Ukraine Tourism Report Q3 2011

The medium-term macroeconomic outlook across emerging Europe has improved considerably since the beginning of H209, when Central and Eastern Europe (CEE) was facing the worst macroeconomic crisis since the post-Soviet transition. We have upgraded our 2011 real GDP growth forecast for the region to 4.4% after an exceptionally strong Q111 growth figure. Household consumption, buoyed by rising real wages, has made a stronger than expected recovery and this ultimately underpins the rationale behind the upgrade in our forecast. This will take some pressure off the tourism industry. In the Ukraine, the recession subdued arrival numbers in 2009, dropping by 12% year-on-year (y-o-y), and as the majority of arrivals come from CEE, 2010’s arrival numbers did not entirely rebound. For 2010, BMI estimates growth of 7% y-o-y in tourist arrival numbers, with a jump from 21.9mn in 2009 to 23.3mn. From 2011 to the end of our forecast period in 2015, we forecast the industry to return to and maintain double-digit growth until 2015, when the industry is then forecast to grow by 9% y-o-y to 38.5mn tourist arrivals.
The majority of tourists arrive in Ukraine via road or rail. The country is well placed for land travel as it borders seven countries, including Russia. Transport via road is forecast to substantially outpace rail travel. This coincides with the visa liberalisation between the EU and Ukraine – so EU citizens no longer require a visa to enter the country for stays of less than 180 days – and the fact that Ukraine’s rail connections with the rest of Europe and Asia are in need of development. Positively, in November 2009 a memorandum of intent was signed between then Slovakian transport minister Lubomir Vazny, Ukrainian Railways deputy director Micheal Kospjuk and Russian Railways president Vladimir Yakunin for the expansion and upgrades to the broad gauge line linking Ukraine and Slovakia. The line was originally built to transport Ukrainian iron ore to Slovakia’s steel works in Košice.
Ukraine is set to co-host the 2012 European football championship with Poland and the tournament will be a key driver for the country’s tourism industry during our forecast period. Not only will it bring thousands of tourists to the country, but the requirements to be chosen as a host for the competition include an array of infrastructure investment that can only be regarded as positive for the industry.
European football’s governing body, UEFA, said in February 2011 that it was satisfied with the progress made by the four cities in the Ukraine selected to host matches for the tournament, after an internal dispute at the Ukraine Football Association and slow progress on infrastructure put its host position in jeopardy. The first match will take place in Poland, while the final will take place in Ukraine.
Hungarian budget airline Wizz Air started offering services in Ukraine in 2008 and BMI expects the trend of low-cost carriers in the country to increase in the coming years. As of March 2011, Wizz Air, Italy’s Wind Jet and Turkey’s Pegasus Airlines all fly to Ukrainian cities. The authorities at Boryspil International Airport, which serves Kiev, are constructing another terminal for international and budget flights. Terminal D is scheduled for completion in winter 2011. This would be a positive development as it would drive down fare prices, making travel within, to and from Ukraine more affordable, increasing tourism numbers. Wizz Air’s entrance to the market has already prompted the largest Ukrainian carrier, Aerosvit, to reduce fares.
The January 2010 presidential election, the country’s first since 2004’s Orange Revolution, had the potential to destabilise the country politically but turned out better than expected, with political risk continuing to subside. The new president, Viktor Yanukovych, successfully formed a coalition government in March 2010 and it obtained a new US$15.2bn Stand-By Arrangement from the IMF, after the original loan was suspended in November 2009 – all positive steps for stability.

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Executive Summary 5
SWOT Analysis 7
Ukraine Tourism SWOT 7
Ukraine Political SWOT 7
Ukraine Economic SWOT 8
Ukraine Business Environment SWOT 8
Industry Forecast Scenario 9
Arrivals 9
Table: Arrivals Data, 2008-2015 9
Accommodation 11
Table: Accommodation Data, 2008-2015 11
Expenditure 12
Table: Tourist Expenditure And Economic Impact, 2008-2015 12
Inbound Tourism 13
Table: Inbound Tourism Data, 2008-2015 13
Outbound Tourism 14
Table: Outbound Tourism Data, 2008-2015 15
Market Overview – Travel 16
Road Transport 16
Air Transport 16
Global Oil Products Price Outlook 18
Table: Oil Product Price Assumptions, Q410-Q411 (US$/bbl) 18
Table: Oil Product Price Data And Forecasts, 2008-2015 (US$/bbl) 21
Market Overview – Hospitality 23
Hotels 23
Business Environment Outlook 25
BMI’s Security Ratings 25
Table: Europe Security Risk Ratings 25
Table: Europe State Terrorism Vulnerability To Terrorism Index 26
City Terrorism Ratings 27
Table: BMI’s Central And Eastern Europe And Central Asia City Terrorism Index 27
Europe Security Overview 29
Global Assumptions 35
Table: Global Assumptions, 2009-2015 35
Table: Global And Regional Real GDP Growth, 2010-2013 (% change y-o-y) 36
Table: Selected Exchange Rates, 2010-2013 (average) 36
Developed States 37
Table: Developed States’ GDP Growth, 2010-2013 (% change y-o-y) 38
Emerging Markets 39
Table: Emerging Markets’ GDP Growth, 2010-2013 (% change y-o-y) 40
Consensus Forecasts 41
Table: Bloomberg Consensus GDP Growth Forecasts, 2011-2012 (% change y-o-y) 41
Company Profiles 42
Aerosvit 42
Premier Hotels 42
Ukraine International Airlines 43
Wizz Air 43
BMI Methodology 44
How We Generate Our Industry Forecasts 44
Tourism Industry 44
Tourism Ratings – Methodology 45
Table: Tourism Business Environment Indicators 46
Table: Weighting of Components 47
City Terrorism Ratings 47
Table: City Terrorism Ratings Methodology 49
Sources 49
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