Minister Kerobyan's Statement on 319% Growth in Tourism Lacks Any Justification: Armenia's Hotels Association

On March 26, 2021, during a briefing with journalists, the Minister of Economy of Armenia, Vahan Kerobyan, made several statements regarding the tourism sector that we find necessary to address, considering their unrealistic nature and viewing them as an attempt to conceal the real issues facing the sector.

Specifically, the Minister stated that:

• "Last year in March, we had no tourists, but this year in March we already have a large group of tourists."
• "They know that there are more bookings in April."
• "Starting from May, it is expected that tourism will enter an ‘acceptable and normal pace’ and a 319% growth in the tourism sector is projected compared to 2020, which is the same as the 20-25% decline compared to 2019."

Addressing the aforementioned points, we want to note that as long as there are no official data published by the Statistical Committee of Armenia regarding the number of inbound tourist visits in March 2021, it is unclear whether March 2021 has been more favorable than March 2020, especially with the intensity described by the Minister.

According to data from some hotels that are members of the Association, the Minister’s claim that there were almost no tourists last March is baseless, as bookings made prior to the declaration of the state of emergency by the Armenian Government around March 16 were still preserved within a specific range that was higher than this year's March bookings. However, after the declaration of the state of emergency, all bookings were ultimately canceled, and by the end of March, the number of guests approached zero.

Nevertheless, we await official figures to clarify the situation completely.

Regarding the Minister's assertion that they know there are more bookings in April, we were indeed perplexed, considering that both in Armenia and globally, tourists have begun to book their visits much closer to their arrival dates than before. As a result, the so-called booking window (the period between the booking date and the arrival date) has drastically reduced from an average of three months to 3-7 days. This is objectively explained by the requirement for a PCR test that does not exceed 72 hours for guests’ travel, which forces them to buy tickets and accommodation closer to their arrival days.

For this reason, hotels simply have no idea what to expect in one or two weeks, let alone making forecasts for a month ahead. The member hotels of the Association believe that this April will not differ significantly from March, given the current number of bookings.

We find it unclear on what data the Minister has come to entirely different conclusions. We will ask him to clarify the source of his information, considering the state does not have official data regarding future bookings.

The Minister's claim that “from May we will enter an acceptable and normal pace” is more than concerning for us, as, as already mentioned, there is no possibility to make at least a somewhat reasonable forecast regarding the future.

The Minister’s approach is very dangerous, as it may weaken the vigilance of the state and actors in the tourism sector, create false expectations, and place the sector in a desperate situation in the absence of substantial state support.

In our opinion, the Minister's projection of a 319% increase, which means a more than fourfold increase, is far from reality, as aside from the aforementioned complexities, there are many other obstacles that make such recovery rates impossible.

Here are some of the most significant ones:

• No matter how effortless it seems to establish a considerably high increase from the low baseline of 2020, it must be noted that the target set by the Minister is excessively high. The defined growth of 319% compared to 2020, equivalent to a 20-25% decline compared to 2019, represents 1,400,000 to 1,500,000 tourist visits. It will be very challenging for Armenia, which is on the ‘red’ list of many countries due to the pandemic, to convince that many tourists to visit here, especially considering tourists' extreme sensitivity to the recent war and domestic political instability.
• The traditionally number one market, Russia, still does not have a long-term sustainable approach to Armenia, and vice versa regarding flight permissions, forcing airlines to keep flights reduced out of fear of cancellations, which artificially inflates ticket prices, making Armenia a non-competitive direction for Russian tourists and those arriving from Russia.
• The main land transit point with Georgia, a traditionally number two market, remains closed, significantly reducing the number of potential visitors who could combine their visit to Georgia with a trip to Armenia.
• Armenia is still considered a ‘red’ country by the Schengen area, which limits the influx of tourists from 8 of the top 20 markets in 2019 (Germany, France, Poland, Netherlands, Italy, UK, Spain, Belgium). Given that no Schengen country has even discussed officially classifying Armenia as a ‘green’ country, expecting a significant influx from these countries this year is unrealistic due to the same substantive issues.

Importantly, on the day the Minister spoke about the rapid recovery of tourism and entering ‘acceptable and normal paces’ in May, the Association sent a letter under its name demanding the immediate initiation of a new package of support measures necessary to save the sector from complete collapse. This concerns issues raised by the Association back in March 2020 and their solutions, which include:

• Releasing hotel industry entities from all tax obligations and mandatory payments until the end of the crisis.
• Implementing a post-crisis taxation system specifically for the hotel sector, reducing the high tax burden and ensuring rapid recovery and further growth opportunities.
• Covering at least 50% of the monthly interest payments on the loan obligations undertaken by these companies until they return to stable cost coverage.
• Covering at least 50% of the salaries of preserved jobs within these companies until they return to stable cost coverage.

Another notable fact is that while the Minister announces that the sector has practically recovered, in response to another letter from the Association, the Ministry wrote that the Government plans to allocate additional funds for the 23rd measure created for the sector to overcome the current crisis.

We welcome such a step by the Government; however, as stated in previous letters, this measure is insufficient to solve the problem. To truly get the sector back on its feet, it is necessary to urgently implement a comprehensive set of proposed solutions. Those solutions, individually, will not have the effectiveness or wide-ranging support potential for firms operating in the sector that their aggregate will.

We have expressed and continue to express our readiness to meet and assist the Government in implementing these programs to save the sector.

Armenia's Hotels Association NGO