Marcus Svedberg of East Capital -

An interesting phenomenon that we rarely look at in more detail is tourism in Emerging Europe. There has been a steady rise in the numbers of tourists, and they spend more and more money, making it a vital industry for a number of countries in the region.

In total, 150 million tourists visited Emerging Europe in 2011, and they spent almost $100bn, which is roughly the same amount as these countries received in foreign direct investments (FDI).

The number of tourists and the resulting receipts grew around 12% between 2009 and 2011. The growth in tourism in Emerging Europe is not a new, but rather a steady trend. There has been a constant increase in visitors since the iron curtain fell. In 1990, 35m people visited Central and Eastern Europe, excluding Turkey and the Balkans. By 2000, the number had doubled, and more than 100m people went to the region last year.

The numbers do not distinguish between intra-regional visitors and those from outside. But it is fair to assume that the growth is a result of both, as it has become easier and more attractive for outsiders to travel to the region, and the increased standard of living within the region is making Eastern Europeans more frequent travellers.

Russians everywhere

This trend is perhaps best exemplified by Russians, who became the seventh largest spenders in the world in 2011. Russian tourists, who seem to be everywhere these days, but in particular in places like Turkey and Dubai where they do not need visas, spent more than $32bn in 2011. Russia managed to attract 23m tourists and $11bn in receipts, making it the second largest destination in Emerging Europe. These numbers are perhaps not overly strong given the size of Russia, and may partly be a result of the strict visa requirements.

That Turkey is the most visited country in the region does perhaps not come as a surprise, but that almost 30m people visited Turkey in 2011 is perhaps news. This makes Turkey the sixth most visited country in the world, ahead of both the UK and Germany. Of the top-10 countries, it was also the fastest growing tourist destination in 2011. Turkey is, however, not in the top 10 in terms of tourism receipts, but is 12th, with $23bn.

There are several reasons behind the Turkish tourism success. It certainly has the assets in terms of sunny beaches, and Istanbul being one of the most vibrant cities in Europe. The active development of Turkish Airlines probably also helps, as it is relatively easy to get to Turkey from almost anywhere in Europe.

Small and beautiful is trendy

Tourism is not big business in the largest countries though. In Russia, receipts from tourism only made up 0.6% of GDP in 2011. It is not even that crucial in Turkey, where it constituted 3% of the economy last year. In Poland, another large and increasingly attractive destination, tourism receipts made up 2% of GDP. Rather, it is the small countries that stand out in this regard.

The combination of being small and on a beautiful coastline or with a beautiful capital city often means that tourism is a substantial industry. A handful countries in the region attracted more tourists than they have inhabitants, and three had receipts in double digits as a share of GDP. That Croatia, with its long coastline and beautiful islands in the Mediterranean, comes out on top should surprise no one, as it has become a well-known destination for Europeans. The fact that they have received a green light for EU membership should only increase the attraction.

Neighbouring Montenegro, which is a favourite destination for Russians, actually has the highest dependency on tourism, as receipts made up 17% of the economy last year. Tourism is important for the other coastal countries in the Balkans, such as Slovenia and Albania, but relatively unimportant for landlocked Serbia and Macedonia.

The fact that Estonia and Hungary are among the top performers in this regard is probably due to their beautiful capital cities and perhaps also a result of the emerging wellness industries (spas in both countries are increasingly popular and good value).

New destinations

Tourism is by no means new in Emerging Europe. Prague has been a popular weekend destination for decades now, but it is interesting to note that tourists seem to be starting to venture deeper into the region.

Georgia has been investing a lot into its tourism industry over the past few years and it is paying off. The small landlocked country in the Southern Caucasus had the fastest growth in tourist numbers in Emerging Europe in both 2010 and 2011. The number of visitors almost doubled, from 1.5m in 2009 to 2.8m in 2011.

Other countries that enjoyed rapid growth, albeit from modest levels, include Azerbaijan, Kazakhstan and Macedonia. Meanwhile, the number of visitors to the Czech Republic has been more or less constant during the same period.

A qualified guess is that Azerbaijan, Poland and Ukraine will see steady growth when the numbers for 2012 are summed up as a result of them hosting Eurovision and Euro 2012 respectively. Russia should similarly get a boost in 2014 and 2018 when it arranges the Winter Olympics and World Cup in football.

But there are other ways of promoting tourism as well. Abolishing visas for EU citizens, like Ukraine did a few years ago, is an effective way of attracting more tourists. Investing in affordable mid-range hotels is a strategy that Prague and some of the other popular weekend destinations have implemented well. Poland is trying to market itself in medicine tourism, capitalising on its renowned medical education. Kazakhstan is working hard to become a congress destination, although it may seem a stretch and probably mostly attract business travellers.

One of the most important factors, however, is to make sure that visitors can get to the country by direct and affordable flights. The role of low-cost airlines is therefore key, and the fight between Ryanair and Wizz Air over the slot times in Budapest after flag carrier Malev went out of business illustrates that this is becoming big business.

A largely unexplored area is second-tier cities in the region, although it is already possible to reach great cities like St Petersburg, Odessa and Krakow directly from Western Europe.

Go east!

As summer is upon us, it may be time to encourage our readers to join the trend and go east. The fact that most currencies in the region have depreciated over the past year means that travellers get even more value for money.

And why not try one of the more exotic destinations, off the beaten track? AirBaltic arguably has one of the most interesting list of destinations and it could also be a good opportunity to stay a couple of days in Riga, which is their hub, en route to Tashkent, Tbilisi or Timisoara.

Bon voyage and have a great summer!

Marcus Svedberg is Chief Economist of East Capital