Thomas Cook moves in on Russian tourist trade

HOLIDAYS giant Thomas Cook flew into the fast-growing Russian market yesterday via a joint venture with one of the country's oldest travel agencies that was synonymous with the Soviet era.

• Thomas Cook will be offering package deals to Russia's expanding middle classes

The UK-based firm is paying up to 28.5 million for an initial 50.1 per cent stake in VAO Intourist which will include the Russian group's network of 144 shops across the country.

The price will be made up of cash and Thomas Cook shares. It will have the option to buy the remaining shares in the joint venture over the next five years.

Intourist, which was founded in 1929 and privatised in the early 1990s, carried more than 650,000 passengers last year and is one of the country's leading travel brands. The company's hotels division is not included in the deal.

Manny Fontenla-Novoa, Thomas Cook's chief executive, said: "The move into Russia is in line with our established strategy of capturing growth in emerging markets. I am glad we have taken our time to secure a strong partnership and a financially attractive transaction."

Europe's second biggest tour operator said the joint venture would look to tap into the strong demand from Russians for beach and family holidays, particularly to Turkey and Egypt.

More than six million Russians went on overseas package holidays last year and analysts say this market is expected to grow by a double-digit percentage in the coming years, given the increasing wealth of the country's 142 million population. Intourist's volumes were up 30 per cent in the nine months to end-September 2010.

Analysts said the new venture would benefit from Thomas Cook's purchasing power and scale of accommodation in key holiday destinations, as well as its sophisticated IT infrastructure.

However, Intourist's existing management team will continue to run the business on a day-to-day basis, under the company's president, Alexander Arutyunov.

Intourist is majority owned by Sistema, a Russian oil-to-telecoms company, with the remainder held by the Moscow city government. It was the monopoly provider of travel services in the Soviet era.

Following a restructuring in 2005, Intourist became the country's biggest mass market travel brand, selling holidays to Russian tourists and also to international visitors.

The deal is conditional on Russian anti-trust clearance and is expected to complete by February. Earlier this year industry sources suggested Thomas Cook had considered making a full takeover offer for Intourist.

Thomas Cook and its big European rival, TUI of Germany, are turning to emerging markets such as Russia and China for growth as the UK and Teutonic holiday markets are viewed as relatively mature.