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When Turkish conglomerate MNG Holding built the 874-room Kremlin Palace Hotel in beachfront Antalya in 2003, its aim was to make Russian tourists feel at home with a replica of its namesake, the landmark Moscow fortress. After the ruble’s recent collapse, it could also leave them feeling poorer.
Red Square is dominated by a vast swimming pool, St. Basil’s Cathedral houses restaurants, and there’s a disco inside a copy of Moscow’s neo-classical Senate, where president Vladimir Putin has his offices. And in the gift shop, a tracksuit with a patterned print of U.S. $100 bills runs to $80 — about 4,900 rubles today, up from 3,750 rubles a month ago — a figure that may be even greater when the high season begins next spring.
“The fall of the ruble is a harsh reality, and there are expectations of a crisis,” said Turker Morova, the hotel’s head of sales. “You can’t say Turkey’s tourism industry will be immune from the fallout — we’re so linked up to Russia’s economy.”
With the ruble plunging and their home country’s economy headed for a recession next year, life is getting tougher for Russian tourists and expatriates along with the businesses that cater to them. After taking advantage of the prosperity of the early Putin era to travel, start businesses, and study abroad, many Russians are worried the crisis threatens those freedoms.
Ignaty Dyakov’s biography typifies the trajectory. A St. Petersburg native and graduate of London’s University College, he moved to the U.K. in 2008 and runs a business called Russia Local, which advises British companies on investing in Russia. After the turmoil of recent months, he’s reluctant to encourage anyone to invest there, so instead he’s focusing on translation services and language classes.
“I can’t really take the risk of advising clients to go to Russia right now,” Dyakov said. “I hope that in the future I’ll be able to do that with the confidence I used to have in my country.”
Jokingly dubbed Londongrad, the British capital has long had special appeal for Russians that have the cash to take full advantage of its amenities. Russians were the most prolific foreign buyers of high-end property in central London from 2010 through 2012, according to broker Knight Frank, and Russian firms such as VTB Group and OAO Gazprom built large presences in the city.
For 38-year-old Victoria, who asked that her last name not be used, the crisis could mean of a four-year sojourn in London, where she moved from Moscow with her three young children.
“We are considering all options now, including going back for several years, because our main income is in rubles and it’s impossible to maintain the same level of expenses,” she said.
The ruble is trading at just over 60 to the dollar after dropping to almost 80 this week, hammered by U.S. and European sanctions over Ukraine and the falling price of oil. Without an uptick in crude prices, which have fallen sharply in the last six months, Russia’s economy may shrink almost five percent next year, the central bank predicts.
Some pockets of Europe will be more affected than others. Russians account for 12 percent of visitors to Turkey each year, or about 4.3 million people. Falling tourism and reduced exports due to Russian turmoil could have a negative impact of 1.3 percent on Turkey’s gross domestic product, according to brokerage BGC Partners.
Austria is preparing for Russians to scale back Alpine ski vacations and shopping trips to Vienna. In Tyrol, home to resorts such as Kitzbuehel and Ischgl, overnight stays by Russians were expected to decline by some 30 percent even before the most recent ruble drop, said Florian Neuner, who works for the local tourism association. “After the past few days, it may even get worse,” he said.
Russians who live abroad concede they’re more fortunate than friends and relatives back home, some of whom are hoarding staples like buckwheat and clearing out ruble-denominated bank accounts to stay ahead of inflation — never mind planning ski trips.
When Polina Kopylova, a 38-year-old interpreter in Helsinki, was between jobs, her parents in St. Petersburg helped her and her Finnish husband with money. Now, she says the family jokes that “the time for me to support my parents is approaching — simply by carrying euros over the border.”
Other Russian expats say they’re planning to pack their suitcases with goods like foreign cheese and wine when they head home for the holidays, after Putin’s embargo on European food imports made them almost impossible to obtain in Russia.
Russia’s economic predicament isn’t necessarily bad news for everyone. Alex Cheatle, the CEO of London-based luxury concierge group Ten Group, says some Russian clients are speeding up searches for high-end homes in the U.K. to have a more secure way to store value.
Dmitry Aksenov, a technology entrepreneur in London, said the currency’s plunge is making it “easier to hire the best people” to write code in Moscow for his company, an artificial- intelligence startup called DigitalGenius. “We will hire more Russians the next time a big project comes our way,” Aksenov said.
Back in Antalya, the Kremlin Palace awaits better times for the Russian clientele it’s tried so hard to attract. Free- flowing vodka is always available, fur stoles are sold in the gift shop, and the main dining room is called Stolitsa — Russian for The Capital — even if it largely serves Turkish fare.
“It’s possible that some who took two holidays a year may now take one, but if things stay depressing people have even more reasons to seek out the sunshine,” said Morova, the sales boss, focusing on the positive. “Yes, Russians are worse off now. But if you think about it, that’s exactly why they’ll be needing a holiday.”
–With assistance from Lyubov Pronina and Tom Beardsworth in London, Kasper Viita in Helsinki, Nicholas Brautlecht in Hamburg, Maria Ermakova in Milan, Patrick Donahue and Stefan Nicola in Berlin and Alexander Weber in Vienna.
To contact the reporters on this story: Matthew Campbell in London at email@example.com; Isobel Finkel in Antalya, Turkey at firstname.lastname@example.org. To contact the editors responsible for this story: John Fraher at email@example.com.