Currency crash offers tourism sector silver lining

  • Currency crash offers tourism sector silver lining
Issue 77, March 2015.

Currency crash offers tourism sector silver lining

Hyrvnia woes serve to make Ukraine one of Europe’s cheapest holiday destinations

It is difficult to identify any positives from the fall of Ukraine’s hryvnia national currency. The dramatic drop in the exchange rate has left whole sections of Ukrainian society impoverished and forced the government to adopt a range of emergency economic measures which could serve to impede the development of the broader Ukrainian economy for years to come. The opposite is true for visitors coming to Ukraine armed with foreign currency. Prices had been steadily creeping up in Ukraine since the dirt cheap days of the 1990s, and for the past few years prices had been pretty close to European norms. Indeed, prior to the Euromaidan Revolution, it had become common for visitors to Ukraine to moan that the country was markedly more expensive than other east European destinations such as the Czech Republic and Poland. All that has now changed, with the slide of the hryvnia serving to make Ukraine one of the cheapest countries in the whole of Europe – if not the entire northern hemisphere.

Nor is inflation likely to even out the changes in the purchasing power of foreign currency. As the Ukrainian national currency has tumbled, inflation has risen sharply, but not sharply enough to keep pace with the dramatic decline in the value of the hryvnia. Local goods and services providers simply cannot afford to hike up prices in line with the hryvnia drops, as to do so would mean scaring off the few remaining clients they have left. Instead, the current trend is towards keeping pre-drop prices in place as much as possible, while accepting the inevitable reduction in real-time revenues which this entails. Ukrainian companies are in survival mode and massive price increases are simply not realistic. This means that everything from high-end restaurants and top-quality hotels to taxi services and souvenirs just became ridiculously cheap. Visitors to Kyiv can enjoy a 5-star experience for budget travel prices.

Ukraine’s incoming tourism industry must now work to actively raise awareness of the country’s value-for-money holiday options. They must swallow their pride and promote Ukraine as the cheapest destination in Europe. Post-Soviet Ukrainian tourism was an under-developed sector at the best of times. In the past year it has faced the added obstacle of having to convince would-be tourists that the country

is safe, despite the images of revolution and war being beamed out to global TV audiences. By marketing Ukraine’s unbeatable value for money, incoming tourism operators will be able to trump security fears by appealing directly to people’s wallets and their love of a bargain.

Any increase in the flow of foreign tourists to Ukraine is unlikely to be sufficient to balance the depleted state budget. Nor will it lead to a surge in demand for the hrynvia itself. However, it could help numerous

small businesses make it through the current challenging times, while also introducing thousands of Europeans to today’s Ukraine. Many of these visitors will return home with positive things to say about Ukraine, providing priceless PR for the country at a time when Ukraine is struggling to convince international audiences that it is worth fighting for.