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March 10, 2022updated 17 Mar 2022 4:27am

Russia sanctions a potential blow for tourism in Southeast Asia

The impacts have severely disrupted outbound tourism from the country, from a transactional point of view, as disposable income falls.

By Globaldata Travel and Tourism

As multiple nations continue to impose sanctions on Russia due to the ongoing conflict with Ukraine, the Russian economy is suffering, affecting all areas of its society. The impacts have severely disrupted outbound tourism from the country, from a transactional point of view, as disposable income falls. While travel to Europe from Russia will almost stop completely, the Southeast Asian market also stands to lose a significant volume of tourists, with Russia being a valuable source market for the region.

Thailand and Vietnam will suffer the impacts most

The impacts are being felt across Russian society and, as a result, tourist hotspots popular with the higher spending middle-class could face notable drops in visits this year. The market in Southeast Asia was growing rapidly over recent years. In 2019, total trips to the Southeast Asia region were at almost 2.6 million, according to GlobalData’s Tourism Demands and Flows Database. Naturally, figures fell sharply due to the pandemic, but in 2021 showed some encouraging signs of recovery, reaching approximately 1.4 million.

As such, Thailand and Vietnam will feel the pinch more than any other nations in the region. Like many parts of the world, 2022 was considered pivotal for international tourism. The lifting of many travel restrictions across the globe had excited both tourists and businesses alike. Forecasts for Southeast Asia this year showed that the two countries were expecting approximately 1.8 million Russian tourists this year. However, it is now unlikely that figures will reach anything like this. With other countries in Europe also feeling the strain, albeit not aggressively, of the economic sanctions on Russia, this will come as a double blow for these destinations, which also receive millions of tourists from the West in any typical year.

A blow for Southeast Asia tourism recovery

The inevitable fall in Russian tourist numbers in 2022, and potentially beyond, is a blow for a region that has invested heavily in attracting travelers from Russia in recent years. According to GlobalData, between 2009 and 2019, tourism to the region from Russia increased at a CAGR of 17%. In Vietnam alone, it grew at a CAGR of 38%, highlighting the significant investment that has gone into attracting Russian tourists. Unfortunately, this situation is unlikely to resolve anytime soon. Singapore, for example, has taken a diplomatic stance against Russia, and its national carrier has indefinitely suspended flights between Changi and Moscow. At the same time, other countries have taken a different view, due to the reliance on inbound tourism. Authorities in Thailand have discussed the use of cryptocurrency to enable them to transact with Russian agencies, highlighting the desperate situation the countries are in to rejuvenate their tourism industries.

Ultimately, Southeast Asian tourist boards will need to focus on growing tourist numbers from other markets. Domestic tourism and Australasia could well be easy wins for the coming years, rather than trying to win back a market that is in a unique and unpredictable state. These markets are likely to grow after challenging a few years during the pandemic.

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