Hospitality & Tourism Sector Georgia: The Place to Be

“From its green valleys spread with vineyards to its old churches and watchtowers perched in fantastic mountain scenery, Georgia is one of the most beautiful countries on earth…

Georgia is a country moving forward in the 21st century, with spectacular contemporary buildings, a minimal crime rate and ever-improving facilities for the visitors who are a growing part of its future”

Lonely Planet

Over the last decade Georgia transformed itself from a lesser-known destination into a competitive regional tourist destination for the CIS and Middle Eastern visitors, with strong prospects to attract more tourists from Europe and Asia. Georgia boasts among the world’s highest growth rates of foreign visitors: since 2007, arrivals to Georgia have grown at a 24% CAGR to 5.9mn in 2015, compared to a worldwide growth rate of 3.4%.

Tourism has become a key pillar of the economy. It’s consistent growth has turned it into a reliable source of currency inflows. Tourist receipts totaled US$ 1.8bn in 2014 (10.8% of GDP), equal to over 60% of merchandise exports.

Tourists come mainly from neighboring countries Armenia, Azerbaijan, Turkey, and Russia, which account for 88% of arrivals. Future growth is expected to come from Russia, the Middle East, and the EU, especially on the back of the recently signed Association Agreement and visa liberalization.

The growth rate of arrivals has settled in the single digits over the last two years after a decade of high double-digit gains. Despite healthy tourist numbers, per-capita spending lags behind Eastern European peers. The challenge now is to increase the number of higher-spending visitors. Average income per visitor has remained relatively stable since 2007 at US$ 325-400, well below the Eastern European average of US$ 750. Georgia has the potential to attract higher-spending visitors from the EU, Russia, and the Middle East. These regions have already generated impressive growth over the last decade in both the number of visitors and income.

Georgia has additional potential to increase tourist inflows by further developing winter resorts and wellness and spa destinations. In recent years brand-name hotels have started to penetrate previously untapped areas as more international travelers visit Georgia’s regions. MICE (Meetings, Incentives, Conferencing, Exhibitions) tourism is another segment that could further attract higher-spending visitors to Georgia. Georgia hosted several high-profile events in recent years, with more scheduled for the near future. In July 2016, the Organization for Security and Cooperation in Europe’s (OSCE) Parliamentary Assembly will be held in Tbilisi, hosting around 700 foreign delegates.

Over the last 5 years a number of international upscale hotel chains have entered the Georgian market. Since 2009, Radisson, Hilton, Rixos, and others have added 1,800 rooms; prior to 2009, just three brand-name international hotels were operating in Georgia – Marriot, Courtyard Marriot, and Sheraton – with 464 rooms. By 2020, Millennium, Intercontinental, Park Inn by Radisson, Crowne Plaza and several local upscale hotels are planning to open operations in Georgia, adding more than 4,000 hotel rooms to Tbilisi and Batumi.

Over 2010-2014, more than GEL 500mn was invested in the hotel and tourism sectors in Georgia. The key recipients were Tbilisi (58%) and Batumi (18%). But despite the investment, Georgia’s number of beds per 1,000 visitors remains well below Eastern European peers. In 2015, Georgia had 8.7 beds per 1,000 visitors (down from 16.0 in 2010), far below the 42.6 average for Eastern European peers in 2014. With further development of tourism and hospitality infrastructure Georgia has a potential to attract higher spending visitors, which should be the key driver of the sector.

 

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