THE TOURIST SURPLUS

The Ministry of Culture and Tourism of Azerbaijan summed up the results of the tourist season in 2017, which coincided with the World Tourism Day (September 27) supported by the UN. The announced indicators demonstrate that due the sectoral reforms implemented in the last two years the tourism sector of Azerbaijan has become the most dynamically developing spheres of the national economy. Azerbaijan has an impressive surplus in the balance of tourism services thanks to a tangible increase in the number of foreign tourists.

"1,818 million people visited Azerbaijan in January-August 2017, which is 23.1% more than the indicator for the same period of 2016," said the Minister of Culture and Tourism of Azerbaijan Abulfaz Garayev at the briefing dedicated to the World Tourism Day. According to him, Azerbaijan is actively developing the regional tourism. So, 860 thousand reservations were made during the summer period in regional hotels of Azerbaijan. In general, 1,294 million tourists stayed in regional hotels in January-August 2017.

"In the first half of 2017, foreign tourists spent $1.3 billion in Azerbaijan against $1.2 billion spent by Azerbaijani tourists abroad, which means a net surplus of $100 million. Today, the tourism sector is making a significant contribution to the replenishment of the state budget," said Mr. Garayev.

Apparently, the dynamics of the current and past years will have a significant positive impact on the development of local tourism. The comparatively low cost of hotel services due to the devaluation of manat, as well as the simplification of the visa regime, the launch of budget airlines, and active attraction of the tourists from the Middle East and the post-Soviet countries have contributed to the development of the incoming tourism in Azerbaijan.

“Last year was revolutionary for the tourism sector of Azerbaijan due to the important decisions of President Ilham Aliyev. As a result, the inflow of foreign tourists increased almost by a quarter in a relatively short period of 2017. The national tourism industry is challenged to ensure the inflow of 4-4.5 million foreign tourists by 2020. This goal is quite achievable," said Kenan Guluzade, the spokesman of the National Bureau for Tourism Promotion.

The indicators of the national balance of payments published recently by the Central Bank of Azerbaijan confirm the changes. In fact, the structure of the tourist flow began to change into the incoming tourism as early as in 2016: for the first time in the past decade, the surplus of the tourism services was $219 million. Apparently, by the end of this year, we can expect better indicators given the surplus of tourist services $186 million achieved in the first half of 2017. In general, the volume of mutual (entry-exit) tourist services of Azerbaijan increased by 5.6% ($2.5 billion) in January-June 2017.

"The minimum period of travel for foreign tourists is 5-7 days, of which 3-4 days they stay in Baku. On average, each tourist spends $700-$1000 in Azerbaijan," said the Press Secretary of the Ministry of Culture and Tourism of Azerbaijan, Vugar Shikhmammadov.

These indicators show a qualitative change in the domestic tourism industry. Today, the share of incoming tourism in Azerbaijan prevails over outgoing tourism, and this proportion is quite consistent with that of other states that dynamically develop the recreational sector. For Azerbaijan, this model is attractive primarily because of the increasing foreign exchange earnings and full financing for the recreational sector that was declining in 2014-2015. The new tourism strategy of the Ministry of Culture and Tourism of Azerbaijan is aimed at attracting guests from the countries of the near abroad, with an emphasis on the development of mass budget tourism.

According to the statistical data of the Ministry, the travelers from 25 countries visited Azerbaijan this year. The top five countries include Russia (17%), Georgia (4%), Iran (89%), Turkey (7.6%), and UAE (more than 3.3 times). The number of tourists from other countries also increased significantly. Thus, in seven months of 2017, the number of tourists from the following countries increased by: Oman (16), Kuwait (8), Saudi Arabia (6), Qatar and Morocco (5), the UAE (4.4), Pakistan and Algeria (3.5), Jordan (2,2), Turkmenistan (2), and Iraq (about 1,5) times.

The number of foreign tourists from the EU countries (13%), Asia (64.4%), Africa (72%), the U.S., and Australia (22.8%) also increased.

It is indicative that Russia is still ranked the number one country in terms of the number of tourists visiting Azerbaijan: almost 500 thousand in the first half of 2017. According to the Russian agency for business tourism and travel management, Aeroclub Group of Companies, Azerbaijan was one of the top five popular destinations in the Russian market of business tourism in 2017 together with Kazakhstan, Uzbekistan, Georgia, and Belarus. According to the Russian analytical agency TourStat, Baku was one of the top three most popular cities of the CIS for travel in the fall of 2017. The experts of TourStat have analyzed the data of online booking systems and identified that the tourists visit Baku in the autumn for three days and spend $78 daily on average.

Azerbaijan considers important the promotion of tourism in the Arab countries based on the experience of the last two years. Thus, according to the chairman of the Association of Tourism of Azerbaijan (AzTA) Nahid Baghirov, the growth of the tourist flow from the countries the Persian Gulf was a result of combined efforts of the Ministry of Tourism and the respective associations dealing with the advertisement and promotion of Azerbaijan’s recreational potential at various tourist exhibitions held in Dubai and Sharjah, simplification of the visa regime, and expansion of air communication with the Middle East.

Thanks to the ASAN Viza, the nationals of 94 countries can obtain entry visas to Azerbaijan automatically within a maximum of three days. The expansion of air communication with a number of regional countries has also contributed to the access of foreign travelers to Azerbaijan. Currently, Azerbaijan has direct flights to Kuwait, Qatar, as well as to the UAE’s largest city, Dubai. According to N. Baghirov, the direct flights to Jeddah (Saudi Arabia), Bangkok (Thailand), and other destinations are quite promising and will also contribute to the growth of the tourist flow.

Along with the opening of the Azerbaijani market of air transportation for low-cost airline companies of Russia, Hungary, Turkey and a number of Arab countries, Azerbaijan is consolidating efforts to develop its own budgetary airlines. So, a new national low-cost airline, Buta Airways, was established under Azerbaijan Airlines CJSC (AZAL) and launched operations from the beginning of September 2017. Equipped with Embraer-190 aircraft, Buta Airways will carry out flights from Baku to Moscow, Kiev, Antalya, Kazan, Mineralnye Vody, Tbilisi, and Tehran. From late October, it will launch flights from Baku to Istanbul and St. Petersburg, as well as from Ganja to Moscow. The minimum cost of a one-way ticket for all directions is €29.

The experts believe that affordable prices for air travel are the second most important factor contributing to the development of a budget tourism, which is recognized as an unconditional priority for Azerbaijan. This requires the availability of many affordable hotels and boarding houses. Unfortunately, Azerbaijan lags noticeably behind the neighboring Georgia, where budget hotels, hostels, tourist-oriented apartments and houses represent 90% of the recreational sector. According to N. Baghirov of AzTA, Georgia is the most favorable destination for Azerbaijani tourists, which can be explained by the country’s geographical proximity. This advantage facilitates the incoming tourism in Georgia and reduces the cost of logistics and recreational prices.

Currently, 575 hotels with a capacity of 33-35 thousand people are functioning in the country. As indicated by the tourist boom experienced in 2017, this number is insufficient to accept an increasing flow of foreign guests. Therefore, the Strategic Roadmap for the development of tourism industry in Azerbaijan envisages as a top priority the construction of inexpensive two- and three-star hotels, hostels and other facilities of similar type.

“It is necessary that more than 1,000 hotels of different types and levels function in Azerbaijan for the further development of tourism," believes Muzaffar Aghakerimov, Adviser to the AzTA Chairman. According to the expert, there are about 155 hotels in Baku, which is a rather low figure.

The need for a sufficient number of budget and medium-sized hotels is extremely important, taking into account the plans of the Ministry of Tourism and AzTA to attract tourists from China, Malaysia, Kazakhstan, Uzbekistan, Ukraine, and Poland. "More than 200 thousand Polish tourists travel to Georgia annually. We want to be part of this process. It is possible to take advantage of Azerbaijan as a transit and organize international tours through the territory of our country," said N. Baghirov. Young people is the largest tourist category from European countries. As a rule, they prefer to stay at budget hotels.

According to N. Baghirov, the current year has revealed a number of other problems in the tourist sphere, which must be solved promptly. Otherwise, they can negatively affect the inflow rate of tourists. In particular, we need more professional guides, a flexible pricing policy in hotels and service facilities based on the "demand-supply" mechanism. Also, AzTA has revealed that the tourists were rendered low service at hotels, even the branded ones. The guests had to wait for several hours to be accommodated in the booked rooms.

Yet another serious problem has been revealed amidst the tourist boom of the last two years: about 800 companies appeared in the local market after the abolition of licenses for travel agencies, but many of them remain unknown. Such ‘ephemeral’ travel agencies often cheat their customers selling them non-existent tourist products. Some hotels that do not provide the required services and recreational facilities also violate the rules. To overcome this negative effect, AzTA specialists made a "black list" of tourist firms, which deceive their customers.

"The main task is the adoption of the law on tourism. We must pay great attention to issues of quality control and healthy competition," said Minister Abulfaz Garayev. The ministry is developing the criteria of the service quality system and a respective register to solve the existing problems.

The minister noted that, despite the efforts, it was impossible to achieve the desired results to improve the maintenance of beaches in the summer season. "In some places, it was not possible to organize beach tourism. Unfortunately, we could not create exemplary beaches and achieve the results that would be recognized by international organizations. However, we continue working in this direction together with the local executive bodies. I believe that next year we will be able to achieve greater development in this sphere," said Mr. Garayev.

One of the serious problems of domestic tourism is its dependence on the seasonal factor. In fact, the peak of activities of the national recreational facilities falls on summer months. The rest of the time, the maintenance costs of hotels, boarding houses and holiday homes, especially in the regions of the country, cannot be recovered. Despite the creation of ski resorts in two regions of Azerbaijan, which provide tourist services for citizens and guests of the country almost all the year round, the seasonal factor still prevents profitability of a significant part of tourist facilities. This has a very negative impact on the quality of personnel working at tourist facilities: some of them work only in the summer season, which creates problems every year with the selection of personnel and the maintenance of required qualifications. Minister Garayev noted that the number of tourists could decrease due to the end of the current summer season. Therefore, it is necessary to work hard to reduce the dependence of the tourism sector on the seasonal factor.