The effects of the economic crisis benefit domestic tourism


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Travel and Tourism in Belarus

Industry Overview | 02 Apr 2012

EXECUTIVE SUMMARY

The effects of the economic crisis benefit domestic tourism

During 2011, Belarus was hit by a new wave of economic recession and the resultant strong currency devaluation made it much more expensive for Belarusians to travel overseas. Moreover, the economic recession compromised the purchasing power of local consumers and a growing number of Belarusians postponed trips abroad and turned instead to domestic tourism. Especially high demand was apparent for domestic rural tourism and domestic health and wellness tourism, both of which offer high quality leisure tourism at reasonable prices. These options are expected to remain popular for local consumers as long as the economic recession persists.

Belarus prepares to host the 2014 Ice Hockey World Championship

In order to gear up for its hosting of the 2014 Ice Hockey World Championship, the Belarusian government has decided to implement a number of projects aimed at developing the country’s travel and tourism infrastructure and boosting service levels in the country’s travel and tourism industry. These projects include the construction of new hotels, the redevelopment and reconstruction of existing accommodation and hospitality facilities. There are also major projects which are making improvements to the busiest road networks in and around Minsk, the venue for all of the matches in the 2014 Ice Hockey World Championship, while Minsk National Airport is also undergoing a complete redevelopment. In addition, a number of tourist information boards and signs are to be installed in Minsk to help foreigners navigate their way around the city.

^ The Belarusian Government extends a warm welcome to foreign investors

The government of Belarus has recognised the importance of attracting foreign investors into the country, with travel and tourism the focus of much of its efforts to attract foreign investment. Some 80% of the projects undertaken by the National Programme for Tourism Development for the period between 2011 and 2014 are expected to be financed from external sources. In order to alter the previous perception of Belarus as an unfavourable destination for foreign investment, the government has announced its willingness to create propitious conditions for investors by offering a number of generous benefits and tax breaks for overseas investors. The majority of this investment is destined to developing Belarus’ travel and tourism infrastructure, with rural tourism and the reconstruction and restoration of historical buildings and landmarks a priority.

^ National online travel and tourism booking resource launched

During May 2011, the national online travel and tourism booking system Kali-laska.by was introduced. This resource can also be accessed through the travel and tourism section of the official Belarusian portal Belarus.by and also the portal of the Belarusian National Tourism Agency and currently offers the option to book excursion tours and various types of tourist accommodation including over 50 hotels, cottages and apartments in eleven Belarusian cities and towns. The national online travel and tourism booking system is expected to double the number of hotels which offer online booking in Belarus and is also set to include the online booking of car rental and transfer services as well as recreation facilities. According to Belarus’ travel and tourism officials, the national online travel and tourism booking system is ready to be integrated with international consolidators in order to become available for foreign tour operators.

^ Belarus’ first hostel opens its doors

On 1 July 2011, Belarus’ first hostel, Postoyalets, was opened in Minsk City, marking the inauguration of a new era in the development of low-cost travel and tourism in Belarus. This event is also significant as the price of hotels and other tourist accommodation outlets in Belarus remain high. The hostel offers two-bed, six-bed and eight-bed rooms, free Wi-Fi, television and a self-service kitchen, all at prices which are around 65% of the price of a hotel room in Minsk. Postoyalets is likely to become a very popular option among younger tourists in Belarus.

^ KEY TRENDS AND DEVELOPMENTS

New economic crisis emerges in Belarus

Following the positive signs of economic recovery which developed in Belarus during 2010, the Belarusian economy was hit by a new wave of economic recession in 2011. In spite of government assurances about the stability of the Belarusian rouble, on 24 May 2011 the national currency was officially devalued by over 50%, while the actual devaluation rate was said to be even higher. The significant difference between the official and the actual currency exchange rates resulted in booming demand for foreign currency, and this led to a shortage of foreign currency supplies within Belarus and posed a number of tangible problems for the majority of businesses in Belarus. The country’s travel and tourism industry was particularly severely affected by the devaluation of the Belarusian rouble and the lack of foreign currency. Following the introduction of a single currency exchange rate in October 2011, the value of the Belarusian currency was officially announced to have declined by a total of 189% over the course of 2011.

Current impact

According to the National Statistics Committee, the average household income in Belarus between January and June 2011 was BYR65.1 trillion, 37.1% higher than over the same period during 2010. However, as a result of the 2011 currency devaluation, prices continued to rise significantly in Belarus, forcing local consumers to trade down to cheaper products and brands and cut down spending on non-essential items, including entertainment and travel and tourism. In light of this extension of the economic downturn and their inability to acquire foreign currency in 2011, many Belarusian consumers postponed their outbound travel plans, turning instead to domestic tourism. This, in part, contributed to sustained demand for domestic excursion tours, although even this was negatively affected by increasing fuel prices. During 2010, there was also rising demand for trips to local sanatoriums and rural tourism facilities. In recognition of the very high popularity of Belarusian sanatoriums among foreign visitors—Russians in particular—the Belarusian government decided to support local consumers and prohibited the sale of sanatorium vouchers to foreigners until domestic demand had been saturated.

Those Belarusians who simply refused to forego their overseas trips during summer 2011 were forced to find another way to economise so as to be able to afford their holidays. Some of them shortened the length of their trips from ten days to seven days, while others preferred to shift the timing of their trips to less popular months such as May, June or the so-called ‘velvet’ season in September and October. In certain cases, Belarus’ outbound tourists chose to stay in hotels with lower star ratings. In order to attract higher numbers of consumers, local travel retailers launched new advertising campaigns and offered generous discounts. According to the estimates of private companies involved in travel retail, the impact of Belarus’ economic recession might have been much worse were it not for the high numbers of consumers who had already booked and paid for their overseas trips well in advance, prior to the worst effects of the recession developing.

Belarus’ economic downturn had the most pronounced effect on the travel plans of local consumers and had only a limited impact on tourism flows inbound. According to data provided by the State Border Committee, arrivals of foreign citizens into Belarus between January and June 2011 amounted to almost two million people, an increase of 7% compared to the same period during 2010. These inbound arrivals figures can be broken down to 173,000 business arrivals and 1.6 million leisure arrivals.

Outlook

The Belarusian government claims that the current economic recession will only be a temporary situation and it has promised to regulate the currency exchange rate in order to mitigate the worst effects of Belarus’ economic woe. According to government officials, Belarus’ adverse economic situation can be alleviated by financial support in the region of US$3 billion allocated by the Eurasian Economic Community (EAEC or EurAsEC) for the period 2011-2013. The first tranche of US$800 million was transferred to the Belarusian government in June 2011.

^ Future impact

According to financial analysts, the prospects for the full recovery of the Belarusian economy remain far from clear and largely dependent on the decisions to be made by the government in the immediate future. The ongoing economic instability in Belarus, coupled with the limited purchasing power of Belarusian consumers and rising prices, will continue to have a negative impact on the country’s travel and tourism industry. As long as the current economic recession persists, Belarusian consumers will continue to spend less on travel and tourism, preferring cheaper outbound destinations and domestic travel and tourism, with agro-tourism and health and wellness tourism becoming more popular. Price will remain the most important factor determining the choices of Belarusians, leading to the country’s travel retailers offering more generous discounts and focusing on cheaper destinations during the forecast period.

^ Belarus’ national tourism strategy begins to take shape

The Belarusian government routinely stresses the importance of developing domestic travel and tourism and its intention to attract more inbound arrivals to the country. On 24 May 2011, a new state programme for the development of travel and tourism in Belarus for the period 2011-2015 was approved by the Council of Ministers. The programme provides for the development of travel and tourism infrastructure and the construction and reconstruction of over 200 travel and tourism facilities including sanatoriums, hotels, hunting lodges, rural tourism facilities and cultural heritage facilities. The programme has identified Minsk—the venue for the 2014 Ice Hockey World Championships—the Lake Naroch tourist zone, Pripyat Polesye and the Braslav region as the most important areas for the implementation of its strategy. Agro-tourism—or rural tourism—is still given the highest priority by the Belarusian state, while other important directions for the strategy include the development of medical tourism and recreational tourism, visits to sanatoriums, historical and cultural tourism, ecotourism and encouraging inbound tourism from people living in the border areas of Belarus’ neighbouring countries.

In addition to the lack of development of Belarus’ tourism infrastructure and the reasonably high barriers presented by Belarus’ relatively strict visa requirements, the Ministry of Sport and Tourism has identified the lack of sufficient information about Belarus as an international travel and tourism destination as being one of the most urgent problems facing the country’s travel and tourism industry. The majority of potential inbound tourists remain unaware of what Belarus has to offer in terms of travel and tourism facilities. Thus, according to the official state programme for travel and tourism development, special emphasis should be placed upon creating a positive image of Belarus as a travel and tourism destination.

^ Current impact

The most popular travel and tourism activity in Belarus for both domestic and inbound tourists has traditionally been a stay at a sanatorium. Belarus’ sanatoriums provide both recreational and medical services at acceptable prices. However, rural tourism is developing at a steady pace. Since 2006, when the presidential programme for rural tourism development was first implemented, the number of rural tourism facilities in Belarus increased from 34 to almost 1,500, while the number of tourists availing themselves of Belarus’ rural tourism facilities increased 137-fold to approximately 120,000 in 2010. 91.8% of these people were Belarusians, with a further 7% being foreigners, mainly from Russia, Germany, Ukraine, Lithuania and Poland. Due to the lack of foreign currency in Belarus during 2011, agro-tourism was subject to even stronger demand among domestic tourists, with the average daily price of US$25 per person for staying at travel accommodation outlets in rural areas. Furthermore, during 2011 Belarus’ domestic tourists were for the first time offered an opportunity to combine rural tourism and health and wellness treatments at the country’s sanatoriums.

Several steps were taken in 2011 with the aim of making Belarus a more attractive travel and tourism destination under the auspices of the national tourism strategy. For example, the government decided to reorganise the National Tourism Agency and finance it directly from the state budget in order to make the work of the Agency more effective. Furthermore, the Ministry of Sport and Tourism has promised to render financial support to local travel retailers which are engaged in the provision services for domestic and inbound tourists, and financial assistance is also on offer for the development and promotion of events and activities which aim to promote the Belarusian travel and tourism industry within Belarus and abroad.

Outlook

During the forecast period, the Belarusian government is expected to continue engaging in the development of rural tourism in the country. According to the leading officials concerned, investors which are currently involved in the construction of agro-tourism facilities and travel and tourism complexes will enjoy preferential treatment in terms of tax breaks. Furthermore, as previously announced, the government’s support for domestic and inbound tourism will be manifested in a simplified taxation system for travel retailers which deal with these types of travel and tourism activity.

^ Future impact

The prospects for rural tourism in Belarus remain highly positive. As the country’s agro-tourism infrastructure continues to develop and the range of services offered at rural travel and tourism facilities continues to widen, a growing number of both local and foreign consumers will become more interested in rural tourism in Belarus, with the reasonable prices charged the main motivation. Outbound tourism in Belarus is expected to continue suffering during the forecast period due to the lack of financial support from the government, which has repeatedly announced that it is interested only in developing inbound and domestic travel and tourism in Belarus. In terms of the economic recession, the number of travel retailers which deal with outbound travel and tourism is likely to decline over the course of the forecast period, while some of them will be forced to alter the focus of their travel and tourism promotion activities.

^ Issues surrounding Belarus’ visa regime continue to have an effect on travel and tourism

The Ministry of Sport and Tourism of Belarus regards the country’s high visa barriers and the high cost of obtaining a visa to visit Belarus as key determining factors preventing higher growth in inbound travel and tourism in Belarus. According to the Ministry’s estimates, visa regime simplification would result in a 20% increase in foreign currency earnings through the provision of travel and tourism services to foreign visitors. The Ministry has identified decreasing the price of obtaining a visa to visit Belarus a key factor in boosting inbound tourism, with cost-free visa applications a realistic option being considered, while a simplification of the visa regime for foreign tourists would also be a major step forward, according to the Ministry. The price of a visa for a group of inbound tourists currently stands at €10, while for individual tourists it still remains rather high, ranging from €25 for visitors from Poland and the Baltic countries to US$131 for US citizens. The Ministry currently proposes to cancel the current visa regime for visitors from more affluent countries, with EU Member States the major focus as the Ministry is considering the possibility of issuing visas to EU citizens online and installing a 50km-long visa-free border zone between Belarus and the EU Member States which lie over its Western border. In August 2011, the Minister of Sport and Tourism put forward a suggestion concerning the introduction of a Russian-Belarusian mutual visa programme, which would allow foreign tourists to engage in visa-free travel in both countries.
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