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Saving tourism business in Russia

August 07, 2014, 16:43 UTC+3 Alexandrova Lyudmila
People gathering near the office of Labirint travel agency

People gathering near the office of Labirint travel agency

© ITAR-TASS/Sergei Fadeichev

MOSCOW, August 07. /ITAR-TASS/. Russian TV reports of families stuck at foreign airports without accommodation as their tour companies went bankrupt have recently become commonplace. Long lines stand in front of tour operators’ offices in Russia to get back passports and money. Dozens had their vacations spoilt or even disrupted. How the crisis started and is there a way out?

Over the month, six Russian tour operators wound up their work as they failed to meet their liabilities to the customers, thus affecting several dozens of thousands of people already on the move or planning their vacations.

The sector’s proxies say the crisis resulted from unfavorable economic environment, primarily the ruble decline continuing since last year, as well as international escalation, which has allegedly put many off travelling abroad, and recommendation to Russian security officials to refrain from going to foreign countries.

On August 4, Russian Prime Minister Dmitry Medvedev pledged to control the “unprecedented” situation comparing it to a financial pyramid.

The government plans to urgently adopt new tourism legislation and toughen requirements to market players. Minister of culture Vladimir Medinsky who is in charge of tourism proposed to fix compulsory authorized capital for legal entities, increase contributions to the sectoral fund and introduce a licensing system and banking guarantees for major operators.

Supervision has already been restricted. The investigative Committee spokesperson Vladimir Markin said on Thursday criminal cases had been opened for fraud against Labirint, Roza Vetrov Mir, Ideal-Tour, Neva and Expo-Tour. According to the official, the companies’ owners were aware of their debts to the partners but continued sales, “and their operations became a financial pyramid”.

These large-scale bankruptcies are not linked to either ruble exchange rate or Western sanctions, said professor of the department of business process management at the Russian Presidential Academy of National Economy and Public Administration, Galina Dekhtyar.

“This is not the first time tourism companies demonstrate their insolvency: tour operators collapse every year, large tour operators with many customers at that,” she told ITAR-TASS. “But the people who directed these companies continued to work in the business and consult.”

Many, Dekhtyar added, had accounts abroad, and they had probably foreseen the course of events. However, some bit off more than could chew. This house of cards collapsed because of financial incompetence or negligence in transportation, reservation and paperwork.

However, inadequate state regulation is the main reason of what happened, the expert believes: “We do not have the scale to let business develop without checks and regulations.”

Dekhtyar described the tourism as “an unloved stepdaughter” and said a special ministry is needed that would be led by a competent specialist.

“Tourism was earlier under supervision of the sport ministry, and sport was clearly in the foreground. It is now controlled by the ministry of culture, and it is clear what is more important there,” she said.

The state register of tourism experts should be restored, Dekhtyar added. They would certify tourism services by checking the companies’ documents before the season starts to make sure they comply with economic security requirements. The existing National standards should be applied, as they clearly set out what to do in each case, she added. If what has been lost is restored we would not have to reinvent the wheel, the expert said.


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