DEFERRED DEMAND EFFECT

Obviously, tourism and the leisure industry in general have been the two main sectors of the global economy most affected by the coronavirus pandemic. Businesses operating in these sectors claim that the recreational sector has not suffered such a massive and catastrophic crisis in its history. Yet tourism has been the fastest industry to recover after two years of forced downtime, thanks to the effects of the deferred demand.

Azerbaijan also enjoys this positive trend. According to speakers at the Azerbaijan Tourism Summit held in Baku, indicators for the sector will return to pre-pandemic 2019 levels as early as in 2023.

Post-pandemic syndrome

Statistical data also shows the ongoing recovery of the tourist flow to Azerbaijan after the pandemic. Thus, in January-November 2022 this indicator reached about 1.5 million people, i.e. 2.1 times more than last year. Interestingly, the indicator for tourist flows from Turkey, Saudi Arabia, and India recovered the fastest, with growth rates of over 90% of pre-pandemic levels, while the indicator for Belarus, Pakistan, and Jordan even exceeded this number.

Fuad Naghiyev, Chairman of the State Agency for Tourism, said that the data is quite in line with forecasts. "Our goal is to restore the 2019 figures. Currently, our forecast based on the indicators from the beginning of the year came true and the industry was able to recover by 50% of the pre-pandemic level". Florian Sengstschmid, CEO of the Azerbaijan Tourism Bureau, added that the initial phase of recovery was expected thanks to tourist flows from traditional destinations. But from the second half of 2022 they expect increase in the tourist flow from European and even Asian destinations. However, the coronavirus restrictions in some countries do not allow for a 100% recovery. Yet it is important that the process started rolling. Interest of tourists in Azerbaijan is growing, which can be clearly seen from both the number of visitors in the streets of Baku and the amount of money they spend here.

In the first three quarters of this year alone, the volume of card transactions by foreign nationals reached ₼1.7b (about $1b), which is almost twice of the 2021 indicator.

These figures are also quite satisfactory given the post-pandemic syndrome, given that tourism is one of the impressive income sources in many countries. Azerbaijan also hopes to increase the share of the tourist accommodation and catering sector in GDP by 1.5 times by 2026 compared to 2019. The expected average annual growth rate in the tourism sector is 20%. Accordingly, Azerbaijan also plans to increase the tourist inflow to 4 million foreign nationals and 6 million local tourists travelling within Azerbaijan.

Is it possible to reach this goal? According to market participants and experts, it is. "Travelling has become a necessity rather than a luxury for people. Tourism is an area that can recover quickly. The tourism sector in Azerbaijan is trying to keep up with the agenda and actively make up for the opportunities lost during the pandemic," Jeyhun Ashurov, chairman of the Baku club of the International Organisation of Tourism Professionals (Skal Baku)  said.

Ruslan Guliyev, Chairman of the Azerbaijan Health & Thermal Tourism Development Support Association, said that “...global restrictions on intercontinental logistics and communication due to the pandemic have cost the tourism sector trillions in lost revenue and 100 million jobs. Given that 75% of employees in the global tourism industry are under 25 years old, you can see how serious the problem is. Tourism also means jobs and investment, so every effort must be made to rebuild the sector”.

New destination: Garabagh

To achieve this goal, Mr. Naghiyev identified ten major areas of integrated tourism development for the next four years.

However, the main focus of tourism officials is the development of new types and destinations in Azerbaijan, including the development of tourism centres in the liberated districts of Azerbaijan. "There are ongoing multilateral activities to study, realise and promote the tourism potential of Garabagh. A new tourist complex was opened in March this year in Sugovushan, Terter with the participation of the President of Azerbaijan. Also, a preliminary recreational tourism infrastructure has been established in the vicinity of the historical Shahbulag Fortress in Aghdam. We also assessed the tourism opportunities of the city of Shusha and the settlements of Dashalty, Fuzuli, Khojavand, Jebrail, Zangilan, Gubadli and Kalbajar, including the integration of appropriate development strategies and action plans," Naghiyev said.

There are also plans to launch full-fledged tour trips to Shusha with the possibility of staying in the city for several days, overnight stays in hotels, excursions, etc.

According to preliminary forecasts, about 1 million local and foreign tourists will visit the liberated territories before 2025.

According to F. Naghiyev, the agency is currently implementing several projects in these territories, including the construction of tourist facilities in Hadrut, Tugha, Dashalti, Sugovushan and Shahbulag. "We are assessing the tourism potential of the region and creating tourist products. First of all, it is important to finish the mine clearing works in these territories, establish appropriate infrastructure to provide for the process of returning the population to the area. We believe that in the next two years the liberated territories will open to global tourism and we will be able to host visitors,” Naghiyev said.

The State Agency for Tourism has also prepared draft one-day tours 'Heading to Aghdam' and 'To Fuzuli and Khojavand' as part of the 'Garabagh Victory Routes' concept.

"In general, we have already assessed the tourism potential of Fuzuli, Khojavand, Jabrayil, Zangilan, Gubadli and Kalbajar and prepared a draft Regional Tourism Strategy and Action Plan for tourism development in the liberated territories. We will soon complete the works on organising tourist trips to Shusha. We are implementing a set of various measures to study, capitalise on and promote the tourism potential of Garabagh," Naghiyev said.

He believes that Garabagh will open its gates to tourists from all over the world in almost two years.

The problem is high prices

Despite the rather positive attitude of the participants of the tourism market, they have complaints and problems. They mostly complain about the high cost of tour packages and blame the airlines. When asked why air tickets to Azerbaijan from different European cities are 3-4 times more expensive than to neighbouring Turkey and Georgia, Head of the Tourism Policy and Strategy Department of the State Agency Muhammed Nuriyev said that the issue was on the government agenda. "We act as a coordinating body between government agencies and have raised this issue for discussion at the government level. We hope there will be significant changes in this area in the coming years," Nuriyev said.

Goydeniz Gahramanov, chairman of the board of the Association of Travel Agencies of Azerbaijan, also believes the high price of flight tickets is the first factor impeding the growth of tourist flow to Azerbaijan. "Due to the pandemic, airfares have risen significantly. We understand that airlines have suffered serious losses due to flight restrictions. But when we analyse possible ways to attract European tourists to Azerbaijan, we first come across the difference in airfare, which plays a significant part in forming the overall cost of the tour package. We would very much like to see a change in the airlines' approach to this problem," Gahramanov said.

He also underlined the need to increase the number of direct flights to Azerbaijan and solve logistical problems. "We would like to have a metro line to the airport, high-speed trains to function between the regions. We receive all these requests from the guests of our country," G. Gahramanov said.

Meanwhile, the aviation sector responds to criticism with a significant drop in revenues and a forced increase in prices to maintain profitability. For example, the International Air Transport Association (IATA) expects the industry to have a total net loss of $6.9b by the end of 2022 (revenues: $727b). In 2020 and 2021 the loss was $137b and $42b, respectively.

Airline forecasts indicate the situation will stabilise soon. According to IATA, next year airlines will reach the profitability level of $4.7b with revenues of $779b, while the passenger traffic in 2023 can exceed the 4b mark for the first time since 2019.

It is hard to say whether this will influence the airfares, as there are many associated problems, including jet fuel prices, global inflation, etc. But it is the affordable tour packages that drive the development of inbound tourism in all countries. Since the participants of the market hope the indicators grow, it means that we can hope for the return of such tour packages.