Sanctions take their toll on Russian tourism, international travel, and luxury purchases

By Catherine Kent

After the Russian rouble nearly halved in value last year because of the oil crash and Western sanctions, Russia’s spending power was greatly diminished. Sectors of the consumer market that relied on Russians with larger amounts of disposable income–international travel and luxury goods –are feeling the squeeze. International travel spending by Russians fell from a steady 20 percent per year increase to a 6 percent decrease in 2014. Turkey, Egypt, and various airlines have felt the loss of the Russian tourists, and responded by cutting prices for hotels and trips, or offering fewer seats on flights to Russia.

Luxury goods companies such as Burberry, Armani, Ulysse Nardin, and Michael Kors also rely heavily on Russian consumers and have taken various responses to counteract the fall in the Russian economy. Russian sales account for around 20-30 percent of many luxury good companies.  French lingerie maker Mairson LeJaby cut 27% of its staff this month, attributing the necessary cut to its loss in Russia’s business, which accounts for 30 percent of its sales. Other companies have chosen to take a loss on profits, and try to wait out the storm.