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(Bloomberg) -- Greg Tepper typically sends 1,500 travelers to Russia every year. Since he founded his company Exeter International in 1992, he’s been one of the foremost leaders in the United States of luxury travel to Russia. And this has been his best year in a very long time—maybe ever.
“I haven’t seen demand for Russia like this since 1989, which may have been the greatest time ever for Americans in Russia,” he said. “It was perestroika. It was Gorbachev. People wanted to see the place that they kept hearing about.” Now, in the aftermath of a tanking oil industry, the collapse of the ruble, American sanctions, and Trump-driven political scandals, Russia is back in the headlines—and, at least where travel is concerned, back in the money.
According to data from the Moscow branch of JLL Hotels & Hospitality Group, an advisory firm for hospitality investors, the hotel occupancy figures for the first quarter of 2017 are the highest they’ve been in five years. Tatiana Veller, head of JLL’s Russia group, says the highest gains were posted in the midscale sector, which has added 11 percent to its bottom line so far this year, thanks to a high volume of domestic, leisure, and group travelers.
Tepper’s Florida-based company has posted even more impressive gains. He says its Russia inbound business grew 30 percent from 2015 to 2016, and bookings in 2017 are already on pace to break that record by an additional 12 percent.
Also posting double-digit, year-on-year growth are luxury specialists Ovation Vacations, high-end group tour purveyor Tauck, bespoke outfitter Abercrombie & Kent, and the mass-market behemoth Globus, which, according to the industry publication Travel Pulse, is seeing 38 percent growth in Russia-bound travelers thus far in 2017.
Even airports and airlines are on track to set growth standards. In the first five months of 2017, Russian airlines carried 35.81 million passengers—up 22 percent year on year—according to Federal Air Transport Agency figures, with a record high of 8.672 million arrivals in May alone.
Russians Rediscovering Russia
Russia’s travel spike is the result of a few factors. For several years in a row until the late 2000s, Moscow had been among the top three of the world’s most expensive destinations, explained Veller. “ You could pay $300 or $400 for a Courtyard Marriott.” A luxury hotel could cost you $1,000 a night—that’s the average nightly rate that the general manager of the Park Hyatt Moscow once bragged he’d hit. “Coming back to 2014, prices dropped dramatically,” Veller continued. “Now, for $350 or $400, you can stay at the Ritz-Carlton or sometimes even the Four Seasons.” That added value is what initially catapulted Tepper’s Russia-bound business by 30 percent to 40 percent.
And now, in the aftermath of U.S. and E.U.-led sanctions , domestic travel inside Russia is experiencing a significant renaissance. “Because of the slightly separatist policies of our government, it has become impossible or undesirable for a lot of government-related workers on a high level to travel outside of the country,” Veller added diplomatically. Those are the people with the most dispensable income, she said, and the ones who would otherwise decamp from Moscow to Greece, Spain, or Turkey in the summertime. Instead they’re heading to Sochi, which is benefiting from what Veller calls a “free captive market,” and traveling domestically within their own countryside.
This isn’t limited to government officials. While Russians have cut their spending on international travel by roughly 30 percent since 2015, according to the United Nations World Tourism Organization, domestic airport arrivals increased 10 percent in the past year alone. In other words, Russians are rediscovering Russia.
The sanctions that catalyzed Russia’s domestic travel market were largely Obama’s doing. But the spike in American interest? That’s all Trump. Both Tepper and Veller say they’ve seen an anecdotal correlation between the level of Russo-American tensions and the number of U.S. luxury travelers landing in Moscow. “It’s reversed to what would be common logic,” said Veller, “but upscale and upper luxury hotels are looking at a higher share of American guests since the tensions started.”
The Revival Movement
Another way sanctions have benefited Russian travel is by forcing a Russian renaissance. “There’s a new attitude in Russia that says, ‘we don’t really need the West anyway, we can do it all ourselves,'” explained Tepper. “All this stuff you hear from Putin about the decadence of the West being evil, that’s all about turning inward and being a real Russophile.”
Looking inward—and avoiding projects that rely too heavily on international sourcing—has spurred several new tourism attractions that make a trip (or a return visit) worthwhile. In St. Petersburg, New Holland island is a long-abandoned shipyard built by Peter the Great that has reopened this month as an urban entertainment center, complete with food and dining concepts, retail, public parks and playgrounds, and a concert venue. “It’s the hot thing right now in St. Petersburg,” said Tepper.
The Hermitage, also, has recently introduced a new wing in the former General Staff building across the square from the Winter Palace. It houses a collection of large-scale Impressionist paintings that had been held in storage for decades. To take it all in, book into the historic Hotel Astoria, which Tepper calls the best location in town.
In Moscow, the Russian Revival is even more apparent. Such new hotels as the Four Seasons and the recently redone Park Hyatt are popping up. (Tepper prefers the latter, unless you splurge for a room with a view at Four Seasons.) The Bolshoi is fresh off a top-to-bottom, $800 million renovation.
And as part of a massive beautification initiative, a new 32-acre park will soon open next to Red Square, showcasing Mother Russia’s seven climactic zones, from the tundra of Siberia to the steppes of Eurasia. It’s rumored to be among the most expensive parks in the world, with an estimated price tag of nearly half a billion dollars. It’s being designed by Liz Diller and Charles Renfro, the same team that was part of creating New York’s High Line.
A Russian food movement has also taken root, with such places as World’s 50 Best-rated White Rabbit elevating the nation’s cuisine beyond your standard borscht or beef stroganoff. At the steakhouse Voronezh, it means a focus on southern Russian cuts, known for their excellent marbling; at Dr. Zhivago, it means creative twists on the dumplings called pelmini, which are stuffed with locally hunted venison and duck rather than minced beef.
Even Russian embroidery and design are getting a rethink: Tepper sets up guided studio visits with upcoming fashion names such as Natali Leskova and Yulia Zhuravleva, who take their cues from traditional Russian arts and architecture.
It all adds up to a rich cultural experience that cements Russia’s artistic legacy for the 21st century—and it’s as far from the Cold War hangover image as you could possibly imagine.
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