Russia’s Travel Resilience Underscored by Startup Aviasales’ $43 Million Funding

Russia has seen its domestic travel recover faster than most other countries in the pandemic. That reality is highlighted by news on Wednesday that private equity firm Elbrus Capital and venture firm iTech Capital will invest $43 million in Aviasales, a Moscow-based travel price comparison search site that has been focused on Russian-speaking travelers. The fundraising is one of the largest in the Eastern European travel tech scene since the crisis began.

The fundraising comes against a backdrop of strong Russian performance in Skift Research’s Travel Tracker, which provides a real-time measure of the performance of the travel industry in 22 countries using several metrics. Russia has consistently led most countries month by month in the Skift Recovery Index, and in June notched a 76 out of 100 score, which was well above the 64 point average for countries tracked.

“We are roughly 40 percent up compared to pre-pandemic levels in terms of domestic bookings,” said CEO Max Kraynov. “Around 17 percent of all flight tickets sold online or offline in Russia are sold through us.”

For investors, tapping a large, underpenetrated online travel market like Russia’s is a plus. Obstacles to foreign rivals are a bonus. But the incomes of many Russian-speaking travelers remain pressured. High growth is likely, but the pace is unpredictable.

Aviasales finished 2020 in the black, and it is ahead of travel metasearch rivals Yandex and Skyscanner in market share. It had a previous $10 million funding round in February 2014 from iTech Capital’s iTech Fund I and was profitable from then until the pandemic struck.

The startup’s core product has been a flight search engine that provides customer support in case of service disruptions. But it has recently expanded its non-flight revenue streams partly by using content marketing to become a place for people to plan trips in the pandemic.

Validation of the Russian Travel Market

“The Russian flights and travel market is one of the largest in Europe and is strongly rebounding after the Covid-19 induced crisis,” said Dmitri Krukov, senior partner of Elbrus Capital funds, in a statement. “The company has one of the most recognizable and appealing brands in the Russian travel market.”

Aviasales has used a multi-year brand campaign, including TV, outdoor, and airport advertising, that has led it to enjoy a year-over-year decline in its dependence on paid search engine marketing to acquire customers. It has also sponsored many popular YouTube shows.

“We track our brand recognition in top-of-mind surveys, and we’re the number-one brand online in the entire Russian travel market, and even more recognized than some famous airline brands,” Kraynov said.

Analysts said that the company needs to broaden its user base faster than the pace of an expected decline in commissions from airlines and online travel agencies.

Strategic partnerships may help. Three years ago, the company signed a deal with Booking.com so that most of its accommodation content comes from that Amsterdam-based brand, which is Russia’s most-used online travel agency for hotel reservations.

The company will use the new investor funds to develop more products and speed up growth across European markets and foster the company’s year-old corporate travel service, which Skift recently reported on.

The funding will also expand the startup’s subsidiary Travelpayouts, which does automated affiliate marketing mostly in Europe and the U.S. and competes in a similar space to Expedia Group’s comparable affiliate offering.

“Travelpayouts is moving from positioning as an affiliate model to being a marketplace offering distribution for travel brands and monetization for publishers,” Kraynov said.

The subsidiary offers display advertising (such as branded search forms, widgets, and banners) where a brand is charged only if a transaction is completed. It also monitors traffic quality.

The investment is one of the largest venture capital bets in the Russian-speaking travel market. The last significant funding was for Emerging Travel Group, which runs Ostrovok and RateHawk, when it raised $10 million in 2019.

For more context on the Russian-speaking travel market, see Skift’s articles from last month: Russia’s Homegrown Online Travel Firms Poised for Competitive Reset and Russian Startup Takes Page From Software Industry With Travel-As-a-Service Model.