16 May 2007 
Miami - Though there is a lack of official statistics, Russia's estimated $2 billion business travel industry is growing by 15 percent per year, faster than local travel management companies can handle, experts said this month. However, problems with corruption, content fragmentation, lodging supply instability and obstacles to technology development make implementing managed travel programs difficult.
Travel management companies often use five different global distribution systems in their offices, creating "quite a mess," said Vadim Zelenski, general director and owner of Zelenski Corporate Travel Solutions in Moscow, here during a presentation at the annual global education conference of the Association of Corporate Travel Executives. The content fragmentation makes it difficult for suppliers to develop and use online booking tools, he added.
Airlines are not prepared to work with agencies, Zelenski said, noting that there are more than 200 small local airlines providing limited service. Also, a crop of low cost carriers based in Germany, Austria and Italy is developing short-haul service to replace train travel, he said, and these smaller carriers are reducing travel costs and increasing traveler safety.
Use of a bank settlement plan for the agencies would be "huge," noted Zelenski. Though a local BSP has been around since 1999, it is not used by the industry. Currently, payment is made mainly though bank transfer, and credit cards are not commonly used.
Bank transfers are a headache, said Natalia Beschastnova, director of administration in Russia for NCR Corp. During her prepared comments, Beschastnova recounted a time when a rural hotel property refused to honor a room agreement made through bank transfer, and demanded more payment from the NCR traveler. Negotiating preferred rates with major city center hotels is a "fiasco," she said, with agreements not honored in busy travel seasons.
"It's almost always high season," she added.
There are about 8,000 rooms currently available in the capital, but another 40,000 are needed to meet growing demand, Zelenski said. Hotels outside Moscow and St. Petersburg are of poor quality. However, a new law giving tax breaks to hotel developers is expected to spur an increase in supply, he noted. More than 110 hotel development projects are currently in progress in major cities across Russia.
Last-minute travel arrangements are "impossible," Beschastnova said. Without e-ticketing capabilities, airlines and TMCs rely on delivery services. These services are often unreliable and slow, she said. Though rail is used for short trips, there is no booking or reservation system in place and no ability for buyers to change tickets after payment.
Visa processing is also a huge challenge for NCR in Russia, Beschastnova added. Inbound visa processing takes up to five weeks, she said, and officials require companies to be pre-registered with the government for visa issuance. Short-term stays are usually possible through tourist visas, but it is difficult to obtain visas for long-term work projects. Russian lawmakers are changing immigration laws in Russia, but only to make them stricter, she said, to combat illegal immigration.
Although most companies ask their agency partners to handle visa arrangements (a multi-entry visa costs about $500), Russian and multinational companies are holding back from outsourcing their entire travel programs. "Clients are still not giving us their travel budgets to manage completely," Zelenski said.
Though there is a clear need for agency services, Zelenski said customer service is generally poor and a lack of educated staff has made it difficult for TMCs to retain clients. Multinationals entering the market for the first time may find the Russian culture "unfriendly and hostile," he said, and corruption is rampant.
"Make sure you know how to bribe," Zelenski said.
Despite the challenges, continued market growth in the travel industry is expected, along with downward pressure on transaction fees, Zelenski said. New agreements between the European Union and Russia address some of the visa processing problems, and younger generations in Russia are learning English and international standards for service. Zelenski said technology in the near future would help the industry overcome many of the obstacles for managed travel in Russia.
