Vladimir Dorofeev: “There is no crisis on the market – you can take my word for it”

Sergey Vladimirov, 18.08.2014 11:35
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St. Petersburg’s travel market is akin to the city itself: idiosyncratically conservative, relatively open and relatively ambitious. It is also notable for its careful approach and thoughtful caution: St. Petersburg’s travel companies stay away from high-risk ventures and overt scams, even when there is big money there. The bankruptcy of Neva is a business-exception. But Neva and others still managed to negatively affect the operations of the key players, who have nowhere to fall back to: their charter flights and programs are the pillars for the majority of St. Petersburg’s travel agencies.

Vladimir Dorofeev, CEO of Versa – a key market player recognized by many – spoke about the business during the tough August days in an interview with TRN.

— Vladimir Artemovich, what does Versa’s business currently hinge on? What is its “safety cusion”?

— First and foremost, it is versatility. It was the foundation of the company 15 years ago. And this versatility transcends in many ways in our activities. For instance, when it comes to tourists’ holidays, we offer charter flights, individual tours, health and excursion programs, educational trips. We exercise the same approach to our tour portfolio and organizing holidays in St. Petersburg: Versa services both organized groups and individuals, international tourists and Russian school students. Working with both outbound and inbound tourists, coupled with our own bus fleet and office network for selling railway and air tickets, makes our business stable and highly competitive: no other Russian travel company has this kind of business structure.

At the same time, our mobility is also a positive factor: all destination managers have autonomy in making decisions, which makes us highly responsive to any developments in the market.

All these factors let us provide services on a constant basis: all destinations cannot collapse at once, so decline of one destination is always offset by growth of another.

The reputation that we have built throughout the years is both our ally and our enemy now. This period is a real litmus test of trust both for us and for other market players.

— Was Versa prepared for the market crisis? Did you know about what was coming?

— First of all, there is no crisis. You can take my word for it. If we really break it down, Neva was the only travel company that had significant enough reasons for stopping its operations. The company was unable to compete, lost its clients, and did not restructure its business in time, which led to its bankruptcy. But then came another story — concerning Ideal Tour, and that one had to do with fraud. In my opinion, Labirint was the victim in this situation, since the people who paid for their plane tickets never got their money back.

There, of course, needs to be an investigation into what has happened, and a legal one as well. However, going strictly by the business logic, Labirint could not just up and repay the “lost” flights to the airline — the amount was too great. Such a situation has nothing to do with business and competition. Unfortunately, this can happen to any company. Later, for example, IntAer tour operator ran into similar problems.

That is why “crisis” would be the wrong word here — it is more like a simple commotion. The shrinking of the market would be a more precise way to describe the current state of affairs: foreign economic conditions also play a role here, since they influence both inbound and outbound tourism, contribute to the increase of the exchange rate and to the rise of credit rates. Fewer people are going on a holiday.

— What are your relations with partners?

— We have direct ties with airlines. For instance, we have rented a plane from Orenair, with which we have a contract until the end of this year, and now it services our destinations only. It does 14 flights a week. In working with Yamal Airlines, Aegan, Aeroflot and a number of other airlines we use the prepayment system. Not one of our partner airlines objects to the payment scheme: all former contracts and agreements remain in place.

As for destination management companies (DMCs), I cannot say that they are completely free of worries. They have to deal with hotels’ frequent queries. They call us, often with the same question — “How are you?” We explain, inform, put their worries to rest. These worries are understandable, given the situation. There is some hysteria in regard to payment, but things were even more frantic when Capital Tour collapsed. Currently, no one requires urgent payments of us, for example, for all bookings until the New Year. Our reputation lends us control over the situation.

— What about your relations with agents? Will they need to be calmed?

— We owe our agents a great deal of gratitude. Their trust lets us work much more efficiently. Sure, both tourists and agents are worried: they call and ask for confirmation of flights, hotels. We understand their concerns as well, so our accountants give them certificates and payment receipt copies confirming that plane tickets and hotel rooms are paid for. Sometimes customers do ask for refunds, and we grant them, as we have always done.

We view agents as our “younger brothers”, and we try to help them our more. The more loyal we are, the faster an agent will realize that we offer not only business, but support as well.

— Are you planning to streamline the company’s operations? Cut programs, lay off employees, cut salaries…?

— No, we are not even considering it. We are positive that the market is going to stabilize, which is why there is no need to adjust our programs. Another reason is that these cuts will lead to losses: we have quite stringent agreements in place with DMCs and airlines. So it would be more beneficial for us to go through with our commitments instead of cutting programs short.

As for internal restructuring, it is needed when something becomes obsolete. We are currently content with everything. There is no need to drastically reduce our expenses. We did not do it during the 2008 crisis, as well. We run a successful operation, which is currently in its heyday, and we are not going to change our course just because someone else has failed. Our company is highly competitive, which has been further proven by the current season.

— Tell us about Versa’s sales. For how long do they extend?

— If we look at the general sales only, there is a decrease, but not to an extent that can hurt us – about 15-20%. Since July 16, there has been only a 10% y-o-y decrease in the period for which the sales extend. In the current informational onslaught on the travel business this stands as a great result, which reflects our stability and trustworthiness. Currently, people are buying tours for the New Year and for October-November.

- What about your financial guarantees? There have been reports that you have insured 50 m with Avesta insurance company.

- That is correct. Avesta is one of our most reliable partners. We have worked with them before, so it only took two meetings to enter into a new agreement.

- Are your winter programs going to change?

- Right now we are in the process of developing these winter programs. There are no adjustments due to the so-called crisis, but we are making adjustments to demand. It is currently not very clear due to political and foreign economic conditions. That is why we try to be as careful as possible when launching new programs. Overall, there will not be much change as compared to the previous year. We are still going to be offering flights to Tenerife, Egypt and the Czech Republic. Moreover, we now have our own plane – the one from Orenair – so we are no longer dependent on buying blocks of seats. This will let us offer winter flights to Sharm, Hurghada and Taba, on Tenerife – twice a week.

- Summer is not only the busiest season, but also the period of depositing hotels for the next season. What steps is Versa taking in this regard?

- Yes, booking is in progress: due to changes in the foreign economic environment we approach this process more carefully – this goes both for depositing and for contracts. Our business is structured in such a way that we pay the hotel first, and collect money for the said hotel from the tourist later. This is why we resort to credit lines during the peak periods. Right now we have a credit line opened in Promsvyazbank (PBS), but we have not had the need to use it yet.

- Moving away from the current affairs, what are Versa’s strategic business plans for the future?

- Judging by the global developments, a modern tour operator should have its own plane, ready accommodation, its own service departments, in order to maintain the trademark quality. These are the demands of the modern business. One of the key components and competitive advantages are own planes. In 2008, we rented buses, and now I regret that we did not rent a plane as well. This is among our plans for the future. On the one hand, buying a plane is not an issue, all that is needed is money. But you also need to sell tickets for this plane. Due to our versatility we always have tourists who are willing to travel. Also, our own plane will give us the opportunity to revise the cost of a travel package and offer tourists a cheaper price.

- When do you think the travel market will finally stabilize?

- It all depends on how many more companies will leave the market. These may be companies that suffered from Ideal Tour’s scheme or those that have already been having trouble.

My estimate is that only a minuscule number of companies will leave the market. As for the market becoming stable again – it is going to happen in the coming weeks. If our tourists believe us and understand that they are, indeed, safe, the situation will stabilize even faster. Despite all the commotion, people still want to use their vacation to the fullest and go on a good holiday…

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