AFFORDABLE TOURISM

The development trends of the tourism industry in the Black Sea-Caspian region that have established over the past decade and a half have confirmed the efficiency of developing mass tourism with a dominance of low-cost hotels and engagement of discounter airlines to significantly reduce transport costs. Such reforms are long overdue in the recreational sector of Azerbaijan, which experiences a drop in demand in a growing global crisis.

Having passed the stage of formation and developed the hotel and accompanying recreational capacity, Azerbaijan's tourism sector is on the threshold of quality structural changes. Reforms envisaging a reduction of hotel and transport tariffs, simplified entry procedures and a favorable environment for the industry to capitalize on new trends are in the offing. The main goal of these changes is to maintain the attractiveness of recreation in our country for all citizens and to significantly increase the number of foreign visitors.

In a Cabinet meeting in June 2015, President Ilham Aliyev identified the problems existing in the sector and set a clear objective - to take a series of measures to reduce costs and improve the competitiveness of the tourism sector. Over this period, the Ministry of Culture and Tourism, as well as a number of organizations, have developed a number of proposals to encourage market entities to invest in the construction of low-cost hotels, reduce prices and develop new directions in tourism. The need for new development methods and incentives is also explained by the negative economic processes taking place in the region of late.

According to the Deputy Minister of Culture and Tourism, Nazim Samadov, the comprehensive measures initiated 10 years ago, including the development of industry-specific legislation, development of the recreational infrastructure, the country's participation in international programs, state support for entrepreneurs and the most favored treatment of local and foreign investors, facilitated rapid development of the tourism sector in Azerbaijan. It is not surprising that over this period the share of tourism sector in the country's GDP has increased to 4.1 per cent.

"The measures taken by the state and financial activities of business entities have contributed to a rapid development of the industry, which is evidenced by the growing number of foreign visitors to Azerbaijan. It has increased from 1.1 million in 2005 to 2.3 million in 2014," N. Samadov says. "However, the economic difficulties experienced in CIS countries adversely affect the number of tourists coming to our country. Thus, in the first half of this year, the number of Russian tourists has dropped by about 87,000 and of those from Georgia by 60,000." In general, over the past eight months, about 1 million foreign tourists have visited Azerbaijan, which is 10 per cent less than in the same period of last year.

According to N.Samadov, a range of measures are taken in the country to stimulate tourism: a system of issuing electronic visas has been developed and the new proposals to facilitate the issuing of visas have been submitted to the Foreign Ministry. The Cabinet has recently introduced "Rules of visa accreditation for travel agencies", and 65 travel agencies have already obtained the right to issue electronic invitations. In order to develop business tourism in the country, a Congress Bureau has been created. The commissioning of "Shahdag" and "Tufandag" tourist centers, as well as the measures to develop balneology and thermal branches of tourism, will gradually eliminate the seasonal factor, when a vast majority of guests visited Azerbaijan in the summer.

"We have managed to reduce the price of air tickets from a number of directions, and this is already having a good impact on the cost of travel packages, thereby contributing to a growing number of visitors to our country", N. Samadov said.

Incidentally, the national airline "Azerbaijan Airlines" (AZAL) has been one of the first to respond to the criticism of the head of state by reducing the airfare by an average of 30 per cent for a number of popular destinations. AZAL is also expanding the network of charter flights, providing customers of local travel agents with the opportunity to acquire cheap tickets to popular Turkish resorts. A few days ago, AZAL launched daily low-cost flights Baku-Dubai-Baku: one ticket, including all taxes and fees, costs 99 euros one way. Talks have also been concluded with the Hungarian budget airline WizzAir, which has announced his intention to resume flights to Azerbaijan in March 2016. In the longer term, the country considers attracting other low-cost airlines, which, as the experience of neighboring Georgia and Turkey shows, is the most effective way of maintaining a competitive level of tariffs.

Guided by objectives identified by the head of state, the Ministry of Culture and Tourism has also taken a number of measures to reduce prices at recreational facilities. "A considerable number of local hotels are positioning themselves as a three- or four-star facilities, but the level of their services is not always consistent with the declared standards," Minister of Culture and Tourism Abulfaz Qarayev has said. "In this connection, we recommend that owners of hotels bring prices into line with the existing standards as per applicable legislation." According to the minister, executive authorities in the regions, businesses and others involved in the recreational sector have already received the necessary recommendations.

To date, the legislation there is no requirement of mandatory standards in the hotel industry. However, the design and construction of hotels and other recreational facilities to businessmen recommended to harmonize standards in cooperation with experts from the Ministry of Culture and Tourism. These measures help to increase the number of low-priced 2-3 star hotels and eventually will have a positive impact on pricing in the industry.

In turn, the experts of the Association of Tourism of Azerbaijan (AzTa) and experts of the Ministry of Culture and Tourism have developed a plan of action, including conducting a large-scale monitoring of tariffs in local hotels. "The monitoring, which will cover both the capital and in regional hotels, we intend to demand economic justification used in their rates for services", - said the head Nahid Bagirov AzTa.

Tourism Authority has also developed special offers to encourage business investment activity. New proposals meant to provide tax benefits to entrepreneurs investing in the development of tourism, especially in the construction of 2-3-star budget hotel. It is also proposed to include the sphere of tourism among the priorities of the National Entrepreneurship Support Fund of Azerbaijan, which would provide soft loans business entities subject to their agreement to build a cheap hotel.

The tourism authority has also developed special proposals to encourage investment activity. The new proposals are meant to provide tax benefits to entrepreneurs investing in the development of tourism, especially in the construction of two- and three-star hotels. One of the proposals is to include the sphere of tourism on the list of priorities of the National Fund for Entrepreneurship Support, which would provide soft loans to the business entities building cheap hotels.

Another mechanism of influencing hotel prices has recently been proposed by the Association of Hotels and Restaurants (DAIR). The introduction of tax breaks, social benefits, the reduction of prices for land plots allocated for the construction of low-cost hotels and special utility tariffs could provide effective motivation for businesses, DAIR experts believe.

The Association believes that the reform of the national system of certification and awarding of stars to hotels may also have an impact on hotel prices. Apparently, the proposals of the Ministry of Tourism on enhancing the competitiveness and modernization of the recreational sphere will become an essential component of the "Strategy on the development of tourism in 2016-2025" developed by the Ministry. This strategy has passed the stage of inter-ministerial approval and will soon be approved by the relevant executive authority. The document defines new tasks of government agencies on the development of the industry and defines the forms and methods of cooperation with players of the market. In order to turn Azerbaijan into an attractive travel destination, the strategy envisages four basic principles: creation of favorable market conditions and preferences to improve the competitiveness of the industry, a variety of tourism products, improvement of industry standards, and preservation of public interest in tourism. In addition, the document includes measures on the development and optimization of the recreational infrastructure, as well as the implementation of international experience in the field of tourism. Another goal is to enhance the professionalism of personnel in the field of marketing and communications.

The most important objective of the Strategy is the formation of new market conditions conducive to lower prices, improved service standards and, as a consequence, improved international competitiveness of the country's tourism sector. This process has already begun: the Ministry of Tourism with the support of professional associations has developed a package of proposals to encourage the market players to cut prices and introduce a more attractive and competitive tourism product.