Russia’s Homegrown Online Travel Firms Poised for Competitive Reset

Russia has to some extent been a humbling market for foreign online travel giants such as Airbnb, Booking Holdings, Expedia Group, and Trip.com Group — so far. The past couple of years has brought upheaval that may favor homegrown travel players catering to Russian-speaking travelers, such as Aviasales, OneTwoTrip, Ostrovok, Biletix.ru, and Tutu.ru — at least for now.

Russians have long shopped patriotically, often favoring homegrown brands. Exhibit A: They use Russian search giant Yandex. Google has second-place popularity. Yandex offers travel price-comparison search that’s much more substantive than Google’s content today.

The rare foreign brand to break through in a big way in Russia has been Booking.com. Before the pandemic, the brand accounted for about 70 percent of online travel sales of Russian hotels according to tour operator Svoy TS. But the brand has faced turbulence recently.

This summer, the Netherlands-based giant of a U.S. conglomerate is challenging the conclusions of the Russian Federal Antimonopoly Service, which in December found the brand to have violated antimonopoly law by imposing a so-called price parity requirement on hotels. While the brand has faced similar complaints in many European countries for years, Russia could take a sterner line. The law would let it charge a fine of between 1 percent and 15 percent of Booking.com’s annual revenue generated in Russia.

Another new law affecting Booking.com among other foreign travel brands is a requirement they have a local office as of January 2022.

Separately, since 2018, a few Russian travel companies have pressured the Federal Tourism Agency’s Department for Tourism and Regional Policy to curb the operations of Booking.com in Russia. Turkey’s tough tactics and a temporary ban on Booking.com, only lifted in October, is seen as inspirational.

Meanwhile, as part of its global portfolio revaluation, Expedia Group reduced its regional office presence in Russia, said three executives at local competitors.

Expedia’s pullback could have a long-term detrimental impact if Russia or other players step in to win more favorable supply contracts from hoteliers and other travel providers.

A similar issue may affect Airbnb. The company closed its Russia office in 2015 and closed its subsidiary in 2017, transferring operations to other European cities. A lack of a local ground game could favor other players. While it still probably has the most home and apartment listings online of any player in Russia, the company faces complexities due to local regulations, resistance to Airbnb’s terms that hosts can’t turn away guests based on sexuality or gender, and occasional money laundering allegations against listers.

Sutochno.ru is an online booking service that claims to have more apartment rental listings in Russia now than Airbnb.

As foreign online travel brands retrench, some Russian entrepreneurs are cautiously optimistic about their ability to compete by avoiding paid advertising wars. They’re using other tactics to defend or gain share instead.

Russia Turns to Travel Metasearch More

The pandemic has sped up a trend of the middle-class switching away from traditional travel agencies as part of a broader digitization trend, benefiting all online players. For example, Russians have been using metasearch more frequently for planning and booking travel.

That trend is good news for homegrown player Aviasales, which said it leads the market in gross transaction volume. Yandex is number two. Skyscanner, owned by Trip.com Group, has slipped to third place. Distantly behind are Momondo and Kayak, two brands backed by Booking Holdings.

“In 2017, roughly 5 percent of all the flight bookings in Russia originated with Aviasales,” said CEO Max Kraynov. “Now it’s around 17 percent. So a sixth of flight tickets sold online or offline are sold through us.”

Aviasales tracks progress by estimating how many Boeing 737s with 180 seats it fills up each day with bookings.

“This week, we’ve been filling the equivalent of 430 Boeing 737s a day with ticketed passengers,” Kraynov said. “After the pandemic, that metric should soar.”

Avoiding the Paid Advertising Wars

As the pandemic ebbs, Booking Holdings and the other global giants will hit the gas on digital paid marketing on Google and Yandex search, YouTube, and Facebook. Upstart travel brands generally can’t compete with the giants in acquiring customers in that way. Yet Airbnb’s success in using word-of-mouth and social media to grow in a niche within travel has inspired other smaller travel players in Russia and worldwide.

About 200 million people speak Russian, and many of them prefer Russian-language social media platforms as alternatives to Facebook and Instagram. Social media diversity provides an opportunity for Russia-based brands to outcompete global players.

Content marketing, such as providing trip inspiration and destination information, has also been a path for attracting and retaining customers. While Aviasales is primarily metasearch, it has been offering alerts about Covid-related updates for various destinations. The content has driven visitors to its trip inspiration content for cities and resorts. That may encourage consumers to make direct visits to the Aviasales site and app for planning future trips.

Russia’s E-Commerce Leaders Want to Sell Travel

A wild card factor for Russia’s online travel sector is a growing pattern of e-commerce companies dabbling with travel sales.

Wildberries, the largest Russian online retailer, has dabbled in selling travel.

Ozon, another e-commerce giant, attempted to create a travel division. But in the past couple of months, it wound that operation down for unknown reasons.

OneTwoTrip, a Moscow-based online travel agency, has been diversifying into other business lines. Skift recently reported on its “travel-as-a-service” solution, where it essentially runs online travel sales on behalf of banks, telecoms, and other companies that have “built-in” customer bases. This path avoids paid online advertising and generates about a third of OneTwoTrip’s revenue.

Corporate travel for small-to-medium-sized businesses is OneTwoTrip’s next business prong. The company believes that its established direct supply contracts with hoteliers and airlines across Russian-speaking markets will give it a head start in scaling up a business agency similar to what Travelperk and TripActions have done elsewhere.

The digitizing of business-to-business (B2B) travel sales is another opportunity local entrepreneurs seek to exploit. Emerging Travel Group is the parent company of Ostrovok, an online travel agency founded a decade ago this month. In recent years, the group has diversified, said Felix Shpilman, Moscow-based CEO of the group. Its RateHawk brand offers B2B hotel booking and hotel reservations for tour operators and corporate clients.

“We aspire to become a global B2B [business-to-business] travel leader,” Shpilman said. “That will include business to agency, straight to corporate, and API-based buyers.”

Aviasales, for its part, has a separate division, Travelpayouts, that focuses on U.S. and Europe for consumers, offering travel brands a mixed marketplace to get distribution and monetization via an affiliate model. It claims to out-compete Expedia Group’s comparable offering in many markets.

The pandemic’s course could still derail short-term travel sales for all players. In recent weeks, Russia has rolled out more restrictions on travel in some regions, along with compulsory vaccinations.

Yet over time, online travel looks set to see double-digit percentage growth in revenue. Analytics firm SimilarWeb shows that visits to Russia’s online travel brands in May had recovered to 70 percent of the level of May 2019, so the country’s domestic tourism has been making some gains.

UPDATE: Article has been updated to remove a mention of Oktogo.ru, which is an Aviasales affiliate site, and to clarify that Aviasales accounts for 17 percent of all tickets sold in Russia, not just online.