SOVIET AND EAST EUROPEAN FOREIGN EXCHANGE EARNINGS FROM WESTERN TOURISM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700040036-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 20
• Document Creation Date: December 20, 2016
• Document Release Date: March 30, 2006
• Sequence Number: 36
• Publication Date: November 1, 1972
• Content Type: IM

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Confidential
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Soviet and East European Foreign Exchange Earnings
from Western Tourism
Confidential
ER IM 7?-153
November 1972
Copy No. 80
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CONTENTS
Page ,
Introduction 1
Conclusions 1
Discussion 2
Development of Tourism, 1964,71 2
Importance of Earnings from Western Tourism 7
Promoting Western Tourism in the USSR and Eastern Europe . . 7
Special Inducements 11
Prospects 12
Appendix
Methodological Note 15
Tables
1. Western Tourists Visiting the USSR and Eastern Europe,
by Country of Visit 3
2. Western Tourists Visiting the USSR and Eastern Europe,
by Country of Origin 4
3. Gross Revenues from Western Tourism in the USSR
and Eastern Europe 5
4. Western Tourists Visiting the USSR, by Major
Country of Origin 5
5. Soviet and East European Tourists Visiting the West 6
6. Estimated Gross Expenditures by Soviet and East
European Tourists in the West 6
7. Western Tourists' Expenditures per Stay, 1970 11
8. Growth of Revenues from Worldwide Tourism 13
9. Growth of Revenues from Western Tourism to the USSR
and Eastern Europe 13
Mustration
USSR and Eastern Europe (map) 8
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
November 1972
INTELLIGENCE MEMORANDUM
SOVIET AND EAST EUROPEAN FOREIGN
EXCHANGE EARNINGS FROM WESTERN TOURISM
Introduction
I. Western tourism in the USSR and Eastern Europe is still small
in absolute terms, but if has become an increasingly important source of
hard currency. This memorandum examines the growth of Western tourism
in the USSR and Eastern Europe since 1964, the programs established to
stimulate tourism, and prospects for 1972. Tentative estimates also are made
of hard currency expenditures of Soviet and East European tourists in
Western countries.
Conclusions
2. In 1971, about 4.6 million Western tourists ? about twice the
number in the mid-1960s ? traveled to Eastern Europe and the USSR and
spent an estimated $226 million. These expenditures compare with an
estimated $48 million spent by Soviet and East European tourists traveling
in the West.
3. Tourism is becoming an increasingly attractive earner of hard
currency for the USSR and the countries of Eastern Europe, adding some
3% to earnings from commodity exports. Communist Europe has come to
realize that it is generally easier to increase exports of tourist services than
of merchandise to the developed West, that the tourist industry requires
less investment relative to sales volume, and that this industry has a relatively
shert payoff period. As a result, these countries are upgrading and expanding
tourist facilities and services to increase hard currency e.._rnings. Each
country is actively promoting its scenic and cultural peculiarities, and most
offer special tourist rates of exchange and other inducements to attract
Western tourists.
Note: This memorandum was prepared by the Office of Economic
Research.
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4. The planned expansion of tourist facilities faces the same delays
as other building programs in the USSR and Eastern Europe. To help off3et
shortcomings, the East European countries have arranged for Western firms
to supply capital, materials, and management know-how for new tourist
facilities. In some cases, foreign firms have been hired to do the building.
Moreover, several large Western hotel chains are reported to be interested
in limited joint ventures in the Soviet Union and Eastern Europe.
5. It is not possible to make a meaningful long-term projection for
Western tourist expenditures in the USSR and Eastern Europe. Revenues
from tourism are to a large extent influenced by general economic
conditions in the developed West and the prevailing state of East-West
relations. Since 1964, however, there has been a general upward trend in
worldwide tourist spending and Western tourist spending in Communist
Europe, which will probably continue for the foreseeable future.
Discucsion
Development of Tourism, 1964.71(1)
6. In 1971, about 4.6 million of the 18 million foreign tourists who
traveled to Eastern Europe and the USSR were from Western countries
(see Table 1)(2) ? about twice the number in the mid-1960s. Bulgaria is
the leading Communist market for Western tourists (more than one million
a year),(3) but the USSR is a close second and is rapidly catching up,
while Czechoslovakia (once the Western favorite) has been hurt by the Soviet
invasion and now hosts few more tourists than in 1964. Western tourism
in Hungary and Romania has grown rapidly and become substantial. East
Germany still has few Western visitors.
7. The August 1968 Warsaw Pact invasion of Czechoslovakia and
the ev ants that led to it probably cost the USSR and Eastern Europe $15
million to $20 million in tourist receipts during 1968 ? that is, the amount
by which tourist earnings(4) would have increased under normal conditions.
As it was, gross receipts from Western tourism in 1968 were only slightly
1. The sources used to estimate the number of tourists and foreign exchange earnings
fru n tourism are discussed in tins. Appendix.
2. The remaining 13.5 million tourists are virtually all intra-bloc (East European and
Soviet) travelers.
3. About one-half of the Western tourists to Bulgaria are across-the-border visitors
from Turkey who spend a fraction per stay compared with "conventional" tourists.(see
Table 2).
4. The term tourist earnings, as used in this memorandum, refers to gross earnings.
These earnings exclude charges for visas and transportation.
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Millie I
Western Tourists Visiting the USSR and Eastern Europe
by Country of Visit
Thousand Persons
1964
1965
1966
1967
1968
1969
1970
1971
Total
2,258
2,695
3,114
3,311
3,326
3,648
3,998
4,578
USSR
488
610
668
758
593
672
761
9001J
Eastern
Europe
1,770
2,085
2,446
2,553
2,733
2,976
3,237
3,678
Bulgaria
531
637
734
738
801
1,017
1,099
1,18011
Czechoslo-
vakia
725
618
755
838
824
725
731
792
East
Germanyti
114
136
157
173
155
171
1901d
21011
Hungary
200
301
356
356
373
448
560
683
Poland
145
190
216
236
226
243
279
313
Romania
55
203
228
212
354
372
37;:ilji
50011
a. Preliminary.
b. Excluding family visits by West Germans and West Berliners but including
visitors from these areas to the Leipzig trade fairs.
higher than in 1967 (see Table 3). The USSR and Czechoslovakia incurred
most of thi-; loss. The decline in Soviet earnings was not as large as the
decline in the number of tourists, however, because of the change in the
"nationality-rix" of the Westerners traveling to the USSR. Nearly all of
the decline originated with low-spending excursionists from Finland and
Norway (see Table 4). Czechoslovak tourism, suffering nearly the same
financial loss in 1968 as the USSR, has since lagged serious!y. To bolster
tourism, Czechoslovakia in mid-1969 reinstituted the policy of freely issuing
Ourist visas at the border, and in May 1970 the minimum amount Western
tourists must spend per day while visiting Czechoslovakia was increased from
$3 to $5. The rest of Eastern Europe, however, suffered little or no decline
in tourist earnings because of the invasion.
8. The number of tourists from these Communist countries to the
West also increased rapidly following the partial relaxation of travel
restrictif ms by the various Communist regimes in 1964. Growth was
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Table 2
Western Tourists Visiting the USSR and Eastern Europe
by Country of Origin
Thousand Persons
1964
1965
1966
1967
1963
1969
1970
Total
2,258
2,695
3,114
3,311
3,326
3,648
3,998
Austria
642k1
416
493
535
517
469
N.A.
Fin1and?1
192
262
309
335
202
175
N.A.
France
102
149
201
225
194
199
N.A.
Germany ,West
355
505
680
761
766
852
N.A.
Italy
40
61
86
107
151
182
N.A.
Japan
N.A.
N.A.
33
32
33
48
N.A.
Sweden
43
63
62
80
98
124
N.A.
Turk ey'?i
245
356
374
340
383
514
N.A.
United
Kingdom
92
105
120
126
146
154
N.A.
United
States
80
103
140
147
148
191
N.A.
Other
46)
684
616
623
688
740
N.A.
a. The total is derived from data for individual Communist countries. Data
for Western tourists, by country of origin, are not available.
b. Including excursionists.
c. Largely excursionists to the Soviet Union.
d. Largely excursionists to Bulgaria.
particularly large in 1969, when the total number of Eastern tourists rose
to 1.2 million from about 850,000 in 1968 (see Table 5). Czechoslovakia
accounted for the bulk of this increase when, for a short time, the
post-invasion regime maintained a very liberal policy on travel in the West.
This sudden surge in travel to the West resulted also in an estimated deficit --
the first for any Communist country ? of about $600,000 in Czechoslovak
1969 tourist earnings. Shortly thereafter, however, strict controls on travel
were reinstated, and the number of Czechoslovaks traveling to the West
dropped sharply, precipitating a sharp drop for the East as a whole to
732,000 in :970. For 1971 the total is estimated at 821,000. During
1964-71, hard-currency expenditures by Soviet and East European tourists
in the West rose from an estimated $22 million to $48 miilion (see Table 6).
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Table 3
Gross Revenues from Western Tourism
In the USSR and Eastern Europe
Million US $
1964
1965
1966
1967
1968
1969
1970
1971
Total
87.0
212.6
128.2
141.2
144.3
171.1
191.9
225.7
USSR
36.8
45.9
50.1
55.4
52.4
70.5
81.0
96.0
Eastern Europe
50.2
66.7
78.1
85.8
91.9
100.6
110.9
1293
Bulgaria
15.0
15.1
19.3
21.0
22.2
26.9
28.1
30.81-1
Cztchoslovakia
13.2
17.1
17.8
22.6
19.7
17.4
17.5
19.0
East Germanytl
4.0
4.9
5.6
6.5
5.8
6.2
7.011
8.0t1
Hungary
8.8
12.2
15,7
15.7
17.5
21.6
26.9
32.8
Poland
6.4
7.2
8.3
9.4
9.0
9.9
12.5
14.1
Romania
2.8
10.2
11.4
10.6
17.7
18.6
18.911
25.019
a. Preliminary.
b. Excluding spending by West Germans and West Berliners, except by those traveling to the
Leipzig trade fairs. Inclusion of this spending would increase total hard currency revenue
by about 10 times.
Table 4
Western Tourists Visiting the USSR
by Major Country of Origin
Thousand Persons
1967 1968 1969 197011
Toial
758
593
672
761
Finland
328
192
163
167
Norway
47
28
13
28
Other West
383
373
496
566
a The last year for which detailed data are available.
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Table 5
Soviet and East European Tourists
Visiting the West!'
TLousand Persons
1964
1965
1966
1967
1968
1Q69
1970
1971
Total
456
503
558
667
850
1,213
732
821
USSR
55
60
80
80
90
100
125121
140
Eastern Europe
401
443
478
587
760
1,113
607
681
Bulgaria
15
27
29
35
46
49
45
50?-1
Czechoslovakia
15011
168
209
303
450
715
188
149
Hungary .
157
165
142
143
151
169
185
216
Poland
72
76
91
97
92
108
114
191
Romania
7
7
7
9
21
72
75
75
a Excluding East Germany.
b. Preliminary.
c. Estimate.
Table 6
Estimated Gross Expenditures by Soviet and
East European Tourists in the Wesel
Million US $
1964
1965
1966
1967
1968
1969
1970
1971
Total
22
24
27
31
39
53
42
48
USSR
8
9
12
12
14
15
19
21
Eastern Eurepe
14
15
15
19
25
38
23
27
Bulgaria
tA
1
1
1
2
2 ,
1
2
Czechoslovakia
3
3
4
6
9
18
4
3
Hungary
6
7
6
7
9
12
13
15
Poland
4
4
4
5
4
4
3
j
RomaniaYi
tai
11
111
1
2
2
2
a. Excluding East Germany.
b. Less than $0.5 million.
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telD.ENTIAL
m ? ortance of Earnin s from Western Tourism
9. Western tourism in Eastern Europe and the USSR is small in
absolute terms, but it is an increasingly important source of hard currency.
Between 1964 and 1970, Western tourist receipts grew at an average annual
rate of 14.1%, compared with commodity exports to the developed West,
which averaged 11.1% per year. Income from Western tourism, while equal
to only 3% of the value of Soviet and East European exports to the
dr.:veloped West in 1970, is a more significant source of revenue for some
of the Communist countries. Bulgaria's Western tourist receipts, for example,
were equal to 11% of its exports to the developed West in 1970. Soviet
and East European hard currency indebtedness now totals about $4 billion,
about half of which is Soviet. This debt picture makes earnings from Western
tourism an increasingly attractive addition to the hard currency income of
these countries, particularly at a time when they face difficulty in expanding
exports to the West.
Promoting Western Tourism in the USSR and Eastern Europe
10. The lack of good-quality hotel rooms is the most serious
impediment to increasing Western tourism in the USSR and Eastern Europe.
In late 1971 a Pravda article by a Moscow architect complained that Soviet
hotels a; e too few and too expensive(5) and suffer from primitive
Visitors in Moscow Invariably Come to the Walls of the Ancient Kremlin, to Red Square
5. Western tourists pay from two to ten times what Soviet citizens pay for the same
room.
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U.S.S.R. and Eastern Europe
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management techniques. The USSR and the East European countries now
have programs under way to step up hotel construction to attract more
hard currency tourists. Intourist, the Soviet travel agency, reportedly is
mounting a $300 million expansion campaign during the current five-year
plan (1971-75), including the construction of 30 large hotels, 12 motels,
and 50 restaurants ? all intended for Western tourists. These projects will
add some 80,000 beds to the Intourist hotel chain.
11. Among the countries of Eastern Europe, Bulgaria's building
program for 1972 includes 17 new hotels, two motels, and various other
accommodations, totaling some 3,500 beds. In addition, a new 50,000-bed
resort on the Black Sea is reported in the planning stage. In Czechoslovakia,
increasing Western tourism has stepped up the demand for new fa;:ilities.
Hotels are being built in Prague, and especially in the High Tatra Mountains
and spa centers. However, the director of the Secretariat for Tourist Travel
reported in early 1972 that the expansion of accommodations is
unsatisfactory and only about 2,000 additional beds will be made available
in 1972. Hotel construction is not as widespread or as large-scale in East
Germany as in some of the other East European countries. The 26 hard
currency hotels in the state-owned Interhotel chain provide only 12,000
beds. Plans call for an increase to 17,500 beds by 1975, with the opening
of new facilities and the expansion of existing ones.
12. Hungary is among the most vigorous and successful of the East
European countries in promoting hotel construction. The recent heavy
investment in constructing resorts in the Lake Balaton region is aimed
mainly at Western tourists. Three first-class tourist hotels have also opened
recently in the Budapest area. Poland is stepping up hotel construction after
years of stagnation. Three large, modern hotels are planned for Warsaw,
the first of which should he completed by the end of 1973. Another 24
hotels, totaling 5,700 rooms, are to be built in other Polish cities before
the end of 1975. Romania is probably the most active on a per capita
basis in expanding its investment in new tourist facilities. At least six new
tourist hotels and motels have been opened recently in areas outside of
Bucharest, and three large hotels are planned for the capital itself. In
addition, Black Sea coast facilities for tourists are being developed further.
13. The planned expansion of tourist facilities faces the same
problems as other building programs in the USSR and Eastern Europe
costly construction delays, shoddy workmanship, and inferior materials and
equipment. Recognizing these shortcomings, some of the East European
countries have made arrangements with Western firms to supply capital,
materials, and management for new tourist facilities. In some instances,
foreign contractors have been hired ? especially Yugoslays ? to do the
building. One of the most attractive hotels in the USSR, the Viru Hotel
in Tallin, was designed and built by the Finns. Prague, Budapest, and
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Romania's Black Sea Coast is a Major Attraction for Western Tourists
Bucharest each have an Inter-Continental Hotel, a subsidiary of Pan
American World Airways. Each hotel was financed through a foreign
subsidiary of Tower International, a US firm. Other large hotel chains such
as Holiday Inn, Sheraton, and Hilton International reportedly are interested
in limited joint ventures in the Soviet Union and in Eastern Europe.
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Special Inducements
15. The USSR appears to have relatively little difficulty in attracting
Western tourists in spite of poorly managed tourist facilities, barely adequate
food, indifferent treatment of the tourists, and other shortcomings. For
the most part, those who travel to the USSR are drawn by curiosity, and
they will spend more than they would in, say, Spain. Few will return if
one is to judge by the almost universal comment of Western travelers to
the USSR that they will never return. Thus, little more than additional
physical facilities to accommodate more tourists will be required to bring
in larger numbers of Westerners to the USSR. The problem is more difficult
for the East European countries. To compete with a country like Spain,
they must offer cheaper vacations. There is much less of the curiosity factor,
particularly for West Europeans who make up the bulk of Western tourists.
Table 7 compares average tourist expenditures per stay.
Table 7
Western Tourists' Expenditures Per StayIJ
1970
US $
Portugal
71
Spain
74
Italy
129
Greece
138
USSR
106
Bulgaria
26
Czechoslovakia
25
East Germany
28
Hungary
48
Poland
45
Romania
50
a. Including one-day or two-day excursionists
and excluding transits. Per day estimates are
not available for Eastern Europe.
16. Aside from the fact that the lower expenditures in some East
European countries (Czechoslovakia and Hungary, for example) reflect a
significant number of low-spending across-the-border tourists, East European
vacations are cheaper for several reasons. One is the favorable rates of
exchange for tourists. Only the USSR and East Germany do not offer such
rates. In some cases, premiums of 200% or more above the official rate
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are offered. lie Poles, for example, allow 22.08 zlotys per US tourist dollar.
The blilcic market rates of exchange are much higher than even the tourist
rate. Although black market trading of dollars appears to be insignificant
because of tight currency controls and severe penalities, some dealings in
black market currency apparently take place, particularly at seaports among
foreign seamen. Goods for tourists with hard currency are also priced much
lower than for the local populace and can be obtained at special hard
currency shops.
17. In recent years, other services and amenities have been introduced
to encourage Western tourists to visit Eastern Europe and the Soviet Union.
Western tourists in the USSR can now use Diner's Club and American
Express credit cards to charge all expenses at Intourist hotels, restaurants,
and car rental points, including Hertz Rent-a-Car service. Other East
European countries have offered F;m:lar services for several years.
Prospects
18. It is not possible to make a meaningful long-term projection for
Western tourist expenditures in the USSR and Eastern Europe. Revenues
from tourism are to a large extent influenced by general economic
conditions in the developed West and the prevailing state of East-West
relations and thus are subject to wide fluctuation in growth rates. However,
since 1964, spending has taken a general upward trend in worldwide tourism
and in Western tourism in the USSR and Eastern Europe (see Tables 8
and 9). This trend probably will continue during the 1970s.
19. Western tourist experts expect a continued moderate growth
during 1972 in international tourism, including Western tourist travel to
the USSR and Eastern Europe. Prospects for increased Western tourism are
brightest in those East European countries such as Romania, where Vie
leadership has recognized the value of the tourist dollar and has given a
special priority to its cultivation. Moreover, the recent summit meetings
and ongoing talks for further East-West cooperation generally have enhanced
tourism prospects in the short term, particularly in the USSR.
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Table 8
Growth of Revenues from Worldwide Tourism'l
Year
Receipts
(Billion US $)
Growth Rate
(Percent)
1964
10.1
15
1965
11.8
17
1966
13.2
12
1967
13.4
2
1968
13.9
4
1969
15.5
12
1970
l8.01-4
16
1971
20.512-
14
a. Excluding receipts from international fare
payments and receipts from domestic tourism.
b. Estimate.
Table 9
Growth of Revenues from Western Tourism
to the USSR and Eastern Europe
Year
Receipts
(Million US $)
Growth Rate
(Percent)
1964
87.0
48
1965
112.6
29
1966
128.2
14
1967
141.2
10
1968
144.3
2
1969
171.1
19
1970
191.9
12
1971
225.7
18
a. Excluding receipts from international fare
payments and visas.
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APPENDIX
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Methodological Note
Estimates of foreign exchange earned from Western tourists for each
of the countries considered are based on official statements and tourism
earnings statistics for Czechosiovakia, Hungary, and Poland for selected years
during 1960-70.* Average spending per tourist is derived from dividing
reported earnings by the number of Western tourists to a particular country.
This figure can be further refined by considering the remoteness and size
of the country visited and the Western tourists' countries of origin.
Spending per stay by a Western tourist in Czechoslovakia averages
about $25; in Hungary, $48; and in Poland, $45. Because of the greater
remoteness of Bulgaria, Romania, and the USSR, tourists tend to stay longer
and, therefore, to spend more. Western tourist expenditures per stay in
Romania are estimated at $50. Turkish tourists to Bulgaria are
across-the-border visitors who spend an estimated $3 per stay; it is estimated
that other Western tourists spend about $50 per stay. Both remoteness and
size characterize the USSR, and tourist income per stay varies widely with
country of origin. Tourists from the United States are estimated to spend
an average of $250 per stay; Finns arid Norwegians, $10 per stay; and other
Western tourists, $112 per stay in 1964 and $125 thereafter.
Estimates of East Germany's earnings from Western tourism are based
on spending by non-German Western tourists (excluding visitors to the
Leipzig trade fairs). The latest data available show average spending of $7
per day, with the length of stay increasing from about two days in 1963
to four days in 1968. It is estimated that visitors to the Leipzig trade fairs,
including West Germans and West Berliners, stay an average of seven days
and spend something more than $6 per day. Data are insufficient on the
number of West Berliners and West Germans otherwise traveling to East
Berlin and East Germany; therefore, they are excluded from this study.
Inclusio ? of the East German revenues from these sources conceivably could
increase present total estimates by about 10 times.
These earnings exclude visa fees and transportation earnings.
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