Uzbekistan
Tourism Infrastructure Market
October, 2007
Author: Jahangir
Kakharov, Bisnis Representative
in Uzbekistan
INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S.
DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED FOR USE OUTSIDE OF THE UNITED
STATES.
Summary
1. Many analysts admit
tremendous potential for development of tourism in Uzbekistan. There are more
than 4,000 objects of art and architecture from different epochs and
civilizations located in Uzbekistan – many of them are on the UNESCO list of
world cultural heritage. Cities of Bukhara, Samarkand, Khiva and Tashkent have
long time been a trademark of Uzbekistan’s historical heritage. Moreover, Uzbekistan numerous natural attractions
such as mountain peaks and rivers, mineral springs and well-known resorts,
along with an authentic culture and wide array of arts and crafts draw in a
growing stream of foreign tourists.
Finally, Uzbekistan has significantly improved its hotel choice from the
luxurious InterContinental Hotel and comfortable Radisson to a chain of bed and
breakfast facilities sporadically spread over the country’s main tourism areas.
Uzbekistan’s tourism
sector offers considerable scope for development and is identified as a
priority sector by the national government.
With the population exceeding 26 million people, Uzbekistan has the
potential to benefit from the growth of jobs and revenue that a more developed
tourism infrastructure could bring.
Tashkent, the capital city and the most common gateway to Uzbekistan,
has seen a boom in hotel construction and renovations over the past few
years. The city’s international airport
has upgraded its runways, air traffic control system and airport terminals.
While the
opportunities for foreign investments into tourism infrastructure are growing,
U.S. companies are urged to carefully examine potential projects. Currency convertibility issues, opaque
bureaucracy and competing interests from state owned businesses still present
challenges for American firms.
Overview of the Uzbekistan’s Tourism
Infrastructure
2. Uzbekistan is
strategically located in the middle of Central Asia along what was once a main
part of the historic Silk Road. It
borders all the other Central Asian republics (Kazakhstan, Turkmenistan,
Kyrgyzstan and Tajikistan), Afghanistan and the Aral Sea. The country’s size is 447,000 square
kilometers (172,000 square miles) which is about ten percent larger than
California. Two-thirds of the country
is deserts or semi-desert. Much of
Uzbekistan’s population of 26 million is concentrated in the east, in Tashkent,
the capital city (about 3 million inhabitants), and the fertile Ferghana
Valley.
While being a part of
the Soviet Union, Uzbekistan was an essential fragment of the Intourist Agency
network. Intourist annually supplied
far more tourists to Uzbekistan than it hosts nowadays. The peak year for the Uzbekistan tourism
sector producing an estimated 1.1 million foreign tourists including former
Soviet Union travelers was 1989. After gaining independence, Uzbekistan had to
start reorganizing its tourism industry. The country came with its own system
of state control and regulation. Some
new institutions and direct relations with the global tourist market were
established. As a result, immediately after gaining independence, the flow of
tourists sharply declined, recovering by mid 1990s and reaching its peak in
2000 with 261 thousand tourists (still significantly below pre-independence
peak). The core countries include mostly tourists from Russia, France, Germany,
Turkey, Japan, the USA and India. According to official statistics, about 54%
of tourists that visited Uzbekistan in 2004 were from Europe (it should be
taken into account that all former Soviet Union countries are included in the
European region), 26% originated from East Asia and the Pacific region, 11%
from Middle East, 5% from America, and about 4% from South Asia.
As to structure of the
demand for tourist products in Uzbekistan, according to Uzbek tour operators,
about 90% of tourists arriving in Uzbekistan are of middle and old age. The
most popular route among tourists arriving in Uzbekistan is visiting Tashkent,
Samarkand, Bukhara, and Khiva. This suggests that tourism potential of
Uzbekistan in the area of ecological and adventure tourism is significantly
underutilized.
UNDP Policy Brief
“Uzbekistan’s Tourism Sector – an Unrealized Potential”, points out to the main
reasons for the failure to achieve more successful results in development of
tourism sector of Uzbekistan. Despite the fact that tourism sector was
determined one of the priority sectors of the economy, still there is no a
comprehensive policy on tourism development. Institutional system of state
control over tourism should be reformed in order to improve licensing,
certification procedures as well as to increase trust between private sector
and state agencies. While the number of Uzbek travel agencies and other
tourism-related organizations exceeds 400, the main policy and strategy of
tourism development are generated by Uzbektourism. Uzbektourism, created in 1991, inherited most of the former
Intourist facilities and at first pushed forward policies aimed to enhancing of
the tourism development in Uzbekistan.
Nevertheless, with the years passing by, Uzbektourism did not acquire
enough initiative or entrepreneurial spirit to advance the existing legislation
for the market economy needs. The
omnipresent bureaucracy and cumbersome process of company registration prevents
smaller businesses’ active development. Existing visa regime is a tremendous
barrier for tourism inflow into the country. Moreover, customs and border
procedures are tedious enough to discourage return of the tourists who have
already visited the country once. There is also a need to improve skills and
capacities representatives of the tourism sector.
Statistics
3. Since 1991 when
Uzbekistan experienced a plummeting fall of arrivals visitors, between
1993-2001 period the country’s tourism indicators have shown gradual
recovery. Based on Uzbektourism data
during 1993-1996 inbound tourism increased from 461,000 to 589,600 tourists,
including foreign tourists from 43,000 to 173,800 people. Below are the main indicators of development
of tourism sector in Uzbekistan during the last few years:
Year |
Arrivals (thousands) |
Revenue (US$,
millions) |
2000 |
278 |
63 |
2001 |
231 |
72 |
2002 |
198 |
68 |
2003 |
230 |
48 |
2004 |
262 |
46 |
2005 |
242 |
35 |
Source: World Tourist Organization and Uzbektourism
*Decrease in revenues
even for years when the number of tourists was on the rise could be explained
by presence of significant informal sector and underreporting with tax evasion
purpose.
Below is the table
which illustrates the role of tourism in the economy of Uzbekistan vis-a-vis
some countries, regions, and the World:
|
Iran |
Malaysia |
South Asia |
Central and Eastern
Europe |
Uzbekistan |
World |
Share of tourism in
GDP |
3.5 |
4.9 |
2.24 |
2.2 |
0.4 |
3.8 |
Share of employed in
tourism sector in the total employment |
3.3 |
4.9 |
2.3 |
1.9 |
0.13 |
2.8 |
Share of tourist
exports in the total exports |
15.8 |
9.1 |
6.63 |
11.6 |
0.5 |
12 |
*Due to presence of
significant informal sector, the data in case of Uzbekistan should be
interpreted with some necessary adjustments.
4. Most visitors to
Uzbekistan arrive in Tashkent. As the
largest city and the seat of the national government, Tashkent is important for
the business traveler investigating business opportunities in Uzbekistan. Travel to other parts of Uzbekistan usually
originates in Tashkent. The city has a
developed network of bus, train and air links with all parts of the country and
is often a launch pad for exploring the famous Silk Road.
Many business
travelers to Tashkent try to combine business and pleasure with a trip to
Samarkand, Uzbekistan’s second largest city and the historical seat of
Tamerlane’s realm. Many Samarkand’s
sites have been recently restored.
Registan Square, an ensemble of three Madrassahs (Islamic colleges)
ranks first in Central Asia and among the greatest of all the grandiose works
of the Islamic world. The Registan
along with Bibi Khanim Mosque, the Shah-i-Zinda holy ensemble of mausoleums,
and Gur Emir (Tamerlane's elaborate tomb), provide many displays of ceramic
tiles from the 14th and 15th centuries.
Bukhara is situated
another three hours west by road from Samarkand. In 1998 the city commemorated its 2500 anniversary. Regular flights and new comfortable train
“Sharq” are among the ways people travel to Bukhara from Tashkent. The old city is well preserved and provides
a glimpse into the grandeur of this once powerful Emirate and seat of Islamic
scholarship.
In the far west of the
country near the border with Turkmenistan lies the city of Khiva, former
capital of the Khorezm Khanate. This is
yet another great attraction along the Silk Road and another historical place
that has undergone extensive restoration in recent years. Because of its distance from Tashkent, it is
less visited than Samarkand or Bukhara but it is spectacular in its own way. Khiva is the best-preserved ancient city in
Uzbekistan with scores of sites to visit within its old walls.
The Ferghana Valley in
the east is the most densely populated part of the country and a fertile place
with many mountains and streams. There
are many sites to see in this region. Kokand was the seat of a powerful Khanate
conquered by the Russian army at the turn of the century. Andijan was the birthplace of Babur, a
descendant of Tamerlane and Genghis Khan and founder of India’s Mogul Empire
who fought many great battles from Bukhara to Delhi in the early 16th century. Margilan is known for its silk production
including the largest silk factory in the former Soviet Union.
Travel Infrastructure
5. Since independence,
Uzbekistan has made development of its transportation infrastructure a top
priority. With loans from the European
Bank for Reconstruction and Development (EBRD), the Asian Development Bank
(ADB) and various export credit agencies, including the U.S. Export-Import
Bank, Uzbekistan has been modernizing its airports, air fleet, railroads and
roads.
Tashkent Airport is
the primary arrival point for international visitors to Uzbekistan. In recent years the airport’s air
navigational system, runways, and security equipment has been upgraded. A new domestic flight terminal has been
constructed according to Western specifications. With total $48 million investment UK-Turkish joint venture
Philipp Holzmann-Baytur completed the reconstruction of the passenger
terminal. This included reconstruction
of one-half of the passenger terminal, as well as complete replacement of the
engineering systems and equipment in the baggage-handling and operations
areas. This project increased the
capacity to handle passengers up to 900 per hour from 600 per hour before. EBRD
and Germany's KFW bank jointly financed the project. There are 12 regional airports across the country offering a
comfortable link to Uzbekistan’s regional centers. The airports in Samarkand, Bukhara and Urgench (near Khiva) have
been renovated and now operate with new navigation equipment and passenger
terminals.
All Uzbekistan
airports are managed by Uzbekistan Airways (HY) National Air Company - the flag
carrier of Uzbekistan. In addition to
HY, a number of Western and Asian airlines, including Turkish Air, Asiana, PIA,
Aeroflot and Transaero conduct regular flights to Tashkent. Foreign operators conduct 42 flights to
Tashkent per week. In total, the Tashkent airport serves 149 flights and about
18 thousand passengers per week. HY modernized its fleet through acquiring of
Airbus A310s, Boeing 767s and 757s and British Aerospace RJ-85s.
The Airbus and Boeing
aircraft are used to link Tashkent with many international destinations
including London, Paris, New York, Amsterdam, Frankfurt, Istanbul, Moscow,
Delhi, Karachi, Sharjah, Tel Aviv, Kuala Lumpur, Bangkok, Seoul and
Beijing. Furthermore, HY flies to a
large number of NIS destinations. HY
has a monopoly on domestic flights originating from the newly constructed domestic
departure terminal. Some domestic and
NIS flights still use Soviet-made aircraft, but the smaller RJ-85s are often
used on these routes. Based on
recommendation of Western advisors HY seeks to expand its use of western-made
aircrafts on all destinations. Over the
past years HY was named the safest airline in NIS, and continues to improve the
quality of its services, introducing new bonus and frequent flyers program for
Uzbek citizens and foreign customers. However, the products of Uzbek Airways
are not well tailored to the needs of tourism sector of Uzbekistan. For
instance, the distance between Bukhara and Urgench is about 500 km and there is
no air connection between these two tourist destinations. Many tourists get
scared away from a trip to Uzbekistan by high price of air tickets, limited
choice of airlines, restrictions on acquiring tickets for internal flights of
Uzbek Airways for those who arrived in the country with another airline, and
long waiting times at the passport and customs controls and absence of luggage
and passenger transfer agreements of Uzbek Airways with other foreign airlines.
The National Railway
Company, Uzbekistan Temir Yollari (TY), provides passenger rail service. TY operates over 4,300 km of railroads
connecting all parts of the country with Tashkent and other CIS destinations. In 1998 a subdivision of the National
Railway called Uzzheldorpass was created to provide passenger service. Since then more than 40 stations have been
renovated. Comfort and service varies
depending on the destination, but many tourists find the new comfortable trains
“Registan” operating between Tashkent and Samarkand as well as “Sharq”
operating between Tashkent and Bukhara to be both affordable and convenient. TY
is modernizing the railway with the assistance of ADB, EBRD and World Bank
loans. EBRD signed a loan of USD 40
million under sovereign guarantee as part of locomotive modernization project.
Road travel is
currently one of the most tedious ways to travel across Uzbekistan due to many
old buses, poor quality and maintenance of cars, bumpy roads and seasonal impediments.
Uzbekistan intends to renovate many of its dilapidated roads. Therefore, some
sections of the roads are in good condition. Most roads are paved but need to
be resurfaced. A state-of-the-art
tunnel completed in 2003 shortened the travel time to the Ferghana Valley. A new Tashkent ring road improved the
capital’s infrastructure. New more
comfortable buses are gradually replacing the Russian and Eastern European
buses procured before independence. SamAuto enterprise assembles Isuzu buses in
Samarkand and plays its positive role in improvement of the road transport
infrastructure. However, high import duties, introduced in 2002 in order to
protect SamKocAuto (predecessor of SamAuto), raise the cost of importing new
comfortable buses into suitable for tourists into the country.
Accommodations
6. Uzbektourism,
Intourist’s successor organization in Uzbekistan, inherited a number of hotels
and camping sites in generally with facilities below world tourism
standards. The Government of Uzbekistan
recognized the need for more suitable accommodations to attract business
travelers and tourists. Several new
hotels have been constructed in Tashkent, Samarkand and Bukhara and other
hotels have been renovated. In 1996
Uzbektourism investment projects with foreign companies totaled USD 84.5
million, including Hotel Uzbekistan ($32 million), LeMeridien ($39 million),
Hotel Shodlik Palace ($12 million) and JV Silk Road ($1.5 million).
Some larger hotels
outside Tashkent are owned by the state agencies. This results in a number of
inefficiencies peculiar to state ownership such as poor quality of management,
excessively centralized decision making process, incentives for efficient
utilization of property and etc.. From 2000 till 2004 the number of hotels in Uzbekistan
decreased by 21, whereas the number of private hotels increased by 4. The total
number of hotel rooms decreased from 17 589 in 2000 to 14485 in 2004. Whereas
the number of hotel rooms in the private hotel sector increased by 344, the
same indicator in the state owned hotels decreased by 3,448 or 43% of its
capacity in 2000. The existing hotel pool can be divided into the following
groups: premium hotels, medium class or old Soviet hotels, and tourist class
hotels in conjunction with Bed-and-Breakfasts (B&B).
Premium hotels include
properties built to international standards and offer a range of services
suitable for foreign visitors. The
range of these hotels however, varies and -- except for Hotel InterContinental
– includes mostly 4 star hotels. Many
of the Western-style hotels have been erected in the 1996-2003 period. Hotel InterContinental, Hotel Tashkent,
Hotel Shodlik Palace, Radisson, Dedeman, Grand Mir transcended into a
well-known Tashkent core of hotels.
Furthermore, Afrosiob Hotel, Presidential Hotel in Samarkand (a $22
million investment project) and New Bukhara in Bukhara, Khorezm Hotel in
Urgench (a $12 million investment project) completed the circle of major hotel
around the Silk Road cities. The majority of premium hotels are located in the
center of Tashkent business and government district. Samarkand’s Afrosiob and Hotel Central, in addition to and
Bukhara’s New Bukhara Hotels enjoy the central location as well.
An average room rate
varies between $45-150, which however, can be offset by significant discounts
offered by local travel agencies. The
average occupancy rate in these hotels comprises 35 per cent. Hotel InterContinental is undoubtedly the
best hotel in Uzbekistan. Nonetheless,
over the past year
Medium range or old
Soviet hotels are generally comprised of the Soviet era built hotel complexes
mainly used by domestic travelers.
Usually a medium range hotel has somewhat modest facilities with a lack
of western style services and relatively poor furnishing. The key old Soviet hotels include: Hotel
Chorsu, Hotel Sayokhat, Hotel Turon, Hotel Samarkand, Hotel Bukhara, Hotel
Ziyerat and Hotel Khoresm.
In 2003, Uzbek
government made significant investments modernizing hotels in this category.
Due to the EBRD’s Board of Governors Annual Conference held in Tashkent, four
hotels were reconstructed and modernized. Turkish construction Group Ay-sel
updated hotel Tashkent. The project for this 268-room four-star hotel amounted
to $16.3 million. Four-star Grand Mir hotel was open in place of the former
Russia hotel. The cost for this project, carried out by Demir Group (Turkey),
was approximately $8.5 million. Tourism and investment firm Ipak Yuli did the
reconstruction of Dostlik hotel for $9.9 million, and now managed by Dedeman,
Turkish hotel chain. These projects were financed by Turkish Exim Bank Loans
guaranteed by National Bank of Uzbekistan.
Price-conscious local
and CIS business travelers and tourists as well as some Western tourists prefer
to stay in these hotels. Originally old
Soviet hotels were developed to accommodate medium and large tourist groups
fully or partially sponsored by the trade unions. After 1991 this formula resulted into further deterioration and
complete lack of competitiveness among these hotels and newly constructed
Western style hotels.
In response to current
market demands, hotels of this type had to undergo complete renovation and
reorganization of services or else - face bankruptcy. With an average room rates as low as $15-35, these medium
price-point hotels still constitute over 70 percent of Uzbekistan hospitality
sector. Their major quandaries include
shabby decoration, small and uncomfortable beds, antiquated plumbing and lack
of air-conditioning (crucial for Uzbekistan summer) and modern bathroom
facilities. However, one of the most
recognized and, perhaps critical problems is a lack of Western style
services. Major downturn of such hotels
is in its inefficient management, which rejects to utterly surrender control to
the Western style operators.
Tourism class hotels
and Bed and Breakfast (B&B) facilities represent a new generation of hotel
facilities. Organized primarily by the
local entrepreneurs in existing old and refurbished residential houses, B&Bs
offer unique and authentic opportunity to grasp the local flavor within a
fraction of a cost. Many analysts
identify this sector as the most dynamic and promising.
Since 1997, Uzbekistan
experienced prolific growth of B&Bs. A common private hotel is usually
based in a relatively large one- or two- floor house with an inner
courtyard. These hotels are compact and
contain no more than 20 rooms. Most of
B&Bs have 6-8 rooms. Generally, a
family business or entrepreneur who purchases and then leases a part of
multi-story house runs these hotels.
B&B provides a broad range of services, including airport pick-up,
transportation, translation/ interpreting, city tours, etc. With a few exceptions, prices vary within
$25-35 range for a single suite and $40-50 for a double suite.
Bukhara provides a
perfect example of successful B&B businesses. There are more than 20
privately owned B&B style guesthouses in this city providing tangible
competition to conventional hotels.
Visitors often favor B&B accommodations because they are usually
family owned and operated providing a higher level of service and a cultural
experience. The original and most favored B&B is “Sasha and Lena's” and its
spin-off “Sasha and Sons”. Its
facilities can accommodate 40 people and occupancy is at or near 100 percent
all year round. Besides Bukhara,
Samarkand rapidly picked up on this trend, and now offers over 15 B&Bs and
apartments for rent, including City, Furkat, Malika, Optimist and others. A famous Arcanchi B&B in Khiva augmented
by two smaller hotels provides accommodations in this city.
Over the course of the
past few years, Tashkent has also experienced an increase of tourism class
hotels and B&B facilities. Sam-Buh
Hotel was a pioneer among tourist class hotel ventures in Tashkent. Offering a more intimate and affordable
place to stay than major local hotels, Sam-Buh’s six rooms with air
conditioners and satellite were almost always booked. In 2000 Sam-Buh has become a part of Orzu Hotel Chain with total
of 73 rooms. Supported by Dolores Tour
agency Orzu has been able to attract a large number of tourists to
Uzbekistan. By April 2002, the hotel
chain management completed 22 additional rooms. The success of Orzu venture demonstrated evident benefits of
small hotel business, resulting in rising interest among the local
entrepreneurs that began constructing or renovating several buildings in the
country’s capital.
Tourism Agencies
7. At the beginning of
2005, 351 firms obtained licenses for conducting tourism related activities in
Uzbekistan. Two hundred and eighty of these firms were private companies (83%).
The share of the private companies in the tourism sector is about 95%. Close to 90% of services rendered in the
tourism sector are delivered by private enterprizes.
The Association of
Private Tourism Agencies (APTA) was established in 1998. Main purpose of APTA is development and
improvement of services of existing Uzbek tourist firms, support of small and
medium (SME) size companies and attraction of foreign investors. More than 90 local tourist firms joined APTA
trying to accelerate the faster development of SMEs engaged in tourism
services.
Future Trends
8. The Government of
Uzbekistan sees the tourism sector as one of its priority sectors for
development. Although Uzbekistan has
made important strides forward in the introduction of a market economy,
development of the tourism sector will likely continue to have heavy government
involvement particularly through the national tourism company, Uzbektourism. However, as mentioned earlier, a
comprehensive state strategy on development of tourism sector has yet to be put
into place. According to UNDP policy brief, such a policy could optimize
efforts and resources targeted at development of tourism sector in Uzbekistan.
UNDP suggests that this strategy should include the following aspects:
Best Prospects
9. The following
tourism infrastructure projects appear to be the best prospects for U.S.
companies:
- Tenders for
continuous modernization of the Tashkent’s airport infrastructure;
- Works associated
with the modernization of the regional
- The construction of
hotels and related infrastructure in Chimgan mountains;
- The construction of
theme parks throughout Uzbekistan;
- Construction of Andijan-Tashkent-Nukus-Beineu
highway;
- Safety and security
equipment for infrastructure projects
These projects also
might create opportunities for US exporters of construction equipment and
technology to implement these projects.
Competitive Analysis
10. U.S. companies may
face heavy competition from European, South Asian and Southeast Asian
firms. Companies from India, Indonesia
and Malaysia have been among the most active in this sector. Japanese, Turkish
and European companies have been involved in several infrastructure development
projects, sometimes with financing from their national export credit agencies
as well as through multilateral development bank-financed tenders.
Market Access
11. Companies engaged
in tourism activities must be accredited with Uzbektourism. U.S. companies conducting business in
Uzbekistan must also register with a number of other Ministries. UNDP Policy
Brief points out that the tourism sector of Uzbekistan is recording a fairly
stable growth in micro and small investments made by private local
entrepreneurs, but at the same showing decrease in activities by large
international enterprises: airline companies like Lufthansa, British Airways,
Air France and hotel chains like Sheraton, Le Meridian, etc. Based on interviews
with the local stakeholders, UNDP concludes that this trend might be a result
of the lack of clear tourism investment policy and strategy and due to the fact
that present financial incentives adopted by the government are inadequate for
development of tourism sector.
Contact information for the Commercial Service
in Tashkent
12. U.S. companies and
individuals interested in learning more about the tourism infrastructure and
travel market in Uzbekistan may obtain additional information from BISNIS representative
in Uzbekistan. BISNIS offers advisory services and logistical support to assist
U.S. companies entering this emerging market.
For additional information about how BISNIS can help your business, or
for answers to specific questions, please direct inquiries to
Mr. Jahangir
Kakharov,
BISNIS Representative
in Uzbekistan
Telephone: 998 71
143-51-54
Fax: 998 71
143-51-54
E-mail:
bisnis.tashkent@bcc.com.uzv
www.bisnis.doc.gov/bisnis/country/uzbekistan.cfm
For
more information on Uzbekistan, visit BISNIS online at
http://www.bisnis.doc.gov/bisnis/country/Uzbekistan.cfm
BISNIS (www.bisnis.doc.gov) is part of the U.S. Commercial Service (www.export.gov)