Like so many other countries across the world, Georgia had been enjoying pretty steady tourism growth during the 2010s but this news found success story came to a crashing end with the Covid-19 pandemic.
Even so, with new hotel and resort development taking place over the last couple of years the country is in a good place to take advantage when travel demand returns.
“Tourism was booming in Georgia before the pandemic and investment in hospitality was doubling each year, now it’s kind of stopped but we believe that it will continue very soon,” said Kakhaber Samkurashvili, senior research associate at Galt & Taggart, an investment bank based in the capital Tbilisi.
Georgia is located at the intersection of Europe and Asia, with Russia bordering to the north and Turkey, Armenia and Azerbaijan to the south.
Batumi on the Black Sea coast and Tbilisi tend to dominate the tourism and hospitality investment landscape in the country. Other regions have historically been less popular although this is changing in areas such as Kakheti, famous for wine production.
“It’s a local dependent market,” said Roger Allen, Group CEO at RLA Global.
According to the Georgian Ministry of Internal Affairs, in 2019 Azerbaijan (21%), Russia (20%), Armenia (19%) and Turkey (16%) made up almost three quarters of all international visitor trips.
“In recent years the number of visitors from Israel, Kazakhstan, European union countries was growing very fast. [The] share of non-neighbouring [countries] is still low, but [the] country is betting on those source markets,” Samkurashvili said.
That is born out in the statistics with Israel (+30.7%), Kazakhstan (+75.7%) and Germany (+38.1%) in the top 10 for visitor trips.
Growth in more far flung source market is down to changes in the airlift over the last few years. Again some of this has fallen back in the wake of the pandemic but if travel demand bunces back like many people expect, these routes should start to come back.
Another potential benefit for the tourism mix in the country is that it can operate year round with beach and ski destinations dotted around the country.
“The wealth of the country has significantly changed and that feeds then into the tourism sector and hotel investment. And when you’ve got a market that can work around the seasons that is absolutely fundamental to making hotel investment more attractive because you’ve got all round seasonal demand that you can potentially accommodate for,” Allen said.
For Georgia it’s very important that this demand does return. According to Samkurashvili, tourism flows account for around 18% of Georgia’s GDP. Only Croatia and Montenegro rank higher in Europe.
Over the past few years there have been a number of prominent hotel investment deals in the country.
The much-delayed Hilton Tbilisi was due to open this year. The property is located in the former Ministry of Agriculture building and investor Granat Holding has so far put in $60 million.
Earlier this year Hyatt announced today that an affiliate had entered into a management agreement with Alliance City LLC for the development of the Hyatt Centric Boulevard Batumi, which is expected to open in 2025.
Currently most of the investment is local, but that the government has laid the groundwork for international investors by removing red tape.
“At the moment it’s still locally driven, but they’ve made it much more easy to invest in the market by creating free zones in the market, that certainly helped, casino licences have definitely heled, just making it an investment friendly sector and removing all the red tape has definitely helped also. And that creates an environment where investors particularly from neighbouring countries want to invest…” Allen said.
Outside of Tbilisi and Batumi the rest of the country is fairly undersupplied in terms of tourism accommodation meaning that the work done by the government should bear fruit at a later date.
“The pace of investment will be lower compared to pre-pandemic levels however it will still pick up…and accelerate in years to come,” Samkurashvili said.