Rail Tourism Strategies for Uzbekistan Railways

8/10/2019 Rail Tourism Strategies for Uzbekistan Railways

1/53

RAIL TOURISMSTRATEGIES

FORUZBEKISTAN

RAILWAYS

FINAL

REPORTPrepared by:

HARRAL WINNER THOMPSON SHARP LAWRENCE, INC2111 Wilson Boulevard, Suite 700

Arlington, Virginia 22201United States of America

In association with

15 Artillery LaneLondon E1 7HA England

For:

Asian Development Bank6 ADB Avenue, Mandaluyong City, 0401 MM0980 Manila, Philippines

and

Uzbekistan Temir Yullari7 Taras Shevchenko Street

Tashkent 700060Uzbekistan

25 November 2002


2/53

/ HARRAL WINNER THOMPSON SHARP LAWRENCE, INC Pagei

TABLE OF CONTENTS

SUMMARY AND CONCLUSIONS.........................................................................................1

CHAPTER 1 TOURISM IN UZBEKISTAN......................................................................3

CHAPTER 2 EXISTING RAIL SERVICES.......................................................................6

SCHEDULED PASSENGER SERVICES ........................ ........................... ............................ .........6

CHARTER TRAINS AND COACHES ............................. ............................ ............................. .....10

CHAPTER 3 POTENTIAL FOR RAIL TOURISM ........................................................ 12

SCOPE AND TARGET MARKET..................................................................................................12

CURRENT TOURIST TRAFFIC......................................................................................................13

TRAVEL INDUSTRY IMPRESSIONS............................ ........................... .......................... ...........13

TOURIST SURVEY FINDINGS........................... ............................ ........................... ....................14

INITIAL ASSESSMENT OF OPPORTUNITIES........................................................................15

INCREMENTAL IMPROVEMENTS TO UZD SERVICES.....................................................16

NEW SILK TOURIST CLASS.......................................................................................................16

CHARTER SERVICE PRICING ............................ ............................. ............................ .................19

ASIA/CIS RAIL PASS ........................ ............................ ........................... ............................ ..............19

CHAPTER 4 IMPLEMENTATION ................................................................................20

APPENDIX 1 TRAIN TIMES ............................................................................................22

APPENDIX 2 INDUSTRY CONTACTS............................................................................24

APPENDIX 3 INVITATION FOR JV PARTNERS...........................................................25

APPENDIX 4 DETAILED SURVEY REPORT.................................................................27

APPENDIX 5 INTERNATIONAL RAIL TOURISM MODELS...................................... 41

NOTE

This Final Report was written by Michael Schabas and Ravshan Sabirov. It reflects commentsreceived from ADB on the Draft Report. It incorporates findings of the Tourist Passenger Survey,and some additional information obtained from UTY.

CREDITS

Special thanks to:

Expert Sociological Centre, which carried out the Tourist Survey;

John Armistead, who gave permission for use of photographs from his trip across Uzbekistan byrail.


3/53

/ HARRAL WINNER THOMPSON SHARP LAWRENCE, INC Page1

SUMMARY AND CONCLUSIONS

ourism is one of the largest industries in the world, with tourist spending estimated at morethan $500 billion by Europeans, Americans and Japanese in 2001. Uzbekistan has some

world-class attractions, but almost all tourist travel within the country is by road even thoughthe key cities of Samarkand, Bukhara and Khiva are all served by rail. There is the potential to attractmany more tourists on to Uzbekistan Railways. This will support development of the tourist industryin Uzbekistan, and can also generate profits for Uzbekistan Railways (UTY).

Uzbekistan currently attracts about 50,000 international tourists per year, well below historic peaks,and there is infrastructure in place to support a doubling or even tripling of tourist volumes.However UZD only carries about 5,000 foreign tourist trips per year on its regular services. Thissuggests that less than 10%, and probably less than 5% of tourists use rail.

Rail Tourism takes many different forms in different countries, depending upon the nature oftourism, the location of tourist sites, availability of rail lines, and other factors. While current UZD1

trains are generally clean and reliable, the standard of accommodation is not acceptable to mostinternational tourists. Also, UZD does not actively market its services or sell tickets through thetravel industry, and it is therefore difficult for tourists to use services. These problems are typical of arailway system that is focused primarily on carrying domestic passengers.

This report examinessuccessful rail tourismmodels from around the

world, and evaluates thestrengths, weaknesses andopportunities. It then

identifies specific strategiesfor developing rail tourismon Uzbekistan Railways,and considersimplementation options.

In the short term, UZDshould publish an English-Russian timetable, withbasic information aboutservices, classes of travel,and how to book tickets.

Cost to produce this, todistribute to hotels andtravel agents, and to put iton a Website, can be offset

if it attracts only one additional passenger per day.

The major opportunity is to attract tourists to use rail for journeys between the major cities ofTashkent, Samarkand, Bukhara and Khiva/Urgench. While it may, eventually, be possible to operateentire trains for tourists, it will probably be more profitable to carry tourists on existing trains. This

will avoid the need for additional locomotives, which are a substantial part of passenger railoperating costs. A new, higher class of service can to be offered, with changes to on-board

1UZD (Uzbekistan Zeleznica Dorog) is the newly-formed Joint Stock company which operates existingpassenger rail services in Uzbekistan. It is a wholly owned subsidiary of Uzbekistan Temur Yollari (UTY), theholding company for Uzbekistan Railways.

T

Figure 1 Uzbekistan Railways

Bukhara

Termiz

TASHKENT

Dushanbe

Turkmanobat

Urganch

Andijon

Shahrisabz/Kitov

Samarkand

Shimkent

Qarshi

K A Z A K H S T A N

T U R K M E N I S T A N

A F G H A N I S T A N

T A J I K I S T A N

K Y R G Y Z -

S T A N

Nukus

Khiva

U Z B E K I S T A N

Uzbek RailwaysOther Railways


4/53


accommodation, services, and arrangements for selling through the travel industry. Survey researchindicates that about one-third of tourists would be interested in using rail for travel between cities inUzbekistan, and that they would be prepared to pay $50 to $100 each for an overnight luxury trainjourney between Tashkent and Bukhara.

Revenues from the new international service, with the working title Silk Tourist Class, might be$1,500,000 or more within a few years. Some investment will be required, but the payback periodmay only be two or three years. The new service will also require new skills and new ways of

working. It is recommended that UTY select a private sector partner and form a joint venture toexploit this market. This joint venture can be established ahead of or alongside the privatisation ofUZD, which will continue to serve primarily domestic and CIS travellers.

The successful establishment of a joint venture to exploit the tourist market should also increaseprivate sector interest for investing in other UTY businesses. In 1998, Eesti Raudtee (EstonianRailways) formed EVR Expres to operate sleeper services to Moscow and St Petersburg. A majorityshare was sold to private investors, which operate the service profitably. In 1999, GB Railways wasselected to acquire Edelaraudtee, the domestic passenger and freight railway. In 2001, bothEdelarudtee and the international freight railway and infrastructure company Eesti Raudtee weresuccessfully privatised with total values of $130 million2. Sale of EVR Expres began the process ofestablishing railway law in Estonia, establishing confidence with investors, which is essential to anysuccessful privatisation.

A smaller opportunity is operation of charter trains, mostly running entirely within Uzbekistan, butsometimes operating as part of a longer journey such as Moscow Beijing. Currently, UZD quotescharges for charter services based on a simple cost build-up. It received $40,000 from domestic andinternational tourist charter business in 2001, for approximately 60 services. Given the need to covercosts for dedicated locomotives, and substantial empty stock movements, it is unlikely that UZDearns significant margins from the charter business and may even be pricing some services below itscosts. Before accepting new charter business, UTY must ensure that charges do indeed cover allcosts, including empty stock and staff movements, opportunity cost of assets, and any risks such aspenalties for non-performance. It may be possible to increase margins, both by quoting prices basedon what the market will bear and by encouraging bookings to make use of empty stock and staffmovements. It may also be necessary to give up some business where customers will not pay enoughto give a reasonable return.

UTY should also consider the possibility to offer a CIS/Central Asia Rail Pass, jointly with other railoperators in the region. This could generate additional tourist traffic on Uzbekistan Railways withpotentially high revenues per passenger.

2The Baltic Rail consortium, which included Rail World Inc and Railroad Development Corporation

(www.RRDC.com) of the USA, and Jarvis Rail of the UK, paid $65m for a 66% share. They also assumed $30million debt and committed to invest a further $200m in capital improvements and equipment. GB RailwaysEstonia paid EEK 100 million, or about $10m for Edelaraudtee, which operates loss-making domesticpassenger and freight services.


5/53


CHAPTER 1 TOURISM IN UZBEKISTAN

Uzbekistan is a significant international tourist destination. Uzbektourism, the state tourism agency,estimates that approximately 50,000 international tourists visited Uzbekistan in 2001 and a similar

number will visit in 2002. Tourism peaked in 2000 at about 82,500, but fell sharply after September2001. There are hopes for a full recover next year. The season is limited to about six months byclimate, with very few tourists in the harsh winter or hot summer months. There are about 1,000hotel and guest rooms in each of the major cities. This suggests that there is capacity for 100,000tourists or more, based on two nights in each city, which is consistent with evidence that hotels areoperating well below 100% occupancy even during the peak tourist season.

The key sites are the cities of Samarkand, Bukhara and Khiva. Samarkand is one of the oldestcontinually inhabited cities on earth. There are key monuments dating from the era of Tamarlane,including the Registan, and Ulugbeks observatory, where key astronomical and mathematicaldiscoveries were made. Bukhara and Khiva are both ancient walled cities on the Silk Road, the

main overland trade route between Europe and China until the 16 thcentury.

We commissioned a survey of departing passengers at Tashkent Airport, to better understand theexisting tourist market and the potential for rail tourism. We chose an airport departure survey asalmost all international tourists fly into and out of Tashkent. The survey was administered in thedeparture lounge by trained interviewers, with survey forms in English, French, German and

Japanese. We were able to survey 108 passengers in late June, and a further 389 in September andOctober 2002. The intention was to survey a random sample of departing passengers.

Of the 497 survey respondents:

53% were male, 42% female, 5% no response; mean age 50.4, range 15 to 85

40% were professional/teacher/office worker, 33% retired, 2% students

56% were on package tours, 30% were traveling with other family members, 30% alone

Figure 2 The Registan in Samarkand


6/53


77% were on holiday, 23% on business

21% French, 19% Japanese, 14% German, 7% Australian, 5% Belgian, 5% English, 5% USA,4% India, 3% Israel, 6% other European, 6% other Asian, 3% CIS.

Mean visit length 15 days, mean total trip length 19 days

72% first visit to Central Asia

95% arrived by air. 3% coach or bus, 1.4% car, 0.2% train

visitors took, on average, 1.4 internal flights during their visit.

The sample roughly matches anecdotal descriptions and general impressions of the existingUzbekistan tourism market.

Almost all business and holiday visitors to Uzbekistan pass through or stay in Tashkent. Most arriveby air and stay about two weeks in the country. A small number of tourists are on longer itineraries,including rail, road, or air travel to a neighbouring country, but for most this is a trip directly fromtheir home country. For most visitors, this is a once in a lifetime trip and they do not expect toreturn. Most spent about US$1500 on the trip, per person.

Almost all tourists, and a significant share of business visitors, go to the key tourist sites inSamarkand and Bukhara. Khiva is smaller and more remote, yet it still attracts about three quartersof holiday visitors and more than one in ten business visitors. It would seem that many business

visitors also take the opportunity to see the key tourist sites.

Most travel between the four main cities by road, with most tourists using private coaches orminibuses.

Urgench, a medium sized Soviet era city, has few tourist attractions of its own. It is mostly used asa base for exploring nearby Khiva, which has very few hotel rooms.

Termez is near the southern border with Afghanistan, and currently attracts very few tourists. Sometourists also visit the fertile Fergana Valley, perched in the Himalayas, while some take trips into thedesert, for example around Uchquduq.

Cities visited3 Business Visitors Holiday Visitors

Tashkent 93.9% 98.7%

Samarkand 50.4% 91.1%

Bukhara 26.1% 85.6%

Khiva 13.0% 73.3%

Urgench 6.1% 53.7%

Fergana Valley 15.7% 8.4%

Termez 11.3% 1.3%

Uchquduq 0 1.3%

Most tourists liked Uzbekistan and 88% said they would recommend a visit to a friend.

In other respects, opinion was divided:

3Source: Departure survey of international tourists. For further information see Uzbekistan Rail TourismSurvey Final Report.


7/53


54% thought hotels were good, but 30% thought they were better than they usually stayed in,while 40% thought they were worse. Only 17% rated them as the same.

Likewise, 30% thought hotels were more expensive but 33% thought they were less expensive,with only 7% rating them as the same.

31% said they spent more than usual on this holiday, with 37% spending less, and only 10% thesame.

In response to open-ended, unprompted questions:

50% commended the people of Uzbekistan, 30% the historic monuments and architecture, 13%the history and culture, 10% the nature, and 5% the national dishes

18% complained about toilets and hygienic conditions

15% complained about airport and arrival/departure services

9% complained about national dishes.

9% complained about militia control

We also spoke with several tour operators in Uzbekistan and one in England. Uzbekistan is seen asan exotic destination for the experienced tourist, who has probably already visited many othercountries. Samarkand, Bukhara and Khiva are seen as world- class historic sites, there are localhandicrafts especially in Bukhara, and there is some nature tourism in the desert and mountains

around Fergana valley. However, incomparison with say India or

Turkey the country lacksattractions such as beaches,interesting food or art galleries. Itis therefore unattractive to families

or young adults, who may wish tocombine a variety of serioussightseeing with relaxation.

The survey results confirmed ourview that there is substantialgrowth potential for tourism toUzbekistan, subject mostly to thegeneral impression of security inthe region. There are now directflights from most European and

Asian capital cities. Although hotel

and restaurant facilities are not, ingeneral, luxurious, they are mostlyto an acceptable internationalstandard and there is ample sparecapacity.

Figure 3 KhivaCity Walls


8/53


CHAPTER 2 EXISTING RAIL SERVICES

SCHEDULED PASSENGER SERVICES

UZD operates services over several routes within Uzbekistan, and into Kazakstan and Russia.Details of train timings are provided in Appendix 1. Key internal routes that could be of interest totourists are as follows.

Route Frequency Departure Arrival times

Tashkent Samarkand Bukhara Daily 19h 07h (12 hours)

Tahskent Samarkand Termez Daily 16h 12h (20 hours)

Tashkent Fergana Valley 3 trips per week 18h 12h (18 hours)

Tashkent Samarkand Urgench (Khiva) 4 trips per week 17h 18h (25 hours)

We travelled on the Tashkent Bukhara service, and visited Urgench, Bukhara, Samarkand, Kitovand Tashkent stations, and the Tashkent City Ticket Office. While train services have been reducedsince independence, our general impression is that the quality of services is of a higher standardthan generally perceived, and potentially acceptable to some international tourists.

Rolling StockMost services are operated with typical Soviet-era passenger coaches. These have steel bodies, withlighting and air conditioning powered by motor-alternator sets. Typically trains have two or three 2-berth coupe cars, two or three 4-berth coupe cars, a restaurant car, and five ore more open berthcars. UTY has recently acquired 10 new passenger coaches built in the Deutsche Waggonbau plant inBerlin. Although these cars are new, they are in most respects very similar to older cars. There are noprivate toilets, with one communal toilet at each end of each car. Some cars are also equipped with

communal showers.

Figure 4 Restaurant car and two -berth passenger coupe


9/53


Marubeni Corporation has recently completed the refurbishment of works in Tashkent for therefurbishment of passenger coaches. This facility is modern and includes machine, carpentry andpaint shops capable of restoring existing passenger cars to like new condition. It also has thecapability to carry out modifications.

ReliabilityAlthough we saw no data on train performance, we understand that trains are very rarely cancelled orseriously delayed.

CleanlinessWe visited the Tashkent service depot and saw train cleaning underway. We also saw trains in Kitovand Samarkand stations, which had not been cleaned carefully. It seems that trains are clean whenthey depart from Tashkent, however, toilets quickly become dirty and smelly. While staff are

supposed to keep toilets clean, this is difficult even if they are motivated to do so. It is not clear whatfacilities are used to wash trains where they terminate at Kitov, Bukhara, Termez, Kunus, andKongrad.

Food and DrinkFood and drink quality and service was mediocre. It met the basic requirements of hygiene andnutrition, and the restaurant car had plenty of seats available. Prices were low. The staff wer friendlybut not particularly attentive. There was no printed menu, and a very limited variety of food anddrink available. Window blinds did not operate properly. Most passengers seemed to take their mealsin their coupes, while most passengers in open sleepers had brought their own food.

We understand UZD is awarding a concession for restaurant services on the Tashkent Ufa train.

This could be a positive move. However there is some risk of non-performance when a privatecaterer is involved. Railway passengers need to have a high level of confidence that restaurantservices will be available before boarding the train. Caterers also need to be able to make alternativearrangements if, for example, the usual restaurant car requires maintenance and is unavailable.

StationsSamarkand, Bukhara, and Urgench stationhave been recently rebuilt, and work at Kitovstation is underway. Stations are imposingstructures and reasonably clean. Howevertoilets are usually dirty and smelly.

Stations are not always well signposted, andwe had trouble finding Kitov station.

Marketing and DistributionIt is difficult to get information about UZDservices and difficult to make reservations orto purchase tickets. Like most railways, UZDexpects customers to do the work of findingout about the railway, and coming to thestation or a special booking office topurchase tickets. Tickets can only bepurchased at train stations within Uzbekistan

or other CIS countries. This compares with other commercial businesses, which advertise theirproducts and try to make it easy for customers to make a purchase. UZD tickets cannot bepurchased over the telephone, on the internet, or by post.

Figure 5 Train in station. Photo: John Armistead


10/53


UZD shares a computerised reservation system with other CIS railways. While this allows bookingbetween any stations in the CIS, it has several limitations. Reservations can only be made 20 days inadvance, with return bookings 40 days in advance. This does not meet the requirements of touroperators, who normally organise tours 6 to 12 months in advance.

Ticket offices are closed for one hour at lunch. Foreign tourists must pay at special foreign currencybooking windows, which require special staff.

UZD offers very little information, even in Russian, and none in English. No information wasavailable at hotels. Printed timetable were not generally available At Samarkand station, potentialpassengers are actually charged 25 cym for information.

Thomas Cook, one of the oldest travel companies in the world, publish an international railtimetable, with an updated edition every two months. This is widely available in Britain and used bytour operators worldwide, with apparently several thousand copies printed. However, information onUZD services does not appear to be up to date and is not presented in the most useful way. There isambiguity about whether trains are show Moscow Time or Local Time. Also, the key Tashkent Bukhara train is split between two timetables, Tashkent Smarkand and Samarkand Bukhara.

It would seem that a few independent travellers, on average two or three per day, disregard advicenot to travel by train, manage to find their way to the train station at a time when the foreigncurrency booking office is open, overcome the language barriers, book tickets, and travel by train

within Uzbekistan or into other CIS countries. However there are probably many more who nevergo to the train station, or get there when it is closed, or find that the train they want to use is notrunning or is full.

As noted above, most tourists come to Uzbekistan in package tours. These companies reserve space

at hotels, on airplanes, and on buses, for say 15 or 20 passengers, and then try to sell the spaces toindividual travellers. While they can confirm space for an individual traveller on flights and at hotelsby phone, email or fax, for rail passengers they must go and purchase tickets at the station like any

Figure 6 Samarkand Station


11/53


other customer. This can cause problems where a tour operator has reserved space for say 15passengers on airplanes, at hotels, and on buses, but can only confirm passengers as they purchaseindividual train tickets.

TimingsTrain timetables have apparently been designed to maximise utilisation of rolling stock and staff, andalso to suit the needs of local travellers. For example, the Tashkent - Bukhara train departs from eachcity at 7PM and arrives at 7AM, allowing a full day of work in each city. The Tashkent Termez,

Tashkent Andijon, Tashkent Khitov, and Tashkent Urgench routes are longer, and so trainsleave earlier to allow a return trip from and back to Tashkent within 48 or 72 hours, with a shortlayover.

The current timings are, however, not ideal for tourists. Only the Tashkent-Bukhara and Tashkent-Termez routes operate daily.

Figure 7 UZD Train near G'allaoroi. Photo: John Armistead


12/53


CHARTER TRAINS AND COACHES

UZD has a policy of providing charter coaches and trains upon request. It has recently acquired 25new passenger coaches, essentially to the same design as other UTY coupe cars. We understand thesecars are being used exclusively on charter services.

Prices for charter services are calculated based on a fixed tariff, set presumably to recoverincremental costs with a margin rather than to reflect potential value to customers or their ability topay.

We were provided with some examples of how charges are calculated for charter coach services.One is international, crossing through Turkmenistan and Kazakhstan. The second is entirely

within Uzbekistan.

Urgench Ganjushkino - Urgench

Distance 1309 km Passengers 54

Rate 9.739 cym / passenger -km 688,419 cym

Tax at 20% 137,684 cym

Sub total 826,103 cym

Return trip 826,103 cym

Coach charter 60,000 cym /day x 5 days 300,000 cym

Bedding 910 cym / person x 2 98,280 cym

TOTAL 2,050,486 cym

Per person 37,971 cym

Tashkent Bukhara Samarkand Tashkent

Distance 1204 km Passengers 36

Rate 13.08 cym / passenger -km 567,009 cym

Discount 15% (85,051 cym)

Tax at 20% 96,392 cym

Sub total 578,350 cym

Coach charter 30,000 cym /day x 4 days 120,000 cym

Bedding 330 cym / person 11,880 cym

TOTAL 710,230 cym

Per person 19,728 cym

The rates, per passenger km, are set according to a printed tariff, which is denominated in SwissFrancs and apparently used by most or all CIS railway administrations. To calculate the rate payableby the customer, this is converted into Uzbek Sum (cym) at the current exchange rate. This mightexplain why a higher rate is charged, per passenger km, for the trip within Uzbekistan.

It is not clear why a 15% discount is then applied to the domestic trip. This may be a discountoffered by UZD for wholly domestic trips, where it has freedom to set the actual rate. Forinternational journeys the fare must be hared with other CIS railways on an apportioned basis, and it

may not be so easy to agree deviations from the standard tariff. It is not known whether UZD offersthis discount selectively or to every customer.


13/53


The coach charter price appears to be calculated at a rate of 30,000 cym per day for a 40 personcoach, with two coaches required for the 54 passenger group.

It is not clear why bedding is charged at 910 cym per person each wayon the Urgench Ganjushkinotrip, but only 330 cym per person for the 4 day domestic journey.

We were also provided with some information as to the number of passenger carried on chartertrains and chartered cars. We have not yet been able to verify this information and it is possible thatit is not correct.

1/2001 11/2001 Foreign passengers inchartered trains or coaches

Domestic in chartered trains orcoaches

Passengers 466 4,912

Revenues $34,000 53.000,000 cym

Revenue per passenger $72 10,789 cym

Altogether UZD handled about 60 charter services in 2001, mostly domestic but also 7 to Moscowand 1 to Minsk.

However, any tariff structure has advantages and disadvantages.A tariff structure has some advantages:

Fares are easy to calculate;

It is fair, in that all passengers making similar journeys are charged similar amounts;

Easily shared between UZD and other CIS railways, on an apportioned basis.However a tariff structure also has some disadvantages.

If it is too simple, it may not reflect all costs. In some cases, the quoted price may be belowincremental costs, so that UZD loses money by carrying the traffic. For example, coaches maybe scarce at busy times of the year, or it may be necessary to move a carriage empty to suit acharter customer;

It will not maximise revenue. Customers have varying need to travel and willingness to pay. Formany customers, the tariff price maybe a bargain, and they would be

willing to pay much more. If UZD isto be profitable, it needs to chargewhat the market can bear.

However, for some customers the

tariff may be too high, so that tripsare not made, or are made instead bybus or car. For these customers,UZD should consider offeringdiscounted prices provided it can stillcover its incremental costs.

Further analysis is required to determinewhether UZD makes a profit on charterservices. However, our initial impressionis that charges are very low, and that totalrevenues could be increased by raisingfares.

Figure 8

Booking Office Clerk in Urgench Station


14/53


CHAPTER 3 POTENTIAL FOR RAIL TOURISM

SCOPE AND TARGET MARKET

Rail tourism ranges from short trips lasting under one hour on preserved railways to long haultrans-continental journeys extending over several days (and nights).4Rail tourism is travel by rail forits own sake, even where it may be slower and more expensive than other modes. This makes railunusual among transport modes. Transport operators are usually concerned with carrying the offeredtraffic as cheaply and quickly as possible. Rail tourism operators are concerned with generatingtraffic, often enhancing the product so as to be able to charge higher prices. The usual transportpolicy issues of capacity and cost-effectiveness often do not apply. Sometimes it even makes sense torun the train slower so as to increase the sightseeing potential or to offer more appropriate arrivaland departure times.

This study concentrates primarily on use of rail by tourists for travel withinUzbekistan. There areseveral reasons for this:

Travel withinUzbekistan is mostlikely to generatesubstantial incomefor UzbekistanRailways andcontribute to itsfinancial viability.

The geography issuch that Tashkent

is very close to theKazakh border, andmost of the revenuefrom long distancetravel to Uzbekistanis shared with otherCIS railwayadministrations;

Uzbekistan alreadyattracts substantialnumbers of tourists

who travel to Tashkent, Samarkand, Bukhara and Khiva, all of which are served by rail. There isless risk in developing an existing market as compared with establishing a new one.

The Government of Uzbekistans visa policy suggests some caution about development oftourism, particularly where it might increase social tensions.

Air is more suited than long haul rail to carry older, higher spending serious tourists, whousually want to limit total holiday length to a maximum of two or three weeks.

The existing Uzbekistan tourist market, which can be characterized as middle-aged, affluent, serioussightseers, are unlikely to be attracted to a long train journey toUzbekistan. However, internationalexperience suggests that this market would be interested in using rail for shorter, daytime orovernight journeys withinUzbekistan.

4See Rail Tourism Concepts, provided in Appendix [ ] for discussion of successful rail tourism businessesaround the world.

Figure 9 Bukhara Medressa and the Ark Fortress


15/53


Rail travel can be preferred for several reasons:

It is safer, particularly where roads are bad or run through a hostile environment (for exampleacross the desert)

It is more pleasant, because of the ability to walk around, use a toilet, or sit at a table for a drinkor meal

It offers variety to the travel experience, with exposure to another side of local life

It is an opportunity for genuine contact with local residents either at stations or on trains

Rail is particularly attractive for half-day or all-day journeys where roads are poor and there are nointervening tourist sights. Where sleeper trains can be used, rail can offer an efficient alternative bothin cost and time to a long daytime journey and an overnight hotel stay.

There may also be some potential to encourage more use of rail for travel toUzbekistan, and indeedacross the CIS. However this would require cooperation of other CIS railway administrations and

was considered to be beyond the scope of this technical assistance programme. Long haul rail, as itoperates in Europe, America, and Australia, attracts the young and the old, who have time to spare.

The young backpacker market is typically aged 18 to 30, including university students, while theolder market comprises affluent retired people. Although backpacker spend is lower, on a perperson-night basis, this is a large and potentially valuable market. The backpacker name ismisleading, as most come from affluent families, and often carry credit cards and even mobilephones. Long haul rail tourism travel toUzbekistan and around the CIS could be the subject of afurther study.

CURRENT TOURIST TRAFFIC

Currently, there is very little use of rail by tourists withinUzbekistan. In May 2001, UZD sold 703tickets to foreigners, earning about $10,000.5 This suggests rail is currently used by less than 5% oftourists for travel within Uzbekistan.

We were not able to obtain any data on international tourist travel by rail to Uzbekistan. There arethree trains each week to and from Moscow, and weekly services also from Almaty, Ufa, and Irkutsk.

These trains are heavily used, but almost entirely by CIS residents. Anecdotal evidence6, andobservation of an arriving train from Moscow at Tashkent Main Station, suggests that fewinternational (non-CIS) passengers use train to travel to Uzbekistan.

There are a few long haul charter train trips each year, run by European operators, which are routedvia Uzbekistan often as part of a longer Trans-Siberian trip.

TRAVEL INDUSTRY IMPRESSIONS

Most tourists to Uzbekistan travel with inclusive tour packages7. This means all travel, hotels, andmost meals, are selected in advance by a tour operator. The tour operators sell their packages to tourretailers in the home countries, in particular Germany, France, Japan, Netherlands, Britain and USA.

5These figures are based on hard-currency ticket sales, which will include all non-residents e.g. diplomats whomay not be tourists.6John Armistead (see website http://www.johndarm.clara.net/silkroute/part2.html) does not reportencountering any other international tourists on his rail journey from Moscow to HongKong via Uzbekistan.7 Industry sources quoted a figure of 80%. This is roughly consistent with the survey, which reported 56% inpackages, but in a sample including 23% business travelers.


16/53


Tour operators and retailers build their reputation by satisfying tourists, who then recommend acompany to friends. While there are few tourists who make repeat visits to Uzbekistan, many tourists

will purchase another trip from the same tour retailer. The views of tour operators are thereforedecisive in whether tourists to Uzbekistan even consider travel by rail.

We spoke with five tour operators, and with managers of major hotels in Urgench, Bukhara,Samarkand and Tashkent. We also spoke with other persons in the travel industry, including hotelfront desk (concierge) staff. Most of these people never use the train and have had no experience

with the train for many years. We also spoke with travel agents in Britain who specialize in tours toAsia. The general view is that train services have deteriorated since independence, and theydiscourage people from using trains in Uzbekistan.

We spoke with tourists who had recently used trains in Kazakstan and other neighbouring countries.Fares are very low, but the quality of accommodation is also perceived by tourists and by touroperators as poor.

A few tour operators book passengers onto overnight trains for a segment of their holiday, and someoccasionally charter entire trains for special excursions. However most tour operators do notconsider rail services to be good enough for international tourists.

TOURIST SURVEY FINDINGS

As indicated above, we commissioned an interview survey of departing passengers at TashkentAirport, to better understand the existing tourist market and the potential for rail tourism. Surveyresults confirm the view that many tourists would like to travel by rail as part of their visit toUzbekistan. About 28% of survey respondents express an interest in taking a luxury train betweentwo cities, for which they would be willing to pay an average of $49.

Two-thirds of respondents had travelled by rail on holiday, in the past three years, and 40% said theyhad done so within the past year. 47% said they considered taking a train in Uzbekistan, althoughapparently none of the 497 respondents had actually done so.

Respondents were asked why they had not used the train on this trip.

Do not like trains 10% (of all respondents).Did not answer 33%Not enough time to take the train 4%Prefer other transport 2%Other reason 3%

Did not know there was a train 20%Was not included in package tour 11%Was told that the train was not good 11%Train times were not suitable 8%Did not know how to buy tickets 7%

TOTAL: 109% indicating that about 9% of respondents gave more than one reason for not usingrail.

Considering that Uzbek Railway sleeping compartments currently are hotel rooms without privatetoilets, we asked tourists whether they would consider staying in a hotel without private toilets. Twothirds of respondents said they would not.

In a separate question, all survey respondents were asked how much they would pay for an overnightluxury train between Tashkent and Bukhara. This question more specifically described the route and


17/53


service, which would replace what for most tourists is an all-day road journey which they re-trace ontheir return to Samarkand. 43% responded positively, again suggesting a willingness to pay $50 onaverage. However there was a bimodal distribution, with about a third of respondents (14% of alltourists, or potentially 7,000 per year or about 35 per day through the tourist season) suggesting they

would pay $100 or more.

Question 26: How much would you be willing to pay for an overnight luxury train trip betweenTashkent and Bukhara, with dining car, private air conditioned cabins with private shower andtoilets?

Per person, USDollar

Frequency Percentage

5 - 14 11 2.2%

15 - 24 22 4.4%

25 - 34 28 5.6%

35 - 44 13 2.6%

45 -54 56 11.3% Median

55-64 6 1.2%

65 - 74 7 1.4%

75 - 84 7 1.4%

85 - 94 0 0

100 48 9.7% Second Peak

150 7 1.4%

190 1 0.2%

200 4 0.8%

250 2 0.4%

300 1 0.2%

500 1 0.2%

Nothing 64 12.9%

Nobody will want 1 0.2%

NO ANSWER 218 43.9%

Total 497 100.0%

INITIAL ASSESSMENT OF OPPORTUNITIES

We have considered a wide range of possible improvements to attract more tourists ontoUzbekistans railway services. We are proposing five specific initiatives:

First, we are recommending certain incremental changes to improve the marketing and delivery ofexisting passenger rail services. Theses will attract more tourists, but will also benefit some domestictravellers.

Second, we are proposing creation of a new class of service intended for international tourists.


18/53


Third, we are proposing that a new company be created to promote and operate the new class ofservice. This company would be a joint venture with a private-sector partner, and would operateseparately from UZD.

Fourth, we are recommending a review of pricing for charter train services, to increase profitmargins for UTY. We are not recommending that UTY take a more active role in promotion ofcharter trains.Fifth, we are proposing that UTY, together with other passenger railways in Central Asia and theCIS, consider joint marketing and introduction of a tourist rail pass on the model of Eurailpass.

INCREMENTAL IMPROVEMENTS TO UZD SERVICES

Some tourists will be prepared to travel on existing rail services, if arrangements for booking berthsand purchasing tickets can be improved.

Improved Information

UZD should produce an up-to-date timetable with train information, in English and Russian. Thiscan be printed and distributed to tourists through hotels and travel agents, and posted on the web.UZD marketing departments should also ensure that up-to-date information is provided to ThomasCook and other publishers of international train timetables.Cost to produce the timetable and distribute it widely should be about $5,000 per year, which will berecovered if it results in one additional tourist passenger per day.

Ticket Sales by Telephone, Fax and EmailUZD should establish a system to sell tickets to tourists who may communicate by telephone, fax, oremail. Tickets would be sent by post. UZD would levy a service charge, perhaps $5 per transaction,

which should cover costs.

NEW SILK TOURIST CLASS

Our research indicates that international tourists expect and can pay for a higher standard offacilities in their hotels, so most will want a higher standard of accommodation on the train. Morespecifically, two-thirds would not be willing to stay in a hotel without private toilets, and presumably

would look at a train much the same way.

The current rail tourism market seems too small to support the cost of operating entire trainsbetween the major cities. However, it should be possible to provide special coaches to carryinternational tourists, coupled to existing trains. This has the advantage of lower costs, as trains

would share existing locomotives and timetable paths. Although UZD trains are often fully booked,UZD could provide additional capacity at relatively modest incremental cost. It is not worth doing

this, at current fare levels. However it could worthwhile at the higher fares that international touristsappear to be willing to pay.

Most tourists to Uzbekistan travel on standard itineraries. Rail can be most valuable where itcombines:

Overnight accommodation

Meals, ideally dinner and breakfast

Transport between two major sites (for example, Tashkent and Bukhara)

Passive sightseeing, out the window of the train in the evening and early morning.

Independent tourists and package tour operators currently pay $50 to $100 per person for theseelements of a tour, and can be expected to pay a similar amount for a rail journey that combinesthem altogether.


19/53


Tourists come to Uzbekistan to experience the culture and sites. Rail can provide another type ofexperience and contact with Uzbek people. This suggests that tourists will not want to use a railservice if it is entirely isolated from the domestic passenger rail services, and that tourists can sharethe same stations as other passengers.

This strategy has two other implications.

Tourists will board at existing stations, and will mix with local passengers at least on the stationplatforms. This can be a selling feature, as tourists who come to Uzbekistan are generallyinterested in seeing the people as well as the historic sites.

Services will need to be reasonably compatible with existing train times, so as not to compromisethe efficiency of UZDs existing passenger operations.

Tashkent Samarkand is served by trains to further destinations, and departures are mostly in themiddle of the night. In any case the road journey is fairly short, and through fertile and interestingscenery.

The Tashkent - Bukhara train is potentially more useful, allowing an overnight journey including atwilight dinner. departure. However the 7AM arrival is too early for tourists, who would prefer tosleep a bit later and have breakfast before sightseeing. Hotels cannot usually let arriving visitors intotheir rooms before mid-morning at the earliest, as rooms must be cleaned after other guests depart.

Tashkent Urgench is served by a weekly train, departing Tashkent Saturday afternoon, and also bythrough services to Nukus departing Monday and Thursday. The 24-hour journey including anovernight journey followed by a day travelling through the desert is potentially attractive to tourists.

Tour operators should be able to devise tours that match the thrice-weekly train service with twice orthrice-weekly international flight schedules.

UTY should establish a Joint Venture company to offer a new, higher quality rail product. Theworking title for this is Silk Tourist Class.

Key features would be:

New or refurbished cars, with private toilets and showers in 2-berth coupes (as is standard inUSA and Australia);

Restaurant/lounge car, offering a choice of food, drinks and snacks;

Silk Tourist Class cars would operate coupled to existing UZD services. Passengers would boardat existing stations and cars would be hauled by the same locomotives;

Specially recruited and trained staff who would keep trains clean and who would providededicated service to passengers;

Spaces sold through a new reservations system, separate from the UZD/CIS system. This wouldallow more flexibility, as discussed below.

Higher fares would be charged for Silk Tourist Class, perhaps $60 per person in a 2-berthcoupe, and $40 in a 2 berth coupe for the Tashkent Bukhara route.

Silk Tourist Class will require new investment, new skills and new ways of working. It will also servea very different market, one that UZD barely penetrates. We think this service can be best deliveredby a new joint venture company, owned by UTY and private sector partners.

Sleeping CarsExisting 2-person coupes, with two narrow berths on either side of a table, provide inefficient use ofspace. They are essentially four-berth coupes with the upper berths missing. Upper and lower berths


20/53


on one side could provide the same sleeping space, while the space on the other side could be usedto create private toilets and showers. See Appendix 5 for plans of the sleeping compartments on

Australias Great Southern Railway.While the resulting compartments are narrower and less comfortable for eating and drinking, thephilosophy is that passengers mostly do this in the restaurant/lounge car which is designed to offercomfortable space also for socialising and which has large windows for viewing the country.Initial estimates are that it will cost about $45,000 per car, or about $5,000 per 2-berth coupe, torefurbish the existing coupe cars and equip them with private toilets and showers. Assuming they areused 100 nights per year, the investment will pay back in 1 year with a $25 fare premium.Rolling stock refurbishment can be done in the existing Tashkent Coach Rehabilitation Workshop..

Restaurant /Lounge CarsExisting restaurant cars can be improved to provide a more memorable tourist experience. This

would include:

Soft, low level lighting to allow a better view outside in the evening

Curtains to replace the window blinds Table cloths

Printed menus in English and Russian, with attractive descriptions of the food and drinkavailable

Comfortable seating

A separate lounge area, with informal seating for drinking, meeting other travellers, or reading

A more varied menu, with salads and sweets to encourage customers to stay longer and spendmore.

Relation to UZD TrainsInitially, Silk Tourist Class cars would operate together with existing UZD trains, being pulled by thesame locomotives and stopping at the same stations. Eventually, they might be wholly separate trains.However the costs of providing separate locomotives would greatly reduce or eliminate the potentialfor Silk Tourist Class services to be profitable.

In commercial terms, Silk Tourist Class would be a separate train coupled to an existing UZD train.

TimingsWe propose that train timings be adjusted, where possible, to better suit tourists. This will of coursesometimes mean that they do not suite existing passengers quite so well, however we think modesttrade-offs are possible.

Specifically: The Tashkent Samarkand Bukhara and Bukhara Samarkand Tashkent trips would depart

earlier, probably 18: 00 from Tashkent and 17:00 from Bukhara, to allow a Samarkand stopbefore midnight. This would make it attractive for use by Bukhara Samarkand and Tashkent Samarkand passengers, for dinner only, arriving in time to check into a hotel in Samarkand.

Train arrivals times would be later, around 08:00, to allow breakfast on the train before arrival.This could be achieved by running trains more slowly overnight, or even stopping them for anhour or two on a siding. This has been common practice on some short overnight routes inNorth America, and allows passengers a period of undisturbed deep sleep.

Reservations System and Fares

A new reservations system is required, separate from the system operated by UZD/CIS railways.Key features would be:


21/53


Ability to take bookings up to 12 months in advance (as compared with 40 days currently)

Pre-booking capacity for tour operators

Integration with travel industry hotel and airline reservation systems

Booking by independent travellers over the internet/web, with secure payment by credit card

Market pricing, with fares reviewed and adjusted to match demand and maximise revenuesThese requirements are simple to specify but difficult to deliver. The system used by Great SouthernRailway required 12 months to develop and cost almost $2 million. More complicated systems for

AMTRAK and VIA Canada were even more expensive.

CHARTER SERVICE PRICING

Further information and analysis is required to determine whether UZD makes or loses money oncharter services, and whether higher or lower prices should be charged to some customers. This isoutside the scope of this report.

ASIA/CIS RAIL PASS

In terms of security and attractiveness to tourists, Central Asia is in a similar position to westernEurope after the second world war. As restrictions are eased, there will be growing interest in travelthrough the region. While older travellers are likely to continue to prefer inclusive package tours andquality hotels, youths and students will seek the adventure of travelling by train. There is theopportunity to introduce a range of Asia/CIS Rail Passes, aimed at regional and internationaltourists. This will facilitate and encourage use of rail by tourists, especially youths and students.

UTY could commence discussions with other regional rail operators as to their interest in establishsuch a pass. If there is interest, a special dedicated team should be established, similar to Rail

Europe, to develop, promote, and manage the pass system. It might be appropriate to seek assistancefrom Rail Europe in the development of the Asia/CIS rail pass.

Figure 10 Bukhara Station


22/53


23/53


Responsibility of the private sector partner for reservations system, marketing, and management

Method for sharing of costs and revenues between the partners.The JV shall have the status of an independent enterprise, and shall have freedom in its commercialand financial activities. This will enable it to be integrated into the market economy of Uzbekistan

and neighbouring countries.

Approval of JV by UTY management and other constitutorsThe proposed Charter and JV Agreement shall be reviewed by UTY lawyers and other experts. Afterlegal assessment, the JV documents will be submitted for signature to UTY management and tobusiness partners. Simultaneously the Chief Executive of the JV will be appointed.

Registration of JV in Uzbekistan Ministry of JusticeThe new JV shall be registered in the Ministry of Justice of Uzbekistan in accordance with thestandard registration procedures for juridical persons in the territory of the Republic. After receiptof registration certificate office premises will be formed, a stamp (seal) will be received, bankaccount will be opened, and trade mark of JV will be registered.


24/53


APPENDIX 1 TRAIN TIMES

See the table below., which has been compiled from various sources and is believed to reflect trainservices withinUzbekistan in July 2002.

NOTES

Departure and arrival times are shown local time, rounded to the nearest hour using the 24h clock.

Day of departure is shown as 1= Monday, 2=Tuesday etc 7=Sunday.

Where arrival time is on a following day, this is show as +1 or +2 etc.

Key trains are showfromKazakstan and Tashkent toSamarkand. All services also operate in thereverse direction, usually with similar timings.

There are additional local services in the Tashkent area.

Trains 222 and 254 may now be routed by the new all-Uzbek route, running from Samarkand viaUchquduq to Urgench, and missing Bukhara and Turkmenabad. Turkmenistan Railways may operateother replacement services linking Turkmenabad to Bukhara.

Train 268 is apparently operated by Tajikistan Railways. It runs from Dushanbe to Khujand andKanibadam, which are both in Tajikistan, via Termez, Qarshi and Samarkand.

Train 280 runs beyond Termez to Denov, the last major town before the border with Tajikistan onthe route to Dushanbe.

Trains 658 and 660 link Tashkent to the Fergana Valley, crossing through Tajikistan. Train 658operates via Namangan to Andjon. Train 660 operates via Margilon to Andjon.

Kazakstan Railways operates daily overnight services Almaty Tashkent, and services west fromKungrad to Beyneu and Aksarayskaya.

There are also trains from Samarkand to Khujand in Tajikistan, some local services in the Tashkentarea and between Samarkand and Bukhara, and occasional services to Turkmentistan and Iran, andto Volgograd via Astrakhan. Some services run beyond Termez to Dushanbe in Tadjikistan.


25/53


Train Number 6 200 282 222 254 268 280 662 ? ?

Moscow-Tashke

nt

IrkutskTashke

nt

Ufa -Tashkent

AlmatyTashke

nt -Nukus

Tahskent-Kungrad

KanibadamDushanbe

Tashkent-Termez

Tashkent Samarkand- Bukhara

Samarkand- Bukhara

Sam- Qa

Trips perweek

3 1 1 1 3 3 7 7 7 7

Moscow 23h

Irkutsk 21h

Almaty 18h

Ufa 09h

TASHKENT 18h +3 23h +4 14h +1 15h +1 17h 1,4 16h Daily 19h Daily

Andijon

Samarkand 20h? 24h 18h 22h 01h 17h 16h

Bukhara ? 05h 2,5 07h 1-7 23h

Turkmenobad 09h

Urgench ? ?

Nukus 18h 7 ?

Kungrad 23h 2,5

Qarshi 22h ? 20h

Termez 10h+1 12h +1

Kitov

Hours per trip 67 96 29 48 29 20 12 5 4


26/53


APPENDIX 2 INDUSTRY CONTACTS

Uzbekistan Temir Yullari Personnel and Facilities (Visited)Uzbekiston Temir Yullari - Vladimir Yakovlevich Bakholdin Deputy Chairman (Passenger) 7 T.Shevchenko Str Tashkent 70060. +998 71 136 44 31 F 133 6924 [email protected] Headquarters Tashkent - Mr. Gaspadin Sultanor, Marketing/Restructuring Department

Tashkent Passenger Rail Depot Manager and Technical ManagerTashkent Passenger Ticket Office Mr. Baktiar PolatovitchUrgench Railway Station Deputy Station ManagerSamarkand Railway Station Mr. Makhmudov Station ManagerKitov Railway StationBukhara Railway Station

Tashkent Railway Station

Hotels (Visited)

Urgench Jayhoon HotelBukhara Palace Hotel - Ralf Poth General Manager 8 Navoi Str 705016 Bukhara tel +99 865 2230024 fax 223 5119 mobile 718 0560 [email protected] Mr. Poth is employed by Inpro HotelManagement GmbhFarkhad & Mayas Guest House, Bukhara

Afrosiyab Hotel Samarkand - Farkhad Houdoyarev ManagerMelika Hotel SamarkandHotel Orient Star SamarkandMelika Hotel Tashkent

Tashkent InterContinental Hotel Mr. Kees Kramer Manager 107 Amir Temur Street Tashkent700084 +998 71 120 70 00 f 6161 [email protected]

Inbound Tour OperatorsChotqal Tours - Valentin Sadykov [email protected]@yahoo.com 7 BeshterakStreet Tashkent 70060 +998 71 268 9342 F 268 9343 (interviewed)Orient Voyages - Fattaev Shakuri Deputy Director. Also major tour coach operator. 14 OrzuMachmudova Stre 703000 Samarkand T +998 662 33 00 M 38 18 10 (interviewed)Sairam Tourism Rustam Mirzaem, Director General. Major inbound tour operator. 13-aMovariunnahr, Tashkent 700060 T +998 71 133 35 59 F 120 69 37 [email protected](interviewed)Silk Tour Limited - Saad Al-Haire Deputy Director. 1 Kuy Saray Sq. Samarkand 703057 T +998 662331 735 F 311 735 H 33 76 77 M 38 44 66 (or 33 44 66?) [email protected](interviewed)Sitara, based in Islamabad, Pakistan, and specialising in package tours throughout central Asia

including Uzbekistan, Turkmenistan, Kazakhstan. www.sitara.com. Retail partners in Australia,England, Germany, Austria, Netherlands, Switzerland, Italy, Canada, USA, Japan. (Website visitedonly)Global Travel , Anne Kooistrahof 15, 1106 WG Amsterdam Z.O. Holland+31 20 696 7585 / 697 6202 email goldentrains.wxs.nl. Specialists in rail trips around the world.Operate frequent trips (more than 20 in 1999) via Trans-Siberian railway. Have operated occasionaltrips via Uzbekistan. Some trips are in coupes on regular scheduled services, some are in formerPolitburo cars with shared toilet and shower facilities. (advertises in Thomas Cook timetable, notcontacted)Lernidee Reisen Gmbh, Dudenstrasse 78, 10965 Berlin Germany. Advertises in Thomas Cooktimetable that cheap saloon coaches can be attached to any regular train starting from 6 people only.Steppes East Limited, Castle Eaton, Swindon, Wiltshire SN6 6JU England +44 1285 810 267

www.steppeseast.co,uk Paul Craven, Genreal Manager (interviewed)Travelwise Limited. Fortis Green Road, London N10www.travelwiseuk.co.uk(Interviewed)


27/53


APPENDIX 3 INVITATION FOR JV PARTNERSAdvertisement inviting proposals for joint venture company with Estonian Railways, posted26/05/1998 in the Financial Times (London).


28/53


Full Text of the Financial Times Announcement of 26 May 1998 (as shown on previous page)

CONTRACTS & TENDERSJoint Stock Company Eesti Raudtee (AS Eesti Raudtee) announcesA COMPETITIONfor finding an investor for establishing a company for providing nternational railway passengertransportation services jointly with AS Eesti Raudtee1. AS Eesti Raudtee acting pursuant to the "Reorganisation and Privatisation Scheme and Guidelinesfor the State Enterprise "Eesti Raudtee" as approved by the ordinance no 442-k of the Governmentof the Republic of Estonia of June 11th, 1997 shall establish a company for providing internationalrailway passenger transportation services (hereinafter: the Company").2. The Company shall be established by AS Eesti Raudiee together with an investor (hereinafter;"The Investor") as chosen on the basis of the present competition (hereinafter: "the Competition).3. The Company shall be established in accordance with Estonian law with the decisive majority(more than 50% of the votes determined by the shares) of votes belonging to the Investor.4. The Competition shall be implemented pursuant to the terms and conditions set forth by theResolution of the general meeting of the shareholders, acting through the Minister of Transport andCommunications, of AS Eesti Raudtee of April 13th. 1998 (hereinafter "the Terms and Conditionof the Competition").5. AS Eesti Raudtee shall, upon the formation of the Company, transfer to the Company as an in-kind contribution, assets necessary for organising international passenger transport and conclude anagreement for the utilisation of necessary railway infrastructure.6. Upon the establishment of the Company, AS Eesti Raudtee and the investor shall conclude aShareholders' Agreement which shall, in compliance with the Terms and Conditions, set forth theduties of the shareholders vis a vis the company..7. Information on the Terms and Conditions of the Competition and the terms and conditions forthe establishment of the Company as well as the procedures therefore shall be delivered as astandardised package in Estonian and English languages to the address indicated by the applicant

within three (3) days after the payment of 8,000 Estonian Kroons or 1,000 Deutsche Marks to thebank account of AS Eesti Raudtee no 112023S719 in ihe Eesti Hoiupank, code 650. The summentioned hereabove shall not be returned upon the closing of the Competition. Information onthe Terms and Conditions of the Competition shall be made available upon a written requesttherefore to the address here below;

AS Eesti Raudlee36 Pikk Street, suite 310

Tallinnil EEOIOO, ESTONIAphone,+37261 58 508/telefax:+372 6 1587110

8. All natural persons or corporations existing under private law, except such persons in which morethan one-third of the votes determined by the shares or stock are held, directly or indirectly, by theRepublic of Estonia or any local government unit of Estonia. Shall be deemed qualified toparticipate in the Competition.9. The tender' shall be presented pursuant to the Terms and Conditions of the Competition in afirmly sealed envelope marked as "Competition; International Passenger Transportation Company"addressed to 36 Pikk Street, Tallinn EEOIOO, Estonia, the Chancellery of AS Eesti Raudtee.10. Only the tenders that have arrived to the address indicated in Section 9 hereabove by 14:00 hours

August 1st 1998, Estonian time, shall be considered as participating in the Competition.


29/53


APPENDIX 4 DETAILED SURVEY REPORT

The Tourist Survey was conducted by Expert Centre for Social Research, Tashkent, under thedirection of Arslan Joldasov.

1. Survey Questionnaire

The survey form was designed jointly by GB Railways and the Exper Centre for Social Research, andtranslated into English, German, French and Japanese.


30/53


2. Survey Distribution

Survey forms were given to international tourist passengers at Tashkent Airport Departure Lounge,at the conclusion of their stay in Uzbekistan. Forms were not given to business travellers (initially,but see below) or to tourists who had stayed less than 2 nights, for example in transit. Forms werenot given to Uzbekistan citizens. Where two or more people in a family were travelling together, onlyone form was given to each family group.

Questionnaires were self-completed, and completed questionnaires were collected prior to departure.Questionnaires were numbered in sequence, according to date, entered, processed and calculated.


31/53


The survey was started according to the following schedule:

30.05 07.06.02 preparing and translating of the questionnaire07.06 - 14.06.02 signing of the permission in the airport14.06.02 training of the interviewers14.06 - 26.06.02 first stage of fieldwork

First phase of the work was concluded in the preparing, updating and translating of thequestionnaire to three languages: German, French and Japanese. It occupied 8 days.

Interviews began on June 14th because signing of the permission took 8 days, contrary to ourexpectations. Besides, administration of the international airport Tashkent agreed to permit the

working on the territory of airport only on the condition that just airport staff will carry out thequestioning.

During the first phase of the work we faced an unexpected problem - a very few quantity of touristsvisited Uzbekistan during this period. In view of this situation, it was decided to interview alsobusinessmen visiting Uzbekistan. Altogether, we have got during first stage 108 filled outquestionnaires - 50 questionnaires are filled out by businessmen and 58 by tourists. Thus, for 12 daysof twenty-four-hour work in airport covered 54 flights we have received only 58 touristquestionnaires.

As explained to us by the tourist agency CAT Ltd., where we applied for receiving faster result,this situation is caused by two reasons:

Terrorist attacks in America on the 11 of September reduced very much the quantity oftourists visiting Central Asia;

June and July are the hottest months in Uzbekistan and the number of tourists is the least inthis period of year. The most favourable seasons for tourist trips in Uzbekistan are April May and August October. .

The survey was stopped in June and continued since mid of September until the end of October.During this time 392 passengers were interviewed. Three interviews were rejected because they wereunreadable for translators.

Date of interviewFlight number

Month DayFrequency

Number ofquestionnaires

6 21 5

6 25 4

10 8 5

10 11 19

10 18 3

10 20 1

10 23 1

201London

10 29 4

42

6 24 12

231Frankfurt 6 25 1

13

6 18 1

10 8 26

10 15 10

233Frankfurt

10 22 4

44


32/53



Month DayFrequency


10 29 3

6 18 2

6 21 3 6 25 7

6 24 1

10 4 8

10 8 25

10 11 37

10 15 20

10 18 3

10 20 2

10 22 7

10 25 18

251Paris

10 29 4

137

301Tel-Aviv

6 24 7 7

6 18 4

10 8 4

303Tel-Aviv

10 22 1

9

3529 10 31 15 15

6 20 1

6 24 1

10 3 6

421Delhi

10 24 1

9

423 Delhi 10 9 2 2445

Amritsar10 24 10 10

463 10 30 1 1

501Peking

10 2 11 11

505 6 21 4 4

6 19 1

6 26 1

10 2 10

513Seoul

10 9 1

13

6 17 11

525Osaka 10 14 20

31

6 20 7

10 3 19

10 4 1

10 9 1

10 10 2

527Osaka

10 24 33

63

6 17 4

6 20 3

10 3 22

531Bangkok

10 10 9

38

533 6 26 1 4


33/53



Month DayFrequency


10 2 2

Bangkok

10 30 1

6 19 3 10 9 2

10 14 10

553Kuala Lumpur

10 23 1

16

7610 10 25 1 1

6 25 1

6 25 1

779

10 22 2

4

6 20 2

6 24 5

NO ANSWER

6 25 16

23

Total 497

Survey Analysis

For precise wording of each question, see the survey form reproduced above.

Questions 1 8. 18 20 and 29 30 were designed to gather basic facts about the tourists and theirtrip in Uzbekistan, to validate the survey sample and for analysis using cross-tabulations. The resultsare consistent with expectations, suggesting that the survey has been carried out properly and that areasonable sample has been surveyed.

Q1.Are you traveling alone or with other family members?

Code Description Frequency Percentage

1 Alone 350 70,42 With family 147 29,6

Q1_1. How many people, including myself, in your family group on the trip?


Valid 129 26,099 NO ANSWER 18 3,6

Not asked 350 70,4Mean 2,2Min 2,0Max 5,0

Note that as the average group size was 2.2, we actually surveyed about 650 tourists. The survey wasdone over 8 weeks, during the tourist season, when we would expect that about 16,000 tourists

visited Uzbekistan.

Some 350 respondents were not accompanied by family members, while about 300 were travelingwith family members. Note that some people would be traveling with friends who were not howeverfamily members.

Q2. Is your trip for work or holiday?


34/53



1 Work 115 23,12 Holiday 382 76,9

Q3.What country do you live in?


1 France 107 21,52 Japan 95 19,13 Germany 68 13,74 Australia 34 6,85 Belgium 23 4,66 England 23 4,67 USA 23 4,68 India 21 4,29 Israel 16 3,210 Other European countries 29 5,811 Asian countries 31 6,212 CIS countries 13 2,6

13 Other countries 7 1,499 NO ANSWER 7 1,4

Q4_1. How many days long is your visit in Uzbekistan?


Valid 479 96,499 NO ANSWER 18 3,6

Not asked 0 0,0

Mean 15,5Min 1,0

Max 1095,0

90% were staying less than 13 days in Uzbekistan, while 10% stayed more than 60 days.

Q4_2. How many days is your entire trip?


Valid 367 73,899 NO ANSWER 130 26,2

Not asked 0 0,0

Mean 18,7Min 2,0

Max 365,0

Q5.What other countries are you visiting on the trip?


1 Uzbekistan only 199 40,0 2 Kyrgyzstan 53 10,7 3 Turkmenistan 46 9,3 4 Kazakhstan 46 9,3 5 China 42 8,5 6 Thailand 16 3,2 7 Malaysia 13 2,6 8 Russia 13 2,6

9 Tadjikistan 12 2,410 European countries 19 3,811 Other Asian countries 39 7,8


35/53


12 Many 4 0,813 Countries of Middle East 11 2,214 Other countries 12 2,498 NO ANSWER 109 21,9

Most people appear to be on a two week trip, mostly in Uzbekistan with a short stop in one othercountry.

Q6. Is this your first visit to Central Asia?


1 Yes 360 72,42 No 137 27,6

For most people, this is their first visit to central Asia.

Q7. How did you enter Uzbekistan?


1 Airplane 473 95,22 Train 1 0,23 Car 7 1,44 Bus 11 2,25 Coach 4 0,89 NO ANSWER 1 0,2

Q8.What places have you or will you visit on this trip?


1 Tashkent 485 97,6 2 Khiva 295 59,4

3 Bukhara 357 71,8 4 Samarkand 406 81,7 5 Urgench 212 42,7 6 Termez 18 3,6 7 Uchquduq 5 1,0 8 Ferghana valley 50 10,199 NO ANSWER 3 0,6

As the survey was conducted at Tashkent Airport, it is not surprising that most respondents arrivedin the country by air and most visited Tashkent. Most also visited Samarkand, Bukhara, and Khiva.

Q29_AGE.Age

Code Description Frequency PercentageValid 455 91,5

99 NO ANSWER 42 8,5

Not asked 0 0,0

Mean 50,4Min 15,0Max 85,0

Q29_GENDER. Gender


1 Male 265 53,3

2 Female 207 41,69 NO ANSWER 25 5,0


36/53


Q30. Occupation


1 Student 12 2,42 Retired 150 30,2

3 Professional worker 114 22,94 Teacher 21 4,25 Other office worker 64 12,96 Factory worker 10 2,07 Other 118 23,79 NO ANSWER 8 1,6

Q18.What countries did you visit on your last three trips (not including this trip)?


1 USA 65 13,1 2 Russia 55 11,1 3 China 53 10,7 4 France 42 8,5 5 Italy 37 7,4 6 Germany 33 6,6 7 England 33 6,6 8 Spain 32 6,4 9 Turkey 23 4,610 Switzerland 14 2,811 Former socialist countries of Europe 31 6,212 Other countries of Europe 76 15,313 Uzbekistan 25 5,014 Kazakhstan 23 4,615 Asian countries of CIS 30 6,016 Other countries of CIS 23 4,617 Thailand 35 7,018 India 17 3,419 Vietnam 15 3,020 Iran 23 4,621 Other countries of Asia 133 26,822 Countries of North America (except USA) 27 5,423 Peru 18 3,624 Other countries of South America 40 8,025 Morocco 18 3,626 Egypt 18 3,627 Other countries of Africa 71 14,328 Countries of continent of Australia 27 5,429 Other (Arctic, Bali island) 5 1,099 NO ANSWER 68 13,7

Tourists to Uzbekistan are, in general, seasoned travelers who have already been to many othercountries.

Q19. How many internal flights did you take within Uzbekistan on this trip?


Valid 336 67,696 None 156 31,497 Many countries (without name of country) 1 0,299 NO ANSWER 4 0,8

Not asked 0 0,0

Mean 1,4

Min 1,0Max 7,0


37/53


Tourists took, on average, 1.4 internal flights suggesting most travel was done by road.

Q20.Are you on a package tour, including all hotels and internal transport?


1 Yes 277 55,72 No 205 41,29 NO ANSWER 15 3,0

Assuming that only tourists would use package tours, not business travelers, more than 70% oftourists are on a package tour.

Questions 9 22, 25, and 27 explored satisfaction with the tourist experience in Uzbekistan,traveling habits and preferences of the tourists.

Q9.The hotels you stayed in were generally:

Code Description Frequency Percentage1 Good 271 54,52 Variable 171 34,43 Bad 30 6,09 NO ANSWER 25 5,0

While most tourists were happy with the quality of hotels, a significant share were not.

Q10.Were hotels, on average, better or worse than where you usually stay when you travel?


1 Better 147 29,62 Worse 196 39,4

3 Same 84 16,99 NO ANSWER 70 14,1

Q11.Were hotels, on average, more or less expensive that when you usually travel?


1 More expensive 149 30,02 Less expensive 165 33,23 Same 34 6,89 NO ANSWER 149 30,0

Q16. How much do you expect to spend on this trip per person (in pounds)?

Code Description Frequency PercentageValid 340 68,4

99 NO ANSWER 157 31,6

Not asked 0 0,0

Mean 1049,2Min 12,0Max 9690,0

Q17. Is this more or less than you usually spend on a holiday?


1 More 155 31,22 Less 185 37,23 Same 52 10,59 NO ANSWER 105 21,1


38/53


Question 10, 11, 16 and 17 indicated that most tourists were staying in hotels that were either better(and more expensive) or worse (and less expensive) than they were used to. This suggests thatUzbekistan needs to develop a wider diversity of hotel types, to serve a range of budgets. Somepeople want to pay less, and get less, while others would be happy to pay more.

Q22.Would you stay in a hotel without private toilets and showers?


1 Yes 155 31,22 No 336 67,69 NO ANSWER 6 1,2

As we suspected, the majority of tourists were not interested in staying in a hotel without privatetoilets or showers.

Q25.Would you recommend a visit to Uzbekistan to a friend?


1 Yes 438 88,12 No 40 8,09 NO ANSWER 19 3,8

A high proportion of departing visitors would recommend travel to Uzbekistan to a friend.

Q27. How many days did it take to get your visa to visit Uzbekistan?


Valid 217 43,797 Obtained by travel agent 228 45,9

99 NO ANSWER 52 10,5 Not asked 0 0,0


Questions 21, 23, 24,26 and 28 were designed to determine propensity to use a train in Uzbekistan,specifically the Silk Tourist Class product.

Q21 CODE.What would you like to do or have done during your holiday?

Code Description Frequency Percentage1 Ride a camel in the desert 204 41,0

2 Helicopter flight over Samarkand 142 28,6 3 Take a luxury train between two cities 140 28,2 4 Visit the zoo in Tashkent 130 26,2 5 Trip in mountains 3 0,6 6 Trip to Aral sea 3 0,6 7 Visit of Termez and Ferghana valley 3 0,6 8 Other 47 9,599 NO ANSWER 203 40,8

This question confirmed that there is significant interest in use of rail. Rail was of more interest thana trip in the mountain or to the Aral Sea. Note that respondents had not been told that the

questionnaire was focused specifically on use of rail.

People were asked to give their willingness to pay for each suggested activity.


39/53


Q21 SUM_1. How much would you be willing to pay for ride a camel in the desert (USD)?


Valid 95 19,1

0 Not interesting 92 18,599 NO ANSWER 17 3,4

Not asked 293 59,0


Q21 SUM_2. How much would you be willing to pay for helicopter flight over Samarkand (USD)?


Valid 76 15,30 Not interesting 60 12,1



Q21 SUM_3. How much would you be willing to pay for take a luxury train between two cities(USD)?





Q21 SUM_4. How much would you be willing to pay for visit the zoo in Tashkent (USD)?


Valid 73 14,70 Not interesting 54 10,999 NO ANSWER 3 0,6

Not asked 367 73,8


Q21 SUM_5. How much would you be willing to pay for trip in mountains (USD)?



Not asked 494 99,4

Mean 100,0

Min 100,0Max 100,0


40/53


Q21 SUM_6. How much would you be willing to pay for trip to Aral sea (USD)?




Mean 100,0Min 100,0Max 100,0

SUM_7. How much would you be willing to pay for visit of Termez and Ferghana valley (USD)?



Not asked 494 99,4

Mean 200,0Min 200,0Max 200,0

Q23. Did you consider taking a train while visiting Uzbekistan?


1 Yes 232 46,72 No 250 50,39 NO ANSWER 15 3,0

Q24.Why you did not take the train?


1 Train is not included in tour 53 10,7 2 Few time to take train 19 3,8 3 Do not know about train 103 20,7 4 Do not like train 48 9,7 5 Was told it was not good 52 10,5 6 Trains times were not suitable 41 8,2 7 Did not know how to buy tickets 35 7,0 8 Prefer other transport 11 2,210 Other 16 3,299 NO ANSWER 166 33,4

A high proportion almost half did consider use of the train while in Uzbekistan, but were

discouraged or unable to do so for various reasons.

Q26. How much would you be willing to pay for an overnight luxury train trip between Tashkentand Bukhara with dining car, air conditioned compartment with private toilet and shower?


Valid 214 43,10 Nothing 64 12,998 Nobody will want 1 0,299 NO ANSWER 218 43,9

Not asked 0 0,0

Mean 66,1

Min 5,0Max 500,0


41/53


Almost half responded positively to a more detailed descriptioin of a luxury train betweenTashkent and Bukhara.

Q28.When did you last travel by train when on a holiday?


1 Earlier this year 203 40,82 Within past 3 years 126 25,43 Within past 5 years 26 5,24 More than 5 years ago 83 16,79 NO ANSWER 59 11,9

Indeed, many tourists said they had used rail on another recent holiday, and there was a highcorrelation between recent use of rail on holiday and willingness to pay. 329 of 497 respondents hadused rail within the last year or the last 3 years, when on holiday, and were willing to pay on averageabout 70 for the suggested rail journey.

Q26 x Q 28.How much would you be willing to pay for an overnight luxury train trip between Tashkent and Bukhara?

Statistics Answered NothingNobody will

wantNO

ANSWERTotal

214 64 1 218 497

mean 66.1

min 5.0Total

max 500.0

43.1% 12.9% 0.2% 43.9% 100.0%

Last travel by train during a holiday

86 31 1 85 203

mean 62.0

min 5.0Earlier this year

max 250.0

42.4% 15.3% 0.5% 41.9% 100.0%

64 11 51 126

mean 72.1

min 5.0Within past 3 years

max 250.0

50.8% 8.7% 40.5% 100.0%

17 4 5 26

mean 50.6

min 10.0Within past 5 years

max 100.0

65.4% 15.4% 19.2% 100.0%

35 13 35 83

mean 72.6

min 5.0More than 5 years ago

max 500.0

42.2% 15.7% 42.2% 100.0%

12 5 42 59

mean 67.1

min 10.0NO ANSWER

max 300.0

20.3% 8.5% 71.2% 100.0%

Detailed analysis revealed many other interesting characteristics of the survey respondents, whichmay or may not be representative given the modest survey sample.

While 77% of respondents were on holiday, 52% or 12 of the 23 Americans said they were onbusiness. This is explainable by the reluctance of Americans to holiday in the region, and thepresence of US government and military personnel in Uzbekistan.


42/53


Some 81% or 17 of the 21 Indian respondents were on business.

Average (mean) length of stay was 18 days, but for Americans it was 55 days and for Indians 58days.

50% of English, and 60% or more of French, Japanese and Belgians were visiting onlyUzbekistan on this trip. More than 80% of Americans and Germans, and 100% of Australians

were visiting at least one other central Asian country. Curiously, nobody reported that they hadvisited Afghanistan.

65% of English and 40% of Americans had been to central Asia before. For more than 80% ofother European and Japanese, this was their first trip to the region.

9% of Americans entered Uzbekistan by car.

97% of Australians but only 4% of Americans made it to Khiva

24%of Japanese and 30% of English rated hotels as good. 61% of English and 52% ofJapanese said hotels were worse than they were used to staying in

90% of Japanese would stay in a hotel without private toilets and showers, as against only 31%overall.


43/53


APPENDIX 5 INTERNATIONAL RAILTOURISM MODELSRail tourism takes many different forms in different places around the world. This depends upon the

nature of the tourist market, characteristics of the railway network, and also the attitude of therailway company to tourist passengers. There are more than a hundred passenger rail businesses inthe world, and each is different. This section will consider some of the railways where touristrevenue is an important part of the business. In each case we will consider the tourist offer, and howit is marketed, packaged, and priced.

We divide rail tourism models into fivemain models

InterCity mostly daytime routes inwestern Europe, operating manyjourneys per day with tourists carriedtogether with other passengers

Long Haul mostly overnight routes inNorth America, Australia, Africa. Whilesome still perform an importanttransport function, air is often cheaperas well as faster.

Cruise Trains special trains fortourists, not usually operated to aregular timetable.

Preserved Railways short railwayroutes used almost entirely by touristsfor sightseeing

Tourist Cars special cars offering ahigher standard of accommodation forinternational tourists but sharing locomotive power with regular trains serving a local transportfunction.

.This classification is somewhat arbitr

Rail Tourism Strategies for Uzbekistan Railways

Documents

Transcript of Rail Tourism Strategies for Uzbekistan Railways