MVA looks to Russia market’s rebound

Looking at the arrival numbers from Russia these days would get your stomach dropping. From a highest ever total of 13,856 in fiscal year 2014, it has nosedived to just a little over 1,300 in the last five months—a steep plunge equivalent to diving off a cliff.

No less than Marianas Visitors Authority managing director Perry Tenorio acknowledged the downward spiral in tourist arrivals from Russia, which used to be seen as a potential growth market for the islands.

The current reality for the Russian market still remains a question because of that country’s economic crisis stemming from the Ukraine crisis and collapse in world oil prices.

Political conflict between Russia, Europe, and the United States surrounding Crimea led to a series of economic and political sanctions against Russia that negatively affected outbound tourism from Russia to Europe and the U.S.

Air carriers, tour operators, and charter companies have experienced a dramatic decrease in airlift and sales, especially from the central part of Russia, as large tour operators book hard seat blocks, hotel rooms, etc. in advance.

Tenorio said many companies have experienced significant losses and this triggered a series of bankruptcies among tour operators and travel agencies throughout Russia starting in the summer of 2014, culminating with the bankruptcy of AviaCharter-DV in August 2014 and eliminating the direct non-stop charter flights from East Russia to Saipan.

“Despite the bankruptcy of Aviacharter-DV, total arrivals from Russia to the CNMI in 2014 exceeded 2013 arrivals by 2 percent as the growth in arrivals was extremely high from January to July 2014. With the cancellation of the AviaCharter-DV flights however, arrivals from Russia, fiscal year 2015 year to date, is now about 70 percent lower than last year,” Tenorio said.

The Russia market in the CNMI began to take off in 2006 when Asiana Airlines established its first office in the Far East Russia, providing easy access from the region to the CNMI via Seoul.

Russian visitors increased four-fold from 2006 to 2009, from 1,571 to 6,799 visitors per year, and doubled in 2013 to 10,987 visitors with the launch of AviaCharter-DV charter flights to the CNMI. From April 2013 to April 2014, Russia was the fastest-growing source market for the CNMI, with 40 percent annual growth.

“The political crisis in Ukraine and economic sanctions against Russia, in conjunction with the collapse in world oil prices, have negatively affected the entire Russian economy and has caused a 90-percent devaluation of the Russia currency since the beginning of 2014, effectively making travel to the CNMI 90 percent more expensive for Russians. The issue is not costs in the CNMI, but the collapse of the Russian ruble, which has made it impossible for regular tourists to plan their travel expenses,” Tenorio said

In a separate interview, Hotel Association of the Northern Mariana Islands president Gloria Cavanaugh said that after AviaCharters-DV pulled out, the Russian market almost completely diminished. When asked how Russian tourist occupancy was at Mariana Resort and Spa during the market’s heyday, Cavanaugh, who is the hotel’s general manager, said they enjoyed repeater guests from the former Soviet Union.

Cavanaugh said that in January 2014 the Russian market comprised 9 percent of total HANMI hotel rooms sold. That amount is now down to 3 percent.

She said that from November 2013 to November 2014, the Russian market went down 72.7 percent. It further went down to 60 percent from October 2013 to October 2014, while based on December 2014 numbers it went down 85 percent more.

Staying home

A family of Russian tourists who’ve visited Saipan frequently since 2011 said they wouldn’t be visiting this year because of the expensive flights via Asiana Airlines. They normally stay at the Pacific Islands Club Saipan.

Katya Prokopenko, 14, along with her mother, Nina, and her younger brother Vova, 12, who was contacted by Saipan Tribune through Facebook, said they would just spend summer this year in Vladivostok, where they live.

Prokopenko said she vacationed on Saipan about five times, while her brother and mother vacationed eight times. She said her mother and brother visited in the summer of 2011, while she got the chance to visit Saipan in the summer of 2012. They last visited in the summer of 2014.

“We usually travel by Asiana Airlines. Charters cost cheaper, but now there are no charters. So I don’t think we’ll be visiting this year. Now we can’t travel by charters cause they are closed and Asiana is really expensive and booking hotels is expensive too. I feel sorry because the economics of our country is so low, so now I’ll spend all summer here and I miss the workers at PIC. We’re not sure when we’ll travel back to Saipan,” Prokopenko said.

Prognosis, MVA strategy

Although the crisis continues, the Russian ruble is now showing signs of stabilizing and there are initial signs of recovery in demand, with reservations for the end of spring-summer 2015 showing a gradual recovery in reservations to the CNMI for the late spring-summer 2015, according to Tenorio

“As soon as Russia’s economy begins to stabilize in 2015, we fully expect the numbers of Russian visitors to start to increase once again, in tandem with economic stability. Faster recovery of tourism from Russia is predicted from the end of 2015 to 2016,” Tenorio said.

The only route to the CNMI from Russia is via Seoul on Asiana, and as a result, the MVA Russia team is working closely with Asiana to provide discounts for air tickets to the CNMI via Seoul and is launching joint CNMI promotions with Asiana throughout the East Russia market.

MVA Russia is also continually working with major travel agents to lay the groundwork for the re-launch of charter flights to the CNMI from East Russia once Russia’s economy stabilizes.

“Russians will not stop travelling during the coming year, but time is needed to adjust to the new reality, and under these circumstances, the MVA will continue to support its airline and travel trade partners in the Russia market, and maintain visibility for the CNMI as a world-class destination for Russians in anticipation of the recovery of the market in the years to come,” Tenorio said.