government approved rules for emergency assistance to tourists.  A tour operators’ compensation fund is now being formed and it should become fully operational in May. Let's discuss this, too.

We need to establish an effective mechanism to insure tour operators’ liability, similar to the way it’s done all over the world. This should be the main source for covering potential losses.

Today we can discuss all the things that I have mentioned, and some that I haven’t. Over to you, Mr Medinsky (Vladimir Medinsky, Minister of Culture.)

Vladimir Medinsky: Mr Medvedev, colleagues, first of all, a few words about the current situation. In 2012, there were 15 million foreign trips and just over 30 million entries in Russia, of which 2.6 million people came on tourist visas, while 28 million visited Russia for other purposes. In other words, the ratio of entries and exits is completely out of balance. In Europe, the ratio is 1:1, whereas in the United States domestic tourism dwarves foreign tourism by 8 to 1.

These statistics are somewhat misleading, because the number of entries on tourist visas is understated statistically, whereas the number of entries for other purposes is overstated, because it includes all migrants. This is damaging to Russia’s image as a tourist destination. Perhaps this is also why we rank so low in tourism ratings. Therefore, Mr Medvedev, I would like you to issue an instruction to the Federal State Statistics Service, the Federal Migration Service and the Federal Border Service to start using the European system of international accounting of entries and exits. We have sent a proposal to that effect to the Federal State Statistics Service. This will help us to have a more unbiased picture of what’s going on.

I will not elaborate on the causes and consequences of imbalanced tourist flows, since they are clear to everyone. The Soviet system of domestic tourism collapsed, and we are fully aware of the situation in this sphere. The question is: how much money are we losing because of this imbalance and what do we need to do to expand domestic tourism and incoming tourism? According to international agencies, Russians spend annually about $32 billion, or over 1 trillion roubles, during their trips abroad.

Dmitry Medvedev: On what? On tourism? Or does this number also include shopping expenses?

Vladimir Medinsky: That’s how much they spend for shopping during tourist trips.

Dmitry Medvedev: That’s a fairly large amount.

Vladimir Medinsky: Yes, about $2,000 dollars per person per trip. This is a huge amount of money, and you can imagine how our industry would benefit if some of it was spent in Russia.

According to the state programme for promoting culture and tourism development, the volume of paid services in the tourism sector should reach 1.25 trillion roubles by 2020. This figure includes only our direct goals. I’m leaving out the multiplier effect, because, as is known, one tourist creates three jobs for the period of his stay, that is, this figure can be tripled or even quintupled.

What are our main problems and what should we do about them? It may surprise you, but our biggest problem is a shortage of tour packages and routes. Most foreign tourists go to Moscow and St Petersburg. The Ministry of Culture and Rosturizm are developing several tours along with the regions. You saw them, Mr Medvedev. They include the Great Volga tour, Lenin Places – tailored to Chinese tourists – including Ulyanovsk, Kazan, Razliv outside St Petersburg and Moscow, the Silver Necklace of Russia, and the Silk Road. These tours include visiting several places of interest and moving from hotel to hotel. Similar routes in Europe have been in existence for decades, such as the Classic Italy tour.

Ethnic and cultural tourism in Russia was abandoned altogether, but is now developing rapidly. It is one of the most modern and profitable areas of tourism. A future Ethnic Park of over 100 hectares is being built in the Chechen Republic with the support of the Ministry of Culture. There are private ethnocultural projects, such as the popular Ethnomir in the Kaluga Region.

Children's tourism has ceased to exist in Russia. The Government has set the goal of developing it, and we launched several pilot projects during the past winter holidays to see how they will work out. We took children from Dagestan to St Petersburg, and from Irkutsk and Buryatia to Moscow, Kaliningrad, and the Smolensk Region. We have signed relevant agreements with Aeroflot and Russian Railways. We will recommend such projects to all regions. Although the Ministry’s budget doesn’t have a separate line for funding the development of children's tourism, we will use our savings in the amount of 200 million roubles to subsidise children’s tourism in the regions.

Event tourism is next. Modern tourism is all about attending events. This year, we started helping regions create and organise special events. Together with experts, we have drafted a national calendar of events and co-financed festive events in Kolomna, Kazan, the New Year Capital of Russia, and Krasnoyarsk, home of Shirokaya Maslenitsa. This year, we are doing anchor tourist events in Kamchatka and Derbent. We have a separate programme to support associations of small tourist towns of Russia, such as Suzdal, Uglich, Myshkin, Alabuga, and Tobolsk, to name a few.

With regard to infrastructure and the number of hotels, twelve multifunctional tourist clusters in the Ivanovo, Ryazan, Rostov, Lipetsk regions, Altai Territory, and some others are being created under the federal targeted programme. We are building the infrastructure and hotels, because the only way to cut accommodation costs is to increase the number of hotels. In some places, hotel rates in Russia are well above the European average.

The star classification system is the second problem.

Dmitry Medvedev: Do we have any statistics on how many hotels rooms are certified in this country?

Vladimir Medinsky: Regrettably, we don’t have full statistics, as far as I know.

Alexander Radkov (Head of the Federal Agency for Tourism):  600 hotels have been rated.

Vladimir Medinsky: And how many are there all in all?

Alexander Radkov:  All in all, we have 11,000 collective accommodation facilities.

Dmitry Medvedev: 11,000? And how many rooms?

Alexander Radkov: About 200 rooms in a hotel on the average…

Dmitry Medvedev: No, it’s wrong to count like this – 200 rooms in a hotel – because some hotels have only 20 rooms. We must figure this out. If we want to gauge our tourism potential, we must know how many hotels and rooms we have. We should put things in order. We must do this by all means, but of course without red tape and without extorting money for registration from hotel owners. All hotels must be properly certified.

Mr Medinsky, go on please.

Vladimir Medinsky: It is the lack of classification that allows most hotels to operate without registration and stay in the shadow. After mandatory classification was introduced in Sochi, the taxes collected from the resort industry have been steadily growing in the past three years – by 10% in 2010, another 11% in 2011 and 30% in 2012. Once stars are assigned to hotels they start paying taxes and are registered.

What do we suggest doing? There is a draft law on introducing mandatory hotel classification by the FIFA World Cup in 2018 in all cities that will host it.

We suggest doing this by 2016 and rate all hotels by 2018 (the deadline should be fixed). This will allow our hotels to enter international sale networks and we will be able to register these hotels and collect taxes from them. Hotel owners will have enough time to upgrade their facilities. Without the classification system stars are assigned at random. They are assigned by authorised firms that are chosen by…

Dmitry Medvedev: And who assigns stars?

Vladimir Medinsky: Stars are assigned by authorised companies chosen by regional administrations.

Dmitry Medvedev: So this is done virtually at random, correct? I simply don’t know how this is done abroad. Probably there this is also done by public companies. As a rule, all modern economies have self-regulated organisations. And do we have an organisation that could do this on the national scale?

Alexander Radkov: Mr Medvedev, we don’t have one for the time being. We are raising this issue because it is necessary to put things in order here. Such authorised companies are chosen by the regions but there is actually no oversight over their operation. It is virtually impossible to reduce the rating of a hotel after it has been classified. We must establish oversight of this area.

Dmitry Medvedev: Are you referring to public oversight?

Alexander Radkov: Yes, of course, this should be public oversight but with elements of government oversight concerning service standards and classification requirements. They should be unified at the federal level.

Dmitry Medvedev: Okay, we’ll talk about this again.

Vladimir Medinsky: Frankly, we think that by the time mandatory classification is introduced for all hotels, it will be necessary to have a government body authorised to reduce their ratings in the event of confirmed complaints. This could be done by the Federal Agency for Tourism.

Dmitry Medvedev: A government body that would take away stars? Do they do this in other countries?

Vladimir Medinsky: Mr Radkov?

Alexander Radkov: Yes, they do, of course, but this practice is not universal. Classification is mandatory in some countries and voluntary in others. As a rule, voluntary classification is practiced by countries with high consumer standards. And this is done by self-regulating organisations. No unrated hotel will attract tourists – they simply won’t go there. Those countries that have started developing their tourist markets relatively recently have much tougher positions on assigning and challenging stars.

Dmitry Medvedev: It doesn’t seem right to me that the Federal Agency for Tourism should take away stars. I’m worried this will lead to arbitrary rule.

Alexander Radkov: No, of course not. We should have some control over how stars are assigned because once a hotel has been rated nobody can challenge its stars.

Dmitry Medvedev: Okay, got it.

Vladimir Medinsky: In other words, what we have now is absolutely wrong.

The next issue is small hotels. We realise that no Hiltons or Marriotts will go to small cities because they won’t make enough money there. Small hotels should cover an enormous segment of the market in large cities as well. Today small hotels are small business and operate as furnished rooms for rent. A small hotel does not even have the right to put out its sign – if it does, it will be immediately fined and a thousand of inspectors will descend on it in an instant. A small hotel cannot be advertised as such. This is actually about letting a flat or several flats combined into one. Late last year, we proposed to the Cabinet that it should instruct related agencies to review the national standards in that area and introduce Tax Code amendments incentivising the creation of small hotels.

Small hotels tend to thrive where authorities offer encouragement, as is the case in St Petersburg, for example. But their development is stalled in cities where authorities keep finding faults.

We’ll submit our document package once again, Mr Medvedev, and we hope you issue the appropriate instructions to the Finance Ministry, the Economic Development Ministry and others.

Next. There is a lack of street directions and maps in Russia. So a foreign tourist travelling on his or her own is bound to get lost. There are no English-language signs whatsoever. Nor do we have any signs to point to nearby sights, like those classic brown-coloured plaques they’ve got in Europe.

To improve the situation, we’ve undertaken to create, by this May, a complete brand book with standards for street-sign design, to be applied throughout the country for indicating tourist sights, routes, itineraries and so forth. We’ll distribute copies of our brand book among the regions so that they can then use it for reference in their geolocation work on the ground.

Let’s now pass the word on to tourist information centres. Such centres can be found in any European city or town, however small. In Russia, they exist in only 73 of the regions. Only the most advanced of the regions have several tourist information centres.

We’ve developed relevant methodological recommendations, and are sending them out to regional governors, along with a request for support. Without a large enough number of operational tourist information centres, all our efforts to stimulate tourism will come to naught.

It’s very convenient to travel with such an information centre in your pocket, so this autumn, we’re launching a national links website on tourism, complete with a mobile version for smartphones.

This website will offer a tourist map of Russia, drawn in a trip adviser format, and, using our capabilities as a federal ministry of culture, we’re going to indicate all of the country’s heritage sites in it. The heritage lineup includes tens of thousands of sites, listed on paper by related institutes, such as Russia’s Institute of Arts Studies and the Cultural Studies Institute. We’re going to digitise the list, presenting each of the sites in an audio profile, both in Russian and English, along with information on related historical and current events and possible tourist itineraries.

Also, we're trying to introduce here what is known as geo-caching, so that interested users can contribute by posting their own information on tourist destinations, along with personal accounts and photographs. This may become a kind of social network on tourism. The website, to be designed by one of our ministry’s research institutes, will be public, making it possible for commercial information on accommodation, itineraries, etc. to be posted alongside non-commercial content.

Visa requirements are one of the major hurdles preventing us from increasing the tourist inflow.  As you know, we’ve proposed several related bills already. One of these is now going through final deliberations in the Cabinet. It would allow for visa-free visits of up to ten days, to various cultural, sporting or business events in Russia, such as international championships, matches, Christmas/Easter festivals, and so forth. This proposal applies to visitors from countries that are not in the “risk” category, so to speak. We hope you back the idea and ask the Cabinet to speed up their deliberations.

Japan, Korea and China are among major donor countries, and Russia could benefit enormously from facilitating tourism for their nationals. We have a preferential visa regime with China, but with Japan and Korea we’ve been in lengthy negotiations over mutual concessions, among other things. We keep working our contacts with the Foreign Ministry on that, but what we lack at this point is a strong political will. Because of our geographical situation, we stand to benefit from Japanese, Chinese and Korean tourism much more than they do.

Chinese tourists visiting Russia each spend $500 per day, on the average (apart from travel and accommodation expenses), and their Japanese counterparts tend to spend even more. So just by dropping visa requirements, we could give a great boost to travel from that part of Asia.

Another problem has to do with promoting Russia as a tourist destination. The city of Prague isn’t particularly rich financially, yet it spends 20 million euros per year on promoting itself. Paris, which is a bit better-off, spends for the purpose as much as 30 million euros annually. In this country, that kind of an outlay is non-existent.

I don’t know whether there’s any point in marketing Russia as a tourist destination, following the examples of Turkey and Egypt. That would be excessive, perhaps. But, without any doubt, the Russian Federal Tourism Agency should make consistent efforts to attract foreign tourists.

In Moscow, there are tourism offices representing all the countries that Russian travellers visit. As for Russia’s Federal Tourism Agency, it has not a single office outside the country.

It’s no secret that there are a huge number of Russian trade missions abroad, and these are normally housed in spacious compounds. We believe that opening Russian Tourism Agency offices in countries that are potentially beneficial to us in terms of tourism would be a step in the right direction.

Such offices won’t cost much money to maintain, but the effect, especially in countries like China or Japan, could be huge. This is a matter of coordination of efforts by all tour operators, product promotion, and so forth. The domain has been neglected for too long, and this should change.

Finally, a more general issue. Our effective Law on Tourist Activity, No. 132-F3, was written in the early 1990s. It was oriented entirely toward Russian nationals travelling abroad.

The problem of regulating domestic tourism for Russians and foreign nationals’ visits was irrelevant back then, so small hotels and other things we’ve discussed today have remained out of the picture in legislative terms, as a result.

We believe there’s a need for a new law on tourism in Russia, or at least for a new edition of the existing law. We’ll be working toward that goal, and hope you’ll support us along the way. Thank you for your attention.


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