Chinese Tourists Are Flocking to Russia
WHY YOU SHOULD CARE
The weakened ruble is a windfall for certain industries.
By Max Seddon
With a new runway operational and a gleaming international terminal opening this month, Moscow’s Sheremetyevo airport has set an ambitious target to double traffic to 100 million passengers a year.
Nearly half are set to come from routes that were until only recently an afterthought: connecting flights between Europe and Asia, boosted by breakneck growth in tourism from China.
The weak ruble — currently trading at 62 to the dollar, less than half its value five years ago — has made Russia one of the top three destinations worldwide for Chinese tourists, Russian officials say. In fact, state tourism agency Rosturizm estimates that …
More than 2 million Chinese tourists visited Russia last year — compared with just 158,000 a decade ago.
“The ruble devaluation after 2014, Moscow’s efforts to simplify the process for Chinese tour groups to get visas together and active marketing by Russian tourism firms have contributed to the trend,” says Alexander Gabuev, chair of the Russia in the Asia-Pacific Program at the Carnegie Moscow Center.
“Russia has also allowed more flights from regional Chinese air companies to Moscow, which helps turn the Russian capital into an air hub for Europe-bound Chinese tourism,” Gabuev says.
Despite outcries from Russia’s Culture Ministry that Chinese tourists are swamping popular St. Petersburg tourist sites, their big spending makes them an attractive proposition. The average Chinese tourist spends $700 on a trip to Russia, according to the central bank, while total spending for 2019 is expected to top $1 billion. As many as 70 percent of tax-free receipts handed out at Russia’s airports go to Chinese citizens.
Sheremetyevo, Moscow’s largest airport, is looking to capitalize on that growth. Signs and announcements are in Mandarin throughout, while duty-free stores accept popular Chinese payment methods, including UnionPay cards and online systems WeChat Pay and Alipay.
More than 2.3 million Chinese tourists flew into Sheremetyevo in 2019, including 1.26 million who transferred via the airport. Sheremetyevo, which offers flights to 29 Chinese cities served by eight Chinese airlines, expects that number to grow by 30 percent a year in the years to come.
“We think that we’re only just getting started growing Chinese passenger flows,” Alexander Ponomarenko, Sheremetyevo chairman, says.
Ponomarenko and his business partner Alexander Skorobogatko own a 65 percent stake in Sheremetyevo’s holding company, which owns about two-thirds of the airport. Another business partner, Arkady Rotenberg, a childhood judo sparring partner of President Vladimir Putin, owns the remaining 35 percent of the holding company, while the government owns the other 30.5 percent of the airport.
Since taking over Sheremetyevo, Ponomarenko has overseen a $2.5 billion infrastructure upgrade that includes two new passenger terminals, a cargo terminal and a train under the runway linking them to the existing terminals.
In addition to Chinese tourism, Ponomarenko sees transfer traffic between Europe and China as key to growing Sheremetyevo’s passenger flows.
Russian national carrier Aeroflot, which is based in Sheremetyevo, controls 7.8 percent of transfer traffic between Europe and China — second only to Air China, which accounts for 18 percent. The airport has doubled its share of transfer traffic between Europe and China to 10 percent in the past five years and intends to compete with more-established hubs.
“Passenger traffic is going up both because of direct flights out of Moscow and because of transfer passengers. That’s from Asia to Europe and back, where Moscow competes with Doha, Istanbul and Dubai,” says Ponomarenko.
Moscow’s attractiveness as a transfer hub and tourist destination has seen several foreign companies take shares in Russian airports in recent years. Qatar Airways is in talks to conclude the purchase of a 25 percent stake in Moscow’s Vnukovo by the end of 2019, while the Qatar Investment Authority and Germany’s Fraport are part of a syndicate that owns Pulkovo Airport in St. Petersburg.
Ponomarenko says he and his partners were considering selling a 30 percent stake in Sheremetyevo to raise funds to buy out the government’s stake should Russia exercise a put option.
“We don’t think [Chinese tourism has] peaked yet,” he says. “Even if [China’s growth slows down], it’ll only go up, because it’s cheaper for Chinese tourists to go to Russia than anywhere else.”
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