The City The Russians Left Behind, Then Discovered Again

New investment, returning tourists, an airport reboot and high tech research are helping Lappeenranta recover from the economic shock of sanctions.

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Lappeenranta Christmas market / Credit: goSaimaa.com, Mikko Nikkinen

When the Russian rouble collapsed, and EU sanctions hit the economy, Russian visitors to the eastern Finnish city of Lappeenranta dried up almost overnight. When the tourists disappeared, so did their money. And jobs. Investment. Livelihoods.

But now things are turning around, with business picking up again, new life in Lappeenranta’s international airport, big money investments, visitor numbers on the rise, and per-person spending more than it was in 2014. The city found a way to adapt.

This week, Finland’s Minister of Foreign Trade Kai Mykkänen (NCP) said there had been a clear recovery of trade between Finland and Russia, as imports, exports and the number of Russian tourists grows – despite continued EU sanctions.

The Retailer’s Story

Muhamad Darvish build his fortune on Russian tourists. When his Grande Orchidée outlet shopping centre opened up 25km outside of Lappeenranta, the target customer was Russian day-trippers coming over the border for a few hours of quality shopping at good prices.

When the sanctions hit in 2014, the Russians disappeared virtually overnight.

“It was a catastrophic situation. Imagine that your turnover dropped by 60% to 75% in one year, and you’re not ready for that. You thought business is going well for a few years so you make all the investment plans, and it’s a huge impact” Darvish tells News Now Finland.

In a niche outlet, away from the city centre, it wasn’t possible to change the business model and attract Finns to replace the lost Russians. The company had to lay off half its workforce, cutting more than 60 jobs.

“We had a process of restructuring the loan to the bank and restructured the activities of the company to make it more effective, to cut unnecessary expenses, and to concentrate more on the good stuff, not taking any unnecessary risks” says Syrian-born Darvish, who has lived almost 30 years in Finland.

It took two and a half years, but there’s finally some positive signs for the business. The Russian economy is still bad, says Darvish, but it’s plateaued, and people have adjusted to their new purchasing power, and starting to come back to Finland for shopping.

Today, Grande Orchidée is welcoming increasing numbers of Russian visitors through the doors, and while profits haven’t returned to 2014 levels, Muhamad Darvish says they’re reached about 50% of their best year ever.

More Russians, More Spending

Across the region, officials have noticed the growing number of Russians again, and are taking a keen interest in how long they stay, how much they spend.

“The expectation of growth in the near future is quite positive now. We can say that the amount of Russian tourists has increased a little” says Juha Linden from ELY-Keskus, the Centre for Economic Development, Transport and the Environment in South East Finland.

“We cannot talk about them using the same amounts of money like we had in 2014 […] the tourists have come here again, but not so much as they were a few years ago” he says.

Lappeenranta lost 400 retail and tourism related jobs between 2014 and 2015 when the worst effects of the Russian crash, and Finland’s own recession, bit hardest.

At a city level, they’re seeing the effects of the rebounding numbers of Russian tourists, so vital for the local economy.

“Lappeenranta is the most popular destination for Russian tourists in Finland, Helsinki the second” explains Markku Heinonen, Lappeenranta’s Director of Development.

This year tourists numbers are expected to grow almost 25% over last year, with the border city welcoming 1.2 million Russian visitors.

“Today the business is again running good, which we can see, with better figures of young peoples’ employment” says Heinonen.

City Senior Adviser Markus Lankinen says their key strategy has been to get Russians to stay, and not just come for day tourism.

“We want to get them so fatigued during their shopping that they decide to stay for one night” he laughs.

The strategy seems to be paying off. In 2016 the city had 432,000 overnight stays, the best ever year on record – although this is not just Russians, but Finns and non-Russian tourists discovering the Lakeland region.

Airport Takes Off

Lappeenranta is hoping that its airport – just 3km from the city centre – can be an important economic engine for the region. Bringing tourists to the region, but more importantly, attracting some of the seven million potential passengers that live in the St. Petersburg area, to come to Finland for flights. The two cities are only 90 minutes apart on high speed trains with customs and border formalities on board.

After a two year gap, low cost carrier Ryanair announce a return to Lappeenranta with two destinations: Athens, and Bergamo in Italy. Although there’s no domestic flights from the airport, which has been owned by the City of Lappeenranta since early 2016, there is a steady stream of holiday charter services.

“At the moment, people from Helsinki don’t think Lappeenranta is an option” says airport CEO Eija Joro.

“Of course when you have a low cost operator starting like Ryanair, and they are famous for their very good pricing as well, so their catchment area is large, and people from Helsinki might travel […] and our potential is to utilize St. Petersburg next door” she says.

The airport collaborates the city’s marketing and tourism branches to market Lappeenranta and the Lakeland Region in Russia and also Ryanair’s destination airports – trying to encourage tourists to come to Finland.

Old Business, New Investment

In the race to replace jobs and investment coming to South East Finland from Russia, help arrived from an old fashioned Finnish heavy industry: paper.

A decade ago, many people had called time on the paper industry in this part of the country, as international demand for pulp and paper products dropped sharply. But Finnish companies like UPM and Stora Enso sunk about €70m into plants in Imatra and Lappeenranta recently.

“Those paper companies have made quite big investments here, but this is not coming from outside, this is Finnish money” says ELY-Keskus’s Juha Linden.

The local university Laapeenranta University of Technology LUT, is also making a name for itself as a centre of innovation, attracting hundreds of international students.

Projects that started at LUT have spun off into companies that are becoming profitable, and in turn drawing more investment and research jobs to the region.

Recent examples include electronics company Visedo, which was bought by Danfoss – an international company with 26,000 employees in 100 countries. The Visedo founders and many staff are LUT graduates. LUT’s Green Campus Innovations has also invested in Visedo.

In October, LUT secured a multi-million euro funding deal from the EU to develop a replacement material for concrete. And also in October, LUT’s computer vision spin-off Vionice was bought by Vaisala.