Thomas Cook to Invest US$45 Million into Russian Travel Market

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Nov. 29 – Intourist, the Soviet day’s tourism monopoly, and Thomas Cook, Europe’s second-largest tour operator which has been chasing a deal for almost two years, will invest up to US$45 million in Russia’s oldest travel business in order to enter the fast-growing country’s tourism market.

Thomas Cook will get a 50.1 percent stake in the newly established company by paying US$10 million in cash and the remaining US$35 million in its own shares. Russian contribution came out to US$49 million.

In exchange, Intourist, with US$324 million in revenues, wants to tap into Thomas Cook’s European clientele.

The European tour operator will have an option to buy the rest of the company. Manny Fontenla-Novoa, the company’s chief executive, said the deal had created a “very clear path towards full ownership within the next three to four years.”

As he said, the deal should be approved by Russian authorities by January 2011 and will officially close in February.

The new venture will operate under the Intourist brand and the company will retain its current management team, but the new joint venture financial side will be managed by one of Thomas Cook’s top managers, with Denis Wathier appointed as the new company’s CEO.

The deal would enable the new company to cater for Russia’s strong demand for beach and family holidays, particularly to Turkey and Egypt, as well as Cyprus, which has a tax agreement with Russia.

About 2 million Russians go on holiday to Turkey and 1.6 million to Egypt every year.
“We’ve joined together two very strong brands,” said Felix Yevtushenkov, Intourist board chairman, vice president of Russia’s oil-to-telecom holding company AFK Sistema, and son of Sistema owner, Russian tycoon Vladimir Yevtushenkov.

Sistema acquired the business in 1994 and owns 66.2 percent of Intourist, while the remaining shares belong to the Moscow government and GAO Moskva, a company that works on hospitality and tourism projects for the city.

The Intourist hotels, which include the Cosmos and Pekin in Moscow, and Okytabrskaya in Nizhny Novgorod in Russia, and 10 overseas hotels, are not part of the deal.

“This is not a huge deal, but an important foothold. Russia is a growing, if volatile, emerging travel market and is viewed by both Thomas Cook and TUI Travel alike as a key strategic market,” KBC Peel Hunt said in a buy note, reports.

Intourist was founded in 1929 and was the monopoly provider of travel services in the Soviet era. After 81 years in business, it is still a leader in the incoming tourism market and is one of the top five tour operators for outbound tourism.

“It is not the first time that a foreign company has entered the Russian market. Each time the market was hopefully looking at what was going to happen. Each time the overall market dynamic did not change fundamentally, but this is the first time when a major international company is buying this type of business in Russia. So, the new company has a chance to make a difference,” Maya Lobidze, executive director of the Association of Tour Operators of Russia said to The Moscow Times.

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