Russian agencies suffer from political fall out

28, August, 2014

The continuing political tensions between Russia and the West over Ukraine have contributed to a sluggish summer season for many Russian agencies in the region, confirming earlier fears of a business downturn.

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Igor Mishurov, Deputy Director of Students International, told Study Travel Magazine that the “noise of sanctions” had deterred many potential clients this year. “Everybody is worried that credit cards will be blocked,” he said.

In a special STM feature on the crisis earlier in the year, Mishurov predicted a 30 per cent decline in business. “It was a realistic forecast,” he said. “This season was not positive, and nearly all destination countries were down.” He added, “I’ve been in this industry for around 14 years, and each year we saw an increase of between 10 and 30 per cent. Just 2009 [the height of the global financial crisis] and this year have been decreases.”

Several agencies in the Moscow area have reported a decline in business especially in short-term programmes, said Julia Alimochkina, General Manager of agency Litera Scripta Manet Ltd (LSM), a member of the Association of Russian Education Advisors (AREA).

Mishurov advised that three major companies in the wider travel industry had closed down as well as a major domestic budget airline, and he said the agency business could be similarly impacted. However, there could be a positive outcome for the industry from the situation, he added. “Maybe the Russian market needed this shake-up; some of the unstable agents taking big loans will go.”

Although declines in the short-term language business were clear, Alimochkina said longer-term academic courses had been less affected. “Foundation and postgraduate programmes were pretty much the same.” She said this market was less sensitive to price changes and short-term factors as students start planning and saving much earlier.

As well as the fear factor among clients, Mishurov listed reasons for declines including the fact that the movements of some public officials are restricted by sanctions and the currency devaluation, although this has stabilised recently.

Despite fears of visa refusals, this year’s acceptance rates are only very slightly less than usual, he said, “but information between people circulates faster than reality”. Alimochkina also confirmed that visa acceptance has been at regular levels this summer.

Meanwhile, in neighbouring Ukraine agency trade was affected during the summer, with a similar impact on course request types. Alexandra Tarchenko, Partner Development Supervisor at DEC Education, said, “Sales of short-term summer programmes were tangibly affected by the political situation and the fall of hryvnya.”

Tarchenko explained, “Last year, language students from Eastern Ukraine accounted for 55 per cent of our respective clientele, while this year we have already seen a 21 per cent decline in sales to customers from the East and eight per cent to those from the South. The currency collapse lead to frequent cancellations of bookings: thus, sales of UK programmes dropped by 12 per cent.” On the other hand, there was an increase in interest for cheaper destinations and programmes, including in the USA, Spain, Cyprus and Canada, she said.

Long-term academic programmes have continued to grow during the unrest in Ukraine, with students eager to pursue higher education courses and stability. However, Tarchenko said two factors had become noticeable during this trend.

“First, a share of students had to re-orient to cost-saving programmes due to the growing disparity between currencies though earlier they were considering more expensive universities. Second, some students who planned their enrolments some time in 2015, abruptly changed their minds and will be enrolling for foundation programmes already this autumn: both to ensure successful transfer to university and to save money with the current exchange rate (so as not to pay more next year).”

Another trend that was previously highlighted was that institutions were becoming fearful of travelling to the Ukraine for agency visits and student fairs. While some institutions are currently pursuing indirect marketing strategies in the country, others are starting to come again, says Tarchenko, with around 30 institutions already signed up for DEC Education’s Higher Education Abroad Fair in October.

“We are actively preparing for this event too and can assure that educators have not lost interest in Ukrainian students and trust our agency as a reliable and long-standing partner,” she said.

The October issue of Study Travel Magazine will feature an agency survey on the Russian outbound market.

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