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Outshone by the booming Asian economies, and with a reputation for a difficult business environment, Russia is often left out in the cold by many companies in the Attractions Industry, who prefer to concentrate their marketing efforts on breaking into Asia. But should we look more carefully at the country that gave us the first roller coaster? As the Russian Association of Amusement Parks and Attractions (RAAPA) Expo closed its doors on March 25th 2011, Blooloop caught up with first time RAAPA exhibitor Frank Kalff (pictured left), Commercial Director of Cruden, to talk about simulators, the show and his top tips for trading in Russia.
Russia has a long history in the Attractions Business: Catherine the Great was the owner of one of the first roller coasters, a “Russian Mountain” ice slide back in the 18th Century. Although other countries have caught up in terms of coaster design, today Russia is one of the BRICs, that exclusive club of 4 countries (Brazil, Russia, India and China) whose economies have been tipped for greatness. The IMF project impressive output growth of 4.5% in 2011 for Russia compared to 2.5% for the “advanced” economies (see table below). Russia’s super-rich elite will still splash out on an expensive thrilling toy, but the country lacks the growth in the middle classes that is fuelling the demand for quality leisure experiences within Asia [the Asian Development Bank forecast that by 2030 developing Asia will comprise 43% of worldwide consumption].
Ease of Doing Business
So is the reputation for red tape deserved? Well Russia ranks at just 123 out of 183 countries on the World Bank’s Ease of Doing Business Index, just after Uganda at 122 and well behind the Asian economies Singapore (1), South Korea (16), Malaysia (21), Taiwan (33), and even China (79), although ahead of fellow BRICs Brazil (127) and India (134). Looking in detail at the index (see below), Russia scores abysmally for the ease of trading across borders (162). Restrictions on currency movement, impenetrable procedures and the language barrier are likely to put off those thinking of dealing with Russian operators.
Cruden, originating from the Fokker Aircraft Company, provides professional, interactive, racing simulators for both industrial and attraction markets. The same simulator package used by Formula 1 (F1) teams is now available to attractions, and last year Cruden installed eight standard Hexatech and two special simulators with a real F430 Challenge and real F1 vehicle at Ferrari World Abu Dhabi. Having already sold simulators to private customers in Russia, Kalff took the decision to exhibit at RAAPA in order to test the demand for Cruden’s performance driving and motor sport-themed experiences with the Russian general public.
The markets for Cruden’s simulators vary both in terms of geographical location and type of facility. For Cruden a base of F1 fans is essential. Bavarian Moscow City Racing has evolved into a major event over the last 3 years leading to plans for the first Moscow F1 Grand Prix in 2012. The circuit is expected to be the fastest F1 street track with speeds of up to 320km/hr, a feature which is sure to increase the popularity of the sport in Russia.
Whilst a love of fast cars is universal, each operator must tailor their business model to their own unique visitor profile for the purchase of a simulator to make financial sense. Kalff gives as an example I-Way, a motor sport simulator centre in Lyon, France with an exclusive complex of 18 motor-racing simulators, restaurant, bar, spa and conference facilities. “I-Way is a very high end concept. A high ticket price works in France for the mass public 18 and over: the French have a cultural history of exclusivity like the Michelin star. However, I don’t see that working in say London, Germany or Belgium. Similarly if you put our products in an ordinary mall in France the concept would have to be completely different.” So what kind of facilities would Cruden expect to be potential buyers in Russia?
Operators in Russia have to work around an inhospitable climate. With long, cold winters shopping malls have become a major venue for attractions. Kalff says, “There are huge malls in Russia, I think maybe 4 huge ones and 30 “normal” ones in Moscow alone. They’re quite targeted with some very upscale malls. So that’s one target market for us, as well as of course FECs and entertainment centres.”
Tailoring the Product
Cruden have been tweaking their design for the Attractions Market and launched their Hexathrill simulator in 2010. Kalff describes the Hexathrill as a simpler, lighter, more affordable and flexible version that uses less floor space and delivers a faster return on investment, which is ideal for a the mall venues in Russia. “It’s a machine that we developed with the Attractions Market in mind. We can offer all the complexity that F1 teams and private customers want, but the entertainment industry just doesn’t need it. Attractions like to discuss and have all the options but they actually want something simple in terms of ease of operation. That’s been a challenge for us as a very high tech company!”
Know your Customer
Anyone who attended IAAPA in Orlando in November 2010 will probably remember the queues and spectators watching the simulator at the Cruden booth. This is nothing new for Kalff: “We’ve been doing this for 10 years and whenever we have the simulator at any show we always have a waiting list”. Not many of the people enjoying the simulator will be potential buyers but Kalff is clear about who the serious customers are.
“There is a clear profile of people who buy our systems: they are looking for something different, a wow factor to get visitors in. These are people who understand that you need a little patience. Redemption games have to make money in 4 to 6 months, roller coaster in 5 to 7 years but in our case the ROI is on average 2 to 3 years.
We find for larger centres, like I-Way in France, the first year is a year where you figure out what your marketing concept should be. According to what you do in the first year, and you have to spend money on good market research, you adapt your concept to what works for your market: population, region, your target audience, who is repeating. Then in the second year you will see it improving.”
Strategy for RAAPA
Having exhibited all over the world in shows for the Attractions and Motor Industries, Kalff knows how to best to showcase Cruden’s products. However, exhibiting in Russia threw up some interesting challenges.
Although having a simulator on the stand worked exceptionally at IAAPA, Kalff says that the complex Russian import procedures and potential taxes made bringing one to RAAPA too expensive and problematic. He was forced to come up with an alternative strategy. “We had a special video made. What was striking was that 50% of the people asked for it. At IAAPA we had a video and a PowerPoint presentation and only 10% of people asked for it.”
Cruden have also taken the unprecedented step of partnering with an agent to help them trade in Russia: “We don’t have any agents anywhere else in the world because we don’t really need them but in Russia there is so much red tape and logistics.”
For Kalff the most unexpected thing about the show was the language barrier. “We translated three of documents for the show – this was a trial for us so we didn’t want to spend too much money. But it was absolutely necessary.”
“I expected that 20 to 25% of people would be able to speak some form of English so that we could communicate, and another 10 to 15% would be able to sort of understand me. It turned out that only 2 to 5% spoke English and our translator was doing all of the talking!”
“I was very lucky with the lady translating who was very astute. It’s very difficult to control who is saying what, and if you really don’t understand then you have to be able to completely trust the person who is translating for you. You need to get a good translator because the people in this industry just don’t speak English.”
So is it worth stretching your marketing budget to get to Russia? Well time will tell for Cruden as orders get firmed up over the coming months. One thing is for sure – if that royal thrill seeker Catherine was around she’d be buying up Hexatechs for the Winter Palace.