Romania's tourism: a walk on thin air
Last year, Romania's tourism had a tumultuous trip itself due to domestic legal changes, introduction of holiday vouchers, terrorist attacks and alerts. This year it plans to put in its backpack more maturity and consolidation
Although far from its real potential, Romanian tourism is constantly rising both for business and leisure and it intends to keep on walking... but for how long? Alexandra Cioboata (Lopotaru) talks to important travel players to take a snapshot of the moment.
The Romanian tourism market has been evolving in recent years towards a more mature market, experts say, the evolution being closely related to the increasing interest for Romania as a business destination, but also in terms of leisure due to more holiday possibilities which exist now as compared to a decade ago. In addition, the online influence in tourism has brought more competitive prices, more dynamic decisions, and better-informed clients who more carefully choose their destinations. Leisure travel spending in Romania (inbound and domestic) generated around 70 per cent of direct Travel & Tourism GDP in 2014 - 13.6 billion RON (almost three billion Euro), compared with roughly 30 per cent for business travel spending - 6.1 billion RON (around 1.37 billion Euro), according to the 2015 report by the World Travel and Tourism Council. In addition, the leisure travel sector has grown by 4.6 per cent in 2015, with the business segment by 3.7 per cent, reads the same report.
Romania witnessed two major legal changes in the tourism industry last year; VAT cut and the introduction of holiday vouchers, both of them meant to encourage domestic travel and expected to positively reshape 2016′s tourism landscape. The outgoing segment also grew last year, despite terrorist incidents and alerts, Greece and Turkey being the most important destinations, followed by Bulgaria, Spain and the rest of the Mediterranean countries. However, incoming - although growing as well by at least ten per cent - is still below Romania′s full potential, according to experts, mainly because of the poor state of the transportation infrastructure and also because of lack of promotion. Compared to France which sees 80 million foreign tourists per year, Romania receives almost two million foreigners, of which 65 to 70 per cent actually come for business, according to experts.
Nevertheless, last year Romania remained the most important destination for Romanians, choosing the seaside, balneary, and mountain resorts, as well as agro-touristic pensions. Moreover, the number of tourists who chose the Romanian seaside as a holiday destination last year has increased by about 18 to 20 per cent, one of the best years since 2005. The increase was due to an intense promotion campaign of the coastline, a large number of events organized among all resorts, due to an improvement of the standard of tourism services offered by hoteliers and owners of tourist structures, as well as to measures adopted by the Romanian authorities, which had a direct effect on stimulating growth of tourist traffic, according to a press release of the Litoral - Delta Dunarii Association, issued to Agerpres in September.
Furthermore, the holiday vouchers will also play an important role for domestic travel. The president and general manager of the tourism agency Eximtur, Lucia Morariu, estimates that the effects of the law regarding the holiday vouchers, which was finalised in the fall of 2015, will be noticeable starting this year, as the company′s results from January showed a growth of over 25 per cent in sales for destinations in Romania.
"The effects [of the law] will be noticeable this year," Morariu tells The Diplomat - Bucharest. "The interest will be higher for the seaside and mountain resorts, agro-tourism, but mostly balneary resorts and hotels with spas and treatment facilities, which have benefited from important investments in the last few years. Romania is well-known in Europe for its thermal water and its beneficial effects."
Furthermore, according to Alin Burcea, founder of one of the largest local travel agencies Paralela 45, the application of the law regarding the holiday vouchers will bring to the tourism industry an additional ten million Euro this year. "The holiday vouchers were designed to stimulate domestic tourism," Burcea tells The Diplomat - Bucharest. "We estimate that the law will bring to the tourism industry an additional ten million Euro this year, and next year - maybe 30 million Euro. Unfortunately, the new Government did not allow vouchers for state employees. Otherwise, the figures would have been much higher. Nevertheless, they need more promotion, because there are not so many people who know about them."
Geopolitical context, changing the tourism map
Although the business segment will not be affected, 2016 will bring major changes in leisure destinations due to social and geopolitical contexts. The terrorist attacks already destroyed two important destinations in Tunisia and Egypt and the recovery period will be at least three years for them, according to Dragos Anastasiu, founder and president of the long distance coach organisation Eurolines Group. Moreover, Kos, Samos and Lesbos, the Greek islands form the Mediterranean Sea, are also affected by the refugee crisis, he says. According to Anastasiu, this leads to increased bookings in Spain, especially Palma de Mallorca, which is already 80 per cent booked for the summer of 2016 and Bulgaria, which has an increase of at least 25 per cent over last year.
Another country that must find new solutions to attract clients this year - including Romanians - is Turkey, which has witnessed a collapse in the number of Russian tourists after the diplomatic conflict created between the countries last fall. Thus, without its main source of income (3.3 million Russians were registered in 2014), Turkey′s first move was to decrease prices which are now 25 per cent smaller than last year. However, Anastasiu estimates that the decreasing prices in Turkey will end in the next months because there will not be too many alternatives to choose from and the tourists will ultimately still go to Turkey.
"There will be no room for all the tourists in the ′safe′ Med area because we have two almost closed destinations - Tunisia and Egypt - and some with problems such as Kos, Lesbos, Samos, and Turkey," Anastasiu tells The Diplomat - Bucharest. "Therefore, all the tourists who previously went to those destinations must now find others, which is impossible because of the capacity of the latter. Spain, Italy, Croatia, and Bulgaria cannot accommodate the millions of Russians who previously went to Turkey, Egypt and Tunisia. I estimate that the decreasing prices in Turkey will end in the next months because there will not be too many alternatives to choose from, so the tourists will finally choose to go to Turkey. I also think that the long-haul destinations such as Caribbean, Maldives, South-East Asia will increase due to these facts."
According to Alin Burcea, founder of Paralela 45, the effects of the Russian-Turkish diplomatic conflict will be reflected in Romania. According to him, the Russian tourists that have until now gone to Turkey will this year choose as holiday destinations mainly Greece, Spain and Bulgaria, leaving less room for other tourists including Romanians. In order to avoid such a scenario, Paralela 45 doubled the number of rooms under warranty in Greece. "This year, Greece will remain a very strong destination, while Spain is increasingly rising," Burcea tells The Diplomat - Bucharest. "However, there will be some issues regarding Greece as 90 per cent of the Russians will go there. In order to prepare ourselves, we doubled the rooms we had booked. (...) Regarding Turkey, Romanians are still interested in going there and we even registered increases compared to last year. Why? Because hotel players dropped prices to the lowest level registered in the past decade."
Nevertheless, the president and general manager of the tourism agency Eximtur, Lucia Morariu, notes that although Paris and Turkey were affected by the geopolitical context, as long as the situation remains stable things will be all right. Moreover, according to her, the main country that will gain tourists this year will be Romania. "The demand for Greece is high and it has become necessary to make bookings earlier, because many Russians prefer it now," says Morariu. "More Romanians will also probably choose Spain and Italy this year. Tourists have begun to look into other types of holidays and destinations, for example cruises and exotic countries, or turned to closer destinations which they consider safer, such as Hungary, Croatia, Slovenia and Bulgaria. We predict that the main country which will gain tourists this year will be Romania, due to its safety and the holiday vouchers system that has just been implemented."
The Diplomat - Bucharest further analyses the development of the Romanian travel market through the eyes of six important travel agencies (including the ones mentioned above), also taking the pulse of their business and stressing their main objectives for this year.
Happy Tour: Tour operators market, back on the upward trend
After the economic crisis in 2008 and its effects, felt through at least 2012, the tour operators market is back on the upward trend, according to Javier Garcia del Valle, CEO of Happy Tour Group, one of the largest travel agencies in Romania which includes Happy Tour, the online travel agency Paravion and tour operator Prestige Tours. The sector grew even last year, despite the turbulence caused by the terrorist attacks, alerts or refugee crisis. According to the CEO, most of Happy Tour′s tourists are choosing in 2015 destinations such as Turkey, Greece and Spain. Furthermore, the CEO expects the year of 2016 to follow the same growth trend.
"Terrorist attacks create panic among tourists and make them avoid the destination, but only for a while," Javier Garcia del Valle tells The Diplomat - Bucharest. "When local authorities bring things back to normal, confidence returns and tourists travel again to these areas. There are also areas where repeated terrorist attacks, combined with political and administrative crises, have shaken the confidence of tourists for years. In these particular cases, we can talk about an exclusion of these destinations from the tourist map... for now. However, we have also witnessed other situations. Last summer, for instance, we all saw the Greek crisis in the middle of the summer. What did it mean for tourists? Nothing. Not a single Romanian tourist who was in Greece at that time was affected by the financial problems the country had. Moreover, we witnessed the refugee crisis also during the summer. This context did not chase away Romanian tourists from places crossed by refugees."
With more than 84 affiliated agencies and counting around 160 employees, Happy Tour Group recorded a turnover of 94 million Euro in 2015. In addition, compared to 2014, the number of business customers of the group increased by 23 per cent, Happy Tour being a travel service provider for many important companies in areas such as communications, retail, energy, FMCG, automotive and agriculture. The business travel segment, run through Happy Tour, represents a significant part of the group′s activity in Romania and will continue to be the engine of the business in 2016 also, according to Javier Garcia del Valle, after last year it grew by 16 per cent compared to 2014.
Regarding leisure travellers, the number was 20 per cent higher than in 2014, most choosing destinations such as Turkey, Greece and Spain. The charters operated by the tour operator of the group, Prestige Tours, recorded in 2015 an occupancy rate of 93 per cent. Also, online bookings within the group increased by over 250 per cent in 2015, the estimates for the current year expecting an increase of tens of percentage points.
"Our customers are the centre of all activities of the company," says the CEO of Happy Tour. "Last years, Happy Tour Group invested millions of Euro in technology, applicable to both business and leisure travellers, which had a significant contribution to business growth. We developed the business based on the latest technology. We wanted to answer the most complex travel needs of our tourists, whether we talk about employees of companies or people who organize their holidays through our group," he concludes. For 2016, Happy Tour Group expects a double-digit growth in terms of turnover.
Paralela 45: Leisure grew by at least ten per cent in the last four years, but still below full potential
Romania receives roughly two million foreign tourists per year, of which only around 35 per cent come for leisure, with the rest for business, according to Alin Burcea, founder of one of the largest local travel agencies, Paralela 45. There has been a constant increase of at least ten per cent in the leisure segment over the past four years, he says, due to the fact that Romania is increasingly better perceived, but still below its full potential. One of the main conditions for Romania to take hold of the tourism map would be to invest more in its promotion.
"If tourism is not a national priority, it doesn′t interest anyone," Burcea tells The Diplomat - Bucharest. "The budget the Government has allocated for the promotion of Romanian tourism is only two million Euro. It is not enough. We can′t even go to tourism fairs, let alone other activities. We should invest more in promoting ourselves. However, if the Government doesn′t have money, at least it should include on its priority list the legal framework. We don′t have a stable tourism law and there are a lot of things that need to be clarified. We should finalize it as soon as possible."
Burcea adds that although mountain resorts still register a poor development due to insufficient promotion, the Romanian seaside saw a spectacular growth of around 20 per cent last year, the best evolution in the last decade. For 2016, however, he estimates higher figures. "It is hard to estimate by how much, but there will definitely be an increase this year," he says. "Nevertheless, the outcome of last year was huge, from my point of view. We estimate that the seaside saw a growth of 80,000 tourists. We don′t have the official figures yet. Regarding Paralela 45, we have seen a 40 per cent growth on this segment."
Paralela 45 has 39 agencies across the country, including one in Chisinau (Republic of Moldova), which, according to Burcea, will be closed in the near future due to its poor performance. However, the company plans to open two agencies in Bucharest and at least two across the country this year to strengthen its local presence. "We will open four to five agencies maximum this year in certain strategic areas," says Burcea. "Otherwise, we work with franchises. The investment budget for this year is around 50,000-60,000 Euro and we plan to hire 15 more people by the end of 2016."
Last year, Paralela 45 posted a 44 million Euro turnover last year, representing a ten per cent increase compared to 2014, when it recorded 40 million Euro. For this year, Burcea estimates a growth between five and seven per cent. "Furthermore, this year, we launch two unique charters for Portugal and Croatia, because you have to permanently bring something new to the market," he concludes.
Paralela 45 has 200 employees. Corporate travel holds around ten to 12 per cent of the business, having a portfolio of 100 companies. Paralela 45 also includes a real estate division, Paralela 45 Imobiliare, which has more than ten years′ experience in the Romanian real estate sector, specialized in the construction of holiday apartments in tourist areas such as Neptun, Mamaia, Predeal and Snagov. The latest project, Club Lac Snagov, was developed following a seven-million Euro investment, consisting of 75 locative units.
New Concept Travel: When the economy grows, tourism follows suit
New Concept Travel, one of the most important travel management companies on the local market, founded in 1993 and exclusively dedicated to the corporate travel segment, recorded a turnover of 31 million Euro in 2015, representing a more than ten per cent increase compared to 2014, when the company registered 28 million Euro. For 2016, the company hopes to see a five to seven per cent rise, in line with the development of the corporate travel market, according to Malin Malineanu, founder and general manager of the company.
"Currently, the Romanian tourism market is going through a healthy period, following a path of maturation and consolidation," Malineanu tells The Diplomat - Bucharest. "From the explosive growth figures recorded during 1995-2000, it is normal to see now a stable or a slightly increasing trend. I estimate that the corporate travel grew last year around five to seven per cent in terms of outgoing - which is our core business, while the incoming sector remained stable. For 2016, however, I expect to see the same pace, as the macroeconomic indicators look good and tourism is complementary to the economic life. If the economy grows, tourism follows suit... and so will we."
New Concept Travel has a market share of around five to six per cent, counting about 250 clients from all major industries, including auto, pharma, IT, FMCG, energy and construction. Last year, Malineanu confesses that he has seen a structural growth in terms of existing clients - the main reason for the company′s positive evolution, while the number of new clients grew by two to three per cent. With around 70 employees, the company has four offices, namely in Bucharest - the main pillar - Timisoara, Craiova and Chisinau (Republic of Moldova). Regarding other openings, the general manager takes into consideration the possibility to penetrate Iasi, but, "as long as travel services can be done from anywhere, there is no pressure in having another office." However, New Concept Travel has another ace in the sleeve.
"Instead of going towards other locations, we want to consolidate several markets within a single service centre," says Malineanu. "We prefer to develop solutions for regional clients from neighbouring countries. This strategy has started to work pretty well and we managed to apply it to at least three large clients. New technologies are helping us achieve our target. This recipe has been already successfully tested globally, including by the organization we represent, American Express."
In 2003, New Concept Travel became the sole representative of the largest business travel network in the world, American Express, for corporate service in Romania. In 2014, the global company agreed to sell a 50 per cent stake in its business-travel division for 900 million USD in order to boost revenue from corporate bookings. American Express Global Business Travel - the new entity after the joint venture - has started to heavily invest in technology, a strategy that is also applied locally by New Concept Travel.
"I believe that American Express has greatly contributed to the development of our know-how and we′ve managed to create a mix - the best of both worlds - for our clients: on one hand, the global capabilities American Express offers and, on the other hand, the local expertise we have in terms of travel management. In addition, we were cautious enough to put aside funds to replicate locally what they are doing globally. Hundreds of thousands of Euro have been invested in technology so far in recent years and we will also keep the same pace this year - or even accelerate - as the future of travel is mobility," he concludes.
Eximtur′s business division grows by 17 per cent last year
The business division of Romanian-based Eximtur travel agency, which registered a turnover of over 42 million Euro in 2015, has been the growing engine of the company during last year, the growth of the segment being over 17 per cent compared to 2014, according to president and general manager Lucia Morariu. The increase of sales in business travel is due to the fact that Eximtur Business gained 125 new clients last year - private companies and public institutions - while some of the already-existing clients have increased the volume of their business trips and/or business events. According to Morariu, about 117,000 tourists travelled for business, last year, both inside the country and abroad, using Eximtur′s services. For this year, Eximtur expects the business travel growth to continue, reaching eight to nine per cent.
"The most important challenge is the development of the business travel segment, which is highly demanding and requires a great work volume and a lot of knowledge and seriousness," Morariu tells The Diplomat - Bucharest. "This year, we will invest in highly effective technology to sustain business travel management, while another priority will be the growth of the team of agents involved in business travel and events management. We will also open a new business centre in Bucharest."
Business travel generated 67 per cent of total sales last year and the remaining 33 per cent is represented by services provided by the leisure division. When it comes to holidays, about 60 per cent of Eximtur clients chose Romania and 40 per cent preferred to travel abroad. According to Morariu, in Romania, most tourists went to the Black Sea, Baile Felix and Sovata - resorts which benefited from heavy investments in recent years. In addition, the preferred foreign destinations were Turkey, Greece and Bulgaria. For this year, the general manager plans to increase sales with holiday vouchers and, therefore, increase sales for Romanian destinations. In addition, the company will launch Fly.ro, a site for online holiday reservations. "Incoming is one of our priorities, which will also mean expanding the team of consultants involved in incoming activities," she adds.
In terms of Romanian tourism market challenges, the most important state measure Morariu is hoping for in 2016 is one regarding the non-competitive market and to fight the illegal payment of salaries. She wants the state to make a simple analysis of the total workforce expenses per employee for a relevant number of companies and to compare each company′s expenses with the average, to acknowledge the great differences between companies that have the same main sphere of activity and to take measures.
"In our domain, the workforce costs mean over 65 per cent of the company costs and the fact that many players on the market pay only part of the salaries legally and the rest from other sources, less taxed, means a lot of unfair competition, incorrect prices and generally the lack of real competitiveness," she says. "It is neither normal nor economically healthy that those operators who are correct contributors should lose clients in favour of those who do not play fair. Unfortunately, this is the general situation today."
Eximtur has achieved a turnover of over 42 million Euro in 2015, resulting a growth of eight per cent. The company counts 150 consultants, over 200,000 clients, and estimates a growth of five per cent for 2016.
Eurolines Group expects ten per cent growth this year
Eurolines Group, one of the most important long distance coach organisations on the local market, with 109 million Euro turnover at the end of 2015, witnessed a positive development last year as it saw 30 per cent growth on the leisure segment and ten per cent for its business division, according to Dragos Anastasiu, founder and president of the company. For 2016, the company plans to keep up the pace and to register ten per cent growth in terms of revenues.
"We managed to have important increases in the business area of about ten per cent per year," Anastasiu tells The Diplomat - Bucharest. "The MICE segment has increased a lot and we follow this as a target. Many companies are having more and more incentives for their employees and for the sales network. What more valuable services can you choose for incentives than holidays? The leisure segment also increased a lot last year with about 30 per cent in growth for us. The retail network, TUI TravelCenter and Eurolines travel agencies ended with 76 million Euro and, as a group, Eurolines Group Romania ended with 109 million Euro. For 2016 we estimate a plus of ten per cent."
Anastasiu continues that online is one of the main opportunities the Romanian market is offering these days, as in the Romanian online business there are no Online Travel Agencies websites - besides flight ticketing - who can dynamically package a complete holiday - flight, transfers, accommodation and excursions - and have all these services together in a holiday package with competitive prices like Booking.com or Expedia.com for accommodation or flights. In addition, a combination of offline stores and online web booking systems can be the winner of the market in the near future, he says.
"From the social point of view, the market is in the full process of maturing and that means travellers more carefully chose their destinations, hotels, rooms, experiences, time to travel and time to book," says Anastasiu. "It is obvious that our tourists now book earlier than three or four years ago so they can choose better rates. (...) For the near future, a combination of offline stores and online web booking systems can be the winner of the market. This is what we are trying to do with www.tui-travelcenter.ro and with more and more offline shops placed in shopping centres (malls). We target a mix of offline stores and online booking systems that can do for the moment ′book online, pay offline′ and in the same time, of course, we encourage the Romanians to be more trustful with online payments for big expenditures like a holiday."
Eurolines Group will have more than 80 travel shops by the end of the year in Romania in its TUI TravelCenter and Eurolines brands, as it will open at least three new travel stores in City Park Constanta, Park Lake Bucharest and Veranda Shopping Centre (also in Bucharest), where the average investment will be 150,000 Euro.
Anastasiu adds that holiday vouchers will increase the travel market for domestic destinations, creating a new market and "maybe" more productivity for those who will go on vacations. However, Romania remains the most important destination for Romanians, he says, where the Black Sea Coast, the Carpathians, and the Danube Delta are at the top of the list. "Our group invests in the Green Village Resort in Sfantu Gheorghe and also in Valea Verde Resort Cund in Transylvania because we strongly believe that these areas will be the pearls of our touristic destinations in the future," concludes Anastasiu.
Anastasiu estimates that the business travel market in Romania is at least 250 million Euro per year and, within Eurolines′ portfolio, business travel is 14 per cent of the total group business. Eurolines Group has 550 employees.
Vola.ro: European destinations remain top preferences this year
The most attractive destinations for Romanians last year were the European destinations such as Paris, Rome, London, and Barcelona, suitable for city-breaks due to the short fly time and affordable flight prices, according to Daniel Truica, co-founder and CEO of the largest online travel agency on the local market, Vola.ro. According to him, the desire of Romanians to travel was not affected by the geopolitical context on the long term, and in 2016 European destinations will remain on top of the preferences mainly because of their lower prices.
"It is true that 2015 has a been an eventful year in terms of security issues, but we are happy to see that, despite this, the curiosity and desire to travel have not been affected," Truica tells The Diplomat - Bucharest. "The shocks we have seen last year, especially the ones caused by terrorist attacks, were short term. We had seen more cancellations after the Paris attacks and curfews imposed in Brussels, but everything returned to normal levels very fast. (...) For 2016, I think that European destinations will definitely remain on top of the preferences, mainly because of their lower prices and because the critical mass of Romanian tourists travelling abroad have not yet checked their ′bucket list′ of mainstream destinations."
Truica goes on to add that the Romanian travel market, especially the online market which is Vola.ro′s focus, experienced great development in recent years. One of the main opportunities was the constant increase of internet and mobile penetration, constantly expanding the target of potential clients.
"It is very important to observe that the travel environment is at an all-time high in my opinion," says the CEO. "Many international airlines are starting to see the potential of the local market and to invest in local development. For Vola.ro, I think the biggest challenge is being able to scale the business and maintain the quality of our services. The problem with scaling is that each time you have growth targets you also have to pay attention to keep the same level of quality for your services, but I′m confident we accomplished this at the best level possible, having as proof our high number of returning customers."
With over 90 employees, Vola.ro posted last year a turnover of around 42.5 million Euro, a more than 54 per cent increase compared to 2014 when the company registered 27.5 million Euro. In 2015, the online travel agency registered a 70 per cent growth for general leisure bookings on its website, investing both in the technology that powers its booking platform and in marketing. For this year, the company expects to continue to grow at a fast pace and to focus on expanding all of its products, including the dynamic packages products (flight plus accommodation). Moreover, Vola.ro plans to become a one-stop shop for all travel needs, where one will be able to find and compare all options available on the market, no matter what the purpose of the trip is, reports CEO Truica.
"I think clients need a true one-stop shop for all their travel needs," says Truica. "A travel supermarket if you want, where they can buy flights, hotels, city breaks and other dynamic packages and tour operator products. And there really isn′t one on our market. We aim to be just that," he concludes. Corporate travel accounts for less than ten per cent of Vola.ro′s business, but the company may change that in 2016, as it wants to buy a Business Travel company or to grow its in-house department.