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HOTEL MARKET REPORTGEORGIA I 2015
Hotel Market Report | Georgia | 20152
Contents
Executive Summary 3
Georgia - Country Profile 4
Recent Activities in Tourism Industry 6
International Arrivals in Georgia 7
Georgia Hospitality Market Overview 8
Benchmarking 9
Tbilisi Hotel Market Overview 10
Batumi Hotel Market Overview 15
Kutaisi Hotel Market Overview 19
Summer Resorts Market Overview 22
Winter Resorts Market Overview 25
Destination Cities’ Hotel Market Overview 28
Conclusions and Outlook 32
Appendix 1 – Success Story 33
Appendix 2 - Real Estate Registration, Construction Permit and Government Incentives 35
Appendix 3 - Primary Information Sources and Data Used for the Study 38
Disclaimer 40
Project Team 41
Colliers Global Stats at a Glance 42
Team Georgia at a Glance 43
Hotel Hilton Batumi
Hotel Market Report | Georgia | 20153
Executive Summary
Number of international arrivals reached 5.9 millionIn 2015, the number of international arrivals in Georgia reached 5.9 million. The growth rate compared to 2014 amounted to 7% for total visitors and 2% for non-resident visitors staying longer than 24 hours.
Supply in Batumi increased by 26%In 2015, nineteen new accommodation facilities began operating in Batumi, adding 821 rooms and 1,703 beds to the city’s stock – compared with 2014, an increase of 26% and 24%, respectively.
Tbilisi and Batumi – main suppliers of hotel roomsThe number of hotels in Tbilisi and Batumi has grown consistently during the past few years. In 2015, the total number of hotel rooms in Tbilisi amounted to 6,000, representing a 9% growth compared to 2014, while Batumi has seen a 26% increase, comprising 4,000 hotel rooms .
Taking into consideration the future pipeline, these two cities will remain the top suppliers in Georgia for the next five years.
International operators continue to expand in Georgia During next few years, the Georgian hotel market will expand significantly. The major international brands, operating worldwide, will start to build a presence in the Georgian hospitality sector. In addition to the already announced brands, 2015 witnessed a number of new international entrants such as Wyndham Worldwide Group (two hotels - trading as Ramada in Tbilisi, Wyndham in Batumi), Accor Hotels (Pullman Hotels in Tbilisi and Batumi), Marriott (Autograph Collection by Marriott in Tbilisi, Batumi, Shekvetili and Moxy in Tbilisi), Louvre Hotels Group (Golden Tulip in Tbilisi), Hyatt (Hyatt Regency in Tbilisi), Swissôtel Hotels & Resorts in Batumi, Euphoria Hotels & Resorts (Batumi) and Starwood Hotels & Resorts (under the brand Le Meridien in Batumi).
Also, three new hotels are to be operated by Rezidor in Tbilisi, Gudauri and Tsinandali (trading as Radisson Blu) and four Best Western Hotels & Resorts in Kutaisi, Batumi, Gudauri and Bakuriani (BW VIB, BW Plus).
The hotels and resorts development pipeline is valued at USD 1.1 billion, which will meet completion in 2016-2019Currently, Tbilisi has 21 ongoing projects, of which the vast majority are accounted for by international brands. The total investment volume of recent developments in Tbilisi
approximately amounts to USD 583 million.
In Batumi, 14 projects are in the active stage of development, to be delivered in 2016-2018. The total investment volume in Batumi amounts to USD 432 million.
The value of summer resorts, winter cities and destination cities’ hotel projects in the pipeline amounts to USD 95 million.
Kutaisi hotel market awaiting for international brand
In 2016, the internationally-known midscale brand Best
Western will open a 45-room hotel in Kutaisi, able to
accommodate more than 90 guests. The total investment
volume amounts to USD 2.8 million.
Business tourism in Georgia grows modestlyEven though international arrivals are growing rapidly year by year, business tourism has increased at a more modest growth rate, mainly seen in the capital city. During 2010-2014, average annual growth rate amounted to 20% in Tbilisi. The highest figure was achieved in 2014, when the number of business travelers increased by 43% compared to the previous year. Kutaisi also saw a positive trend in 2014, with the number of business travellers growing by 27%, while in Batumi this figure decreased by 13%.
Strong performance indicatorsIn 2015, the ADR of international midscale brands in Tbilisi increased by 2%. In local upscale and middle class hotels this figure grew by 4%. International upscale brands saw a slight decrease (4%). The most significant change has been recorded in Batumi, where the ADR for international branded hotels dropped by 27% compared to 2014. The negative change was mainly caused by the fluctuation of the exchange rate.
In Tbilisi, the occupancy rate of international upscale brands equates to 68%, while the same figure in Batumi stands at 45%. Compared with 2014, positive changes occurred in local upscale and middle class hotels (65%) in Tbilisi and in summer resorts (25%-30%).
At USD 121, international upscale brands in Tbilisi has the highest RevPAR, while the same figure for Batumi amounts to USD 46. In local upscale and middle class hotels the highest RevPAR is in Tbilisi (USD 59), Kazbegi (USD 57), Kvareli (USD 46) and Batumi (USD 36).
GudauriGeorgia – Country Profile
Hotel Market Report | Georgia | 20154
IntroductionLocated at the crossroads of Europe and Asia, the country of Georgia borders Turkey, Armenia, Azerbaijan and Russia. Georgia occupies an area of 69,700 square kilometres and is home to a population of 3.7 million people. The country’s land borders run a length of 1,839 kilometres, while Black sea coastline is 315 kilometres. There are two autonomous republics and 71 municipalities (including 12 self-governing cities) in Georgia.Since emerging from the Soviet Union as an independent country in 1991, Georgia has implemented large-scale reforms, leading to the country’s political and economic transformation. These changes have made clear the country’s choice to strengthen democracy and further their relationship with the EU.Georgia has made business development within the country a top priority, through encouraging entrepreneurship and devising methods to attract private investments to shifting tax incentives and making the country more attractive to the international business world. With its unique cultural heritage, highly diverse nature, and exuberant hospitality, Georgia’s tourism industry continues to grow and thrive, further bolstering economic growth.
GovernmentThe Georgian government shifted from a presidential to a parliamentary republic after the October 2012 parliamentary elections. The president, Giorgi Margvelashvili, is the head of state and supreme commander-in-chief. Georgia’s parliament is located in Kutaisi City and acts as the representative body of the country, exercising legislative power, and determining the principal directions of domestic and foreign policy. As an executive council of government ministers, the Cabinet of Georgia is headed by Giorgi Kvirikashvili who comes from the ruling Georgian Dream Coalition.Based on accountability, citizen participation, technology, and innovation as its guiding values, today’s multi-party government continues to make European and Euro-Atlantic integration a primary strategic objective.
Legal System
The Constitution, adopted in 1995, sets out the structure of the national government as well as its powers and functions. The powers of government are divided into three branches – the legislative, executive, and judicial. Georgia’s court system has three branches: Courts of First Instance (District or City Courts), Appellate Courts (Tbilisi Appellate Court available for appeals from eastern Georgia, and the Kutaisi Appellate Court, available for appeals from western Georgia) and the Supreme Court. Тhe Courts of the First Instance have jurisdiction over all civil, criminal, and administrative cases. Decisions from the Courts of the First Instance may be appealed to the Appellate Courts and, from there, to the Supreme Court. As an alternative to litigation, Georgian laws allow arbitration both in local as well as in international arbitration institutions. The Constitutional Court of Georgia is the sole entity with constitutional jurisdiction in Georgia.
PopulationGeorgia’s population was 3.72 million at the end of 2015, with a density of 53.4 people per square kilometre and a regional average (in the Caucasus region) 95. Urban dwellers make up 57.2% of the total population though the rate of urbanization is rising. Tbilisi, Georgia’s capital and the country’s largest city, is home to 30% of the total population, followed by Batumi and Kutaisi with 4.2% and 4%, respectively. Ethnic Georgians form 87% of Georgia’s population. Other large ethnic groups in Georgia include the Azeri (6%), Armenians (5%), and Russians (1%).
Labor Market Overview
Georgia’s labor force comprises approximately 2,021,500 people. The country’s economic activity rate has risen in recent years, reaching 67.8% in
2015. The current unemployment rate is 12%, which is lower than the 14.8% average seen last decade. It is worth noting that a large percentage of employed population are self-employed. Currently, 15.4% of the working population are employed by Public sector, while 84.6% work in the non-public sector. In 2015, the three industrial sectors that employed the largest share of people were wholesale and retail trade, industry, and construction.
EconomyFocused on improving efficiency and overcoming expected difficulties, Georgia’s economy is structured to improve efficiency and overcome difficulties, thus allowing the private sector to maintain inclusive growth. The process of economic liberalization, backed by evident pro-Western leanings, has greatly improved the country’s competiveness for both export and investment opportunities. Georgia’s main trade partners include Turkey, Russia, Azerbaijan, and China.Following institutional reforms designed to encourage and support entrepreneurship initiatives, Georgia’s economy has taken a giant leap forward in attracting new business. Over the past decade, the per capita GDP increased by 2.45 times from $1,530 in 2005 to $3,743 in 2015 (at current prices). The estimated real GDP average growth equaled 2.3% for Q1 2016 and is forecasted to reach 3% by the end of the year. The ‘Ongoing Country Partnership Strategy for Georgia’, developed through a collaborative effort by the World Bank Group, has further evolved to ensure the effective use of public resources and increase income opportunities.
Tax system
Since the wave of institutional reforms, Georgia has embraced a low-tax model, slashing the number of taxes and tax rates. Georgia now ranks globally among the top ten countries with the lowest taxes and continues to bring its fiscal policies into further alignment with those of the EU. Currently Georgia has concluded the Argument on the Avoidance of Double Taxation with 52 countries. According to the latest tax code changes, imported goods used in VAT-taxable operations will be exempt from VAT. Moreover, additional changes are planned by 2017, including the removal of the profit tax for the reinvestment of funds. Georgia’s liberal tax code includes only six forms of taxes: Profit Tax – 15% Personal Income Tax – 20% Value Added Tax – 18% Import Tax – 0%, 5% or 12% Excise Tax – on a few selected goods Property Tax – up to 1% Tax rate on dividends is defined as a 5% in Georgia.
Foreign Trade OverviewIn 2015 Georgia exports (FOB) and imports (CIF) amounted to $2,204 mln and $7,729 mln, respectively. The top export destinations for Georgia are its neighboring countries as well as Bulgaria and China, totaling about 50% of Georgian exports. Major export commodities include mineral water, metals, and motor cars (mainly re-exported). Throughout the world Georgia is among the largest exporters of hazelnuts, famous for their unique flavor, while the country’s wide range of natural wine products continue to grow in popularity in the Chinese, EU, and USA markets.Georgia’s main import partners are Turkey, Russia, and China, accounting for 33% of the country’s total imports. The primary imported goods include oil, pharmaceutical products, motor cars, electrical equipment, wheat, and sugar.
Gudauri
Hotel Market Report | Georgia | 20155
Business and Investment Environment
According to the ‘Heritage Foundation Index of Economic Freedom 2016’, Georgia’s economy is categorized as Mostly Free, ranking 23rd out of the 178 countries measured. The significant improvements made to Georgia’s legislative framework allowed entrepreneurship initiatives to reach new heights, encouraging domestic businesses and opening the door to foreign investors. Today, the country is exemplary in European and Central Asia due to the ease with which business can be conducted. It ranks 6th in the world for ‘Ease of Starting a Business’, 3rd for ‘Ease of Registering Property’, and 24th (14th in Europe and 1st in the region) for ‘Ease of Doing a Business’. With no minimum capital requirements, it takes on two days to set up a new business following a quick and simple process. Foreign and local investors are treated equally in Georgia.Today there are four Free Industrial Zones (FIZ) in Georgia in the cities Tbilisi, Potiand Kutaisi and several more is also planned to open including Kulevi FIZ. Two unique Free Tourism Zones in Anaklia and Kobuleti offers various advantages to investors such as free land and ready infrastructure.Aimed at the development of different sectors, the Georgian government has implemented several large-scale projects. Launched in 2014, “Produce in Georgia” is a successful state program that encourages entrepreneurship as it relates to the exportation of Georgian goods. Another interesting program which began this year is “Film in Georgia” which hopes to attract international film producers by cash rebate up to 25% on filming expenses. With the project “Host in Georgia” the local Government provides financial and technical assistance including co-financing to entrepreneurs in hotel industry. The “Check in Georgia” program brings together musical events with international stars, and promotes events dedicated to local products, all in an effort to increase tourism. In order to promote the development of innovative ideas, The Development Center of High Technology and Innovation (Tech Park Georgia) opened this year.According to the last Trade Policy Review produced in 2016 by the World Trade Organization (WTO), as evidenced by the progressive liberalization of its trade regime, Georgia has undertaken an impressive range of successful reform initiatives. The country has been a member of the WTO since 2000. Currently, Georgia is considering joining the expanded Information Technology Agreement, which would help the country attract further investment. FDI of USD 1.75 billion in Georgia in 2014 was the highest indicator seen since 2008, however, this number decreased by 11% in 2015. In H1 2016 FDI of USD 376 billion is 29% higher compared to the same period of time of previous year (highest amount of to the same period of time since 2008).Georgia has signed FTAs with CIS countries. Georgia benefits from the General Scheme of Preferences regulation, which lowers tariffs on goods exported from Georgia to the US, Canada, and Japan. As a result of negotiations with the European Free Trade Association in 2016, Georgia was given duty free access to markets in Iceland, Liechtenstein, Norway, and Switzerland. FTA between the Republic of Turkey and Georgia entered into force in 2008. Currently, an FTA between Georgia and China is also in negotiations and will be finalized by the end of 2016.The EU represents Georgia’s main trade partner. The Association Agreement (AA) between the EU and Georgia, signed in 2014, was ratified by all EU countries in December 2015. The Deep and Comprehensive Free Trade Area (DCFTA) was set up as a part of the AA and aims to gradually enhance Georgia’s trade and economic growth on its path toward integrating with the European economy. The DFCTA has provided better opportunities for local businesses to trade with the EU and made foreign investment in Georgia much easier. For the period of 2014-2015 Georgia also benefits from the unilateral Generalized Scheme of Preferences (GSP). Under the current regulations, due to sustainable development and good governance Georgia qualifies for a special incentive (GSP+) that provides advantageous access to the EU markets.
Georgia in International RankingsAccording to the Doing Business report, Georgia has been among The Top Improvers since 2005 in the EE&CA and globally. Characterized as an efficiently-driven economy, Georgia ranked 66th in 2015-2016 with the relative average score of 4.2 on the Global Competitiveness Index, improving its position by 28 levels when compared to their 2004-2005 ranking.The Transformation Index BTI shows that Georgia is up from 95th to 39th position in Management Index Ranking and up from 79th to 45th position for Status Index Ranking during the period from 2003 to 2016. Democracy Status of the country has also risen in recent years and ranks at 40th position for the period of 2016. The country is ranked 48th among 168 counties and territories on the Corruption Perception Index, greatly outperforming its bordering countries. Fitch’s credit rating for Georgia was last reported at BB- with a stable outlook, and referred to 2016 as a challenging year for growth in Georgia. The report also revealed expectations that the country’s economy will grow 2.5% in 2016 and 4.2% in 2017.
Infrastructure & Transport
Due to its access to important terrestrial and maritime transport routes, Georgia has always been a key player in the transportation of cargo as well as natural gas and oil. Today, the three main pipelines are the Baku-Tbilisi-Ceyhan pipeline, the Baku-Supsa oil pipeline, and the South Caucasus gas pipeline. With a capacity to export one million barrels of oil a day, the Baku-Tbilisi-Ceyhan (BTC) oil pipeline runs 443 km through Azerbaijan, 249 km through Georgia and 1,076 km through Turkey.The Baku-Supsa oil pipeline (the Western Route Export Pipeline, WREP) runs from Azerbaijan to Georgia. The pipeline is 833 km long, with 375 km running through Georgia. Reconstruction of portions of the pipeline is scheduled in the near future.The South Caucasus gas pipeline (SCP) has been operational since 2006, following the route of the BTC crude oil pipeline project. The pipeline runs 691 km, with 443 km in Azerbaijan and 248 km in Georgia. Expansion of the SCP is now underway, and will eventually triple the gas volume exported through the pipeline. With the annual capacity of 7 mln tons Supsa oil terminal is a storage for crude oil transported via the WREP. With higher annual capacity of 10 mln tons Kulevi oil terminal has started functioning in 2018.Launched in December 2015, the Iron Silk Road is listed among the 100 Best Projects of Global Significance. Cargo trains will pass via Georgian transit, making the country the key link between the cheapest and shortest roads connecting Europe and Asia. Trade relations between Georgia and China have deepened in recent years, and the Georgian railway received its first cargo train from China in late 2015. The two main ports of Georgia are located in Poti and Batumi, though in order to develop the transit potential currently underutilized, the new $2.5 bln Anaklia Deep Sea port will be constructed till the year of 2020. Efforts will be made to increase its capacity to 40 mln tons in twelve years as the port is expected to become a trade connection between Europe and Asia, and between China and Europe through the New Silk Road.With increasing passenger traffic and an expanding network, the Tbilisi International Airport is the most efficient and secure cargo centre in the Caucasus Region. Reconstruction of the main runway is currently underway and will be completed in 2016. Two other international and one local airport are located in Kutaisi, Batumi, and Mestia. Wizz Air opened a new base in Kutaisi International Airport this year.Ukraine International Airlines and Pegasus Airlines also operate in Kutaisi Airport. Expanding its services, the airport will offer new, affordable flights to seven European destinations. Several local airports including Mestia Airport and Natakhtari Airport are also presented in Georgia.Georgia has also modernized its road infrastructure with some large projects, including the current construction of a primary autobahn that will connect Tbilisi and Georgia’s eastern regions to the seaports. The total length of Georgian Railroad is 2,084 km with an operational length of 1,146 km. Estimated to finish in 2017, the Baku-Tbilisi-Kars (BTK) railway will further enhance Georgia’s reputation and capacity as a transit country.
EnergyThe country is rich in terms of renewable energy resources and substantial coal reserves, however, only about 25% of country’s total energy potential has been exploited thus far. There are approximately 26,000 rivers in Georgia out of which more than 300 can contribute energy sector.Georgia intends to become a regional leader in the sustainable/efficient energy market by 2030. The Government is actively investing in the sector in order to achieve energy security and to establish a fully competitive energy market. Water is Georgia’s most important natural resource. The country’s sizable hydroelectric capacity per capita (40 TWh) ranks as one of the best in the world. This extra capacity holds the promise of export growth and energy self-sufficiency for the country. Currently, Georgia is focused on the development of small and medium-sized hydroelectric power plants to make efficient use of the country’s remarkably rich water resources and to maximize domestic potential. Large-scale projects that have been implemented recently include: Khudoni HPP with an installed capacity of 750 MW and an average projected annual generation 1,66 TWh; Cascade of Oni HPPs with an installed capacity of 272 MW and an average projected annual generation 1530 TWh; Cascade of Namakhvai HPPs with an installed capacity of 450 MW and an average projected annual generation 1,6 TWh.
Hotel Market Report | Georgia | 20156
Recent Activities in Tourism Industry> In 2015, despite many international or internal obstacles, the
tourism sector in Georgia has continued to develop. The
government of Georgia and the National Tourism
Administration are cooperating on marketing and strategic
projects for further development of the sector. The
governmental Mountain Resorts Development Company is
actively engaged in the promotion and development of winter
resorts.
> In October 2015, Georgia attended the 2nd Conference of the
Mountain Resorts of Europe and Asia, which is held under the
auspices of the World Tourism Organization. The delegations of
participant countries were introduced to the potential of
Georgian winter resorts (Bakuriani, Gudauri, Mestia) and the
government’s vision of further development and the
investment environment of country.
> According to the Travel & Tourism Competitiveness Report of
2015, Georgia was ranked 71st among 141 countries. As
compared to 2013, major improvements have been achieved in
Tourism Service and Air Transport Infrastructure,
Environmental Sustainability, Safety and Security.
> In August 2015, Tbilisi hosted the 39th European Youth Olympic
Festival. More than 4,000 athletes from 49 countries
participated. Over 20,000 visitors were recorded during the
Youth Olympic Festival.
> Besides European Youth Olympic Games, in august 2015
Anaklia hosted the electronic music festival – Gem Fest. Over
8,000 attendants were recorded. In 2016, this number increased
to 30,000.
> Tbilisi also hosted the UEFA Super Cup match between
Barcelona and Sevilla, held at the Dinamo Arena. Around
55,000 football fans attended on this match, of which 30,000
were foreign visitors, according to the Ministry of Sport and
Youth Affairs of Georgia.
> Besides the major sport activities, Tbilisi held the annual
meeting and business forum of the European Bank for
Reconstruction and Development (EBRD). Over 1,500 people
attended this forum, of which the vast majority were Governors
and representatives from the EBRD member countries.
> Tbilisi Silk Road Forum was attended by the delegations from
34 countries. More than 800 delegates arrived to participate in
the Forum, including high-level government officials and
private sector representatives, as well as international and
financial organizations.
> In January 2016, Tbilisi held two meetings organized by World
Tourism Organization: Technical Advisory Board and Tourism
Satellite Accounts Committee.
> In February 2016 the first phase of development at Tetnuldi
resort was finished, comprising the longest vertical drop (1.7
km) in Georgia and the longest ski run in the Caucasus at 9.5
km.
> April 2016 saw the start of the biggest project - “Check-In
Georgia”, which will comprise 35 music festivals in 19 cities in
Georgia. Among the local artists, some of the biggest stars
from around the world participated such as Robbie Williams,
Maroon 5, Eros Ramazzotti and Jose Carreras.
> The 25th Annual Session of the Organization for Security and
Co-operation in Europe’s (OSCE) Parliamentary Assembly
united participants from 57 member states in Tbilisi. Within this
event over 700 experts, diplomats and media representatives
visited the capital city of Georgia
> In July 2016, the grand opening of the Black Sea Arena was
announced. Another world star, Christina Aguilera, performed
for the local and international audience.
> In the beginning of September 2016, the World Tourism
Organization in collaboration with the Georgian Tourism
Administration will present the (UNWTO) 1st Global Conference
on Wine Tourism in Kakheti. 250 participants are registered to
join this event. The conference will demonstrate the rich culture
of Georgia and its tourism potential. The sessions will take
place in different wineries.
Radisson Blu Hotel Batumi
Hotel Market Report | Georgia | 20157
International Arrivals in Georgia
Arrivals of non-resident visitors in Georgia
In recent years, the number of non-resident visitors to Georgia increased significantly, reaching a maximum of 5.9 million in 2015. The average annual growth rate from 2010-2015 amounted to 25% for total visitors and 17% for non-resident visitors staying longer than 24 hours.
In H1 2016, the number of international arrivals amounted to 2.6 million visitors, 13% higher than the same timeframe of 2015. The number of visitors staying longer than 24 hours also rose by 18%.
Arrivals of visitors in Georgia by types of visit
In 2015, the number of visitors staying more than 24 hours increased by 2% when compared to 2014. The number of same-day visitors also increased by 2%, while the number of transit visits rose by 26%.
2,229 2,2822,172 2,218
1,1141,401
0
500
1,000
1,500
2,000
2,500
2014 2015
Th
ou
san
ds
Arrivals to Georgia by types of visit 2014-2015
24h+ Same-day visit Transit
Source: Georgian National Tourism Administration, Colliers International
1,0671,319
1,7902,065 2,229 2,282
2,032
2,822
4,428
5,392 5,5165,901
0
1,000
2,000
3,000
4,000
5,000
6,000
2010 2011 2012 2013 2014 2015
Th
ou
san
ds
Arrivals of non-resident visitors 2010-2015
Number of non-resident visitors (24h+)
Arrivals of non-resident visitors
Source: Georgian National Tourism Administration, Colliers International
2,335
2,636
8571,012
0
500
1,000
1,500
2,000
2,500
3,000
H1 2015 H1 2016
Th
ou
san
ds
Arrivals of non-resident visitors H1 2015-H1 2016
Arrivals of non-resident visitors Number of non-resident visitors (24h+)
18%
13%
Source: Georgian National Tourism Administration, Colliers International
Tbilisi International Airport
Arrivals of non-resident visitors in Georgia by countries
Armenia, Azerbaijan, Turkey, Russia and Ukraine remain the top five countries with the most visitors to Georgia, accounting for 90% of the total arrivals. In 2015, the number of visitors from Turkey and Ukraine declined by 3.5% and 1.2% respectively, while visitors from Armenia, Azerbaijan and Russia increased by 10.8%, 8.6% and 14% respectively. The number of Ukrainian visitors has decreased, due in large part to tensions arising from the war. Logging 59,000 visitors, the country of Israel experienced the largest increase in arrivals, rising by 40% and thus it ranked sixth for overall arrivals. In 2015, Iranian visitors dropped from 48,000 to 25,000 visitors. It is also noteworthy that the UAE now features as one of the top 15 countries by arrivals in Georgia.
4246
33
28 28
19
48
1921
2
59
4137 37
3129
25
19 1917
0
10
20
30
40
50
60
Israel Poland Germany Kazakhstan USA Belarus Iran UK Greece UAE
Th
ou
san
ds
Second tier countries by arrivals in Georgia 2014-2015
2014 2015
Source: Georgian National Tourism Administration, Colliers International
Hotel Market Report | Georgia | 20158
1,326 1,283
1,443
812
144
1,4691,393 1,392
926
142
0
500
1,000
1,500
Armenia Azerbaijan Turkey Russia Ukraine
Th
ou
san
ds
Top 5 countries by arrivals in Georgia 2014-2015
2014 2015
Source: Georgian National Tourism Administration, Colliers International
Georgia Hospitality Market Overview
Supply
According to National Statistics Office of Georgia (Geostat) in 2015, 1,225 hotel and hotel-type facilities operated in Georgia. The total number of rooms and beds amounted to 23,100 and 48,600 units, respectively.
In 2015, 172 hotel and hotel-type facilities were put into exploitation and began operating.
Demand
In 2015, the holiday, leisure & recreation category form the largest proportion of hotel guests in Georgia (64%), amounting 1.2 million visitors, followed by business travellers with 22% (406,136) and other purposes around 14% (259,630). Source: National Statistics Office of Georgia, Colliers International
1,188,735 64%
406,136 22%
259,630 14%
Main purpose of visit (hotel guests) in Georgia 2015
Holiday, Leisure, Recreation
Business Travellers
Other purpose
Hotel Market Report | Georgia | 20159
Benchmarking
3.8
3.0
2.5
1.5 1.6
1.0
1.31.0
3.5
2.7
2.4
1.5
2.0
1.4 1.3
1.0
3.9
2.92.6
2.01.9
1.7
1.41.2
4.0
2.92.7
2.2
1.91.8
1.41.2
0.0
1.0
2.0
3.0
4.0
Bulgaria Slovenia Slovakia Estonia Romania Georgia Lithuania Latvia
Bill
ion
s
International tourism receipts (USD/billion) 2011-2014
2011 2012 2013 2014
Source: World Tourism Organization (WTO), Georgian National Tourism Administration, Colliers International
24%
18%
12%10% 9% 9%
-1%
5%
36%
7%3% 5%
-4%
6% 2% 3%
15%
6%5%
9%7%
5% 4% 5%8% 3%
2%
-11%
20%
7% 1% 6%
-15%
0%
15%
30%
45%
Georgia Lithuania Estonia Slovakia Latvia Slovenia Romania Bulgaria
International tourist arrivals (24+ hours) y-o-y growth rate 2011-2014
2011 2012 2013 2014
Source: World Tourism Organization (WTO), Georgian National Tourism Administration, Colliers International
International tourist arrivals
According to the UNWTO Georgia has one of the highest growth rates of international tourist arrivals among CEE countries. In 2012, Georgia ranked first position in the region with 35.7% annual growth. In 2013, Georgia was the fourth country in Europe after Iceland, Bosnia & Herzegovina and Greece. In 2014, the growth rate amounted 8%.
In 2015, international tourist arrivals in Georgia amounted to 2.28 million, which is higher by 2% as compared to 2014.
In 2016, a significant increase of tourists is expected from Russia and Ukraine. In addition, the cancellation of visa control with Iran will significantly increase the number of tourists.
International tourism receipts
In Georgia international tourism receipts increased significantly. The average y-o-y growth rate amounted to 30% during 2011-2014. In comparison with the similar countries, Georgia stands after Romania and has overtaken Latvia and Lithuania.
In 2015, international tourism expenditure in Georgia increased by 8% and amounted USD 1.94 billion.
In the first quarter of 2016, international tourism receipts amounted to USD 354 million. As compared to the same data of 2015, 15.7% increase has been recorded.
Tbilisi Hotel Market Overview
Tbilisi is one of the largest cities in the Caucasus as well as one of the largest in Eastern Europe, with a population of 1.1 million, spread over a 720 square kilometre area. Tbilisi accounts for about 30% of the national population. It is the industrial, cultural and social centre of Georgia.
Demand
The number of hotel guests in Tbilisi has been growing over the years. In 2015, the highest share was held by holiday, leisure and recreation, with 42%, after which stands business travellers (33%) and an other category with 25%.
Supply
In 2015, Tbilisi’s hotel market supply comprised 243 hotels, 5,967 rooms and 13,045 beds. Internationally branded hotels provided 22% of the total room supply and, according to the forecasted pipeline of future projects, this share will increase to 46% by the end of 2018.
When compared to the end of 2014, the number of hotel rooms and beds increased by 9% and 8% (486 and 1,007 units respectively). The opening of Hôtels & Préférence and Mercure significantly changed the supply during the first half of 2015. Over the course of the second half of 2015, seven hotels were added to the local budget/economy class market, totaling 137 rooms and 317 beds.
International upscale brandsNowadays, only three international upscale brands are operating in Tbilisi, including the Tbilisi Marriott, Radisson Blu Iveria and the recently opened Hôtels & Préférence. Together, these hotels provide 12% of the total rooms and 8% of the beds.
In addition to the Millennium, Intercontinental, Hyatt, Rixos and the refurbishment of the Sheraton Metekhi Palace, Pullman Hotels & Resorts announced plans to enter the market.
International midscale brands International midscale brands in Tbilisi include the Courtyard Marriott, Holiday Inn, Rooms Hotel Tbilisi, Citadines Apart’hotel, Best Western and Mercure, which together comprise 10% of the total hotel room supply. Six hotels will enter this segment during next three years, including the Park Inn hotel, the Golden Tulip, Hilton Garden Inn, Moxy and two Ramada Hotels, which will provide an additional 1,266 rooms.
Local upscale and middle class Local upscale/middle class hotels provide 25% of Tbilisi’s total hotel room supply. In the first half of 2016, three new hotels (Ambassadori 2, Colombi and Opera Tbilisi) will be added in this segment with a total of 324 rooms.
Local budget/economy class The local budget/economy class provides the largest share (53%) of Tbilisi’s hotel rooms. Seven hotels in this category opened in the second half of 2015. Supply in this segment is not expected to rise significantly in the near future.
Source: Colliers International
210 234 243 247 257 262
5,036 5,481 5,967 6,357 8,025
8,955 10,025
12,038 13,045
13,898
17,544
19,577
-
40
80
120
160
200
240
280
-
5,000
10,000
15,000
20,000
2013 2014 2015 2016 F 2017 F 2018 F
Existing and upcoming supply in Tbilisi hotel market 2013-2018 F
Number of accomodation units Number of rooms Number of beds
Hotel Market Report | Georgia | 201511
Note: Rooms Hotel is a member of internationally-known brand Design HotelsPipeline hotels with undefined operator (150 rooms) are considered in local upscale and middle class
623 (10%)
2,178 (24%)718 (12%)
1,984 (22%)
1,492 (25%)
1,816 (20%)3,134 (53%)
3,134 (34%)
-
2,000
4,000
6,000
8,000
10,000
2015 2018 F
Existing and future hotel room supply by type (rooms/%) 2015-2018 F
International upscale brands
International midscale brands
Local upscale & middle class
Local budget/economy class
Source: Colliers International
Source: National Statistics Office of Georgia, Colliers International
47%37%
48%33%
24%27%
25%42%
29%36%
27% 25%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015
Breakdown of hotel guests by type 2012-2015
Business Travellers Holiday, Leisure, Recreation Other
# Developer Operator Stars Category Address Number of rooms
Completion date (Year)
Construction status
TypeInvestment
Volume USD/mln
1 Ambasadori LLC Ambasadori* 4Local Upscale and Middle Class
13 Shavteli Street 79 H1 2016FinishingConstruction
Brownfield 3.2
2 Oasis 9 Art Boutique Hotel* 3Local Upscale and Middle Class
33 Tabukashvili Street 30 H1 2016FinishingConstruction
Greenfield 1.5
3 Vasil Bolashvili Colombi* 3Local Upscale and Middle Class
2 Lvovi Street 65 H1 2016FinishingConstruction
Greenfield 3
4 Dhabi Group Georgia Biltmore Hotel* 5International Upscale Brands
29 Rustaveli Avenue 216 H2 2016FinishingConstruction
Greenfield 70
5 Adjara Group Hospitality, EBRD Intercontinental Hotel 5International Upscale Brands
14 Kostava Street 205 H1 2017 In Progress Brownfield 35
6 Silk Road Group LLC Radisson Blu Telegraph 5International Midscale Brands
31 Rustaveli Avenue 189 H1 2017 In Progress Brownfield 60
7 City M LLC Rixos Hotel 5International Upscale Brands
3 Gudiashvili Street 170 H1 2017 In Progress Greenfield 27
8 Redix Hilton Garden Inn 4International Midscale Brands
64 Chavchavadze Avenue 170 H1 2017 In Progress Greenfield 32
9 Block-Invest LLC Golden Tulip 4International Midscale Brands
2a 300 Aragveli Street 80 H2 2017 In Progress Greenfield 5
10 RAKIASheraton Metekhi Palace (refurbishment)
5International Upscale Brands
16 Telavi Street 255 H2 2017 In Progress Brownfield 40
11 Granat Holding Granat 5International Upscale Brands
41 Kostava Street 120 H2 2017 Announced Brownfield 20
12 Block-Invest LLC Park inn by Radisson 4International Midscale Brands
10 Chanturia Street 200 H2 2017 In Progress Greenfield 25
13 M2 Residence Ramada 3International Midscale Brands
15 Kazbegi Street 152 H2 2017 In Progress Greenfield 13.2
14 M2 Residence Ramada 3International Midscale Brands
10 Melikishvili Street 127 H2 2017 Announced Brownfield 11.7
15 GMT Group Moxy 3International Midscale Brands
Zaarbrukeni Square 130 H1 2018 In Progress Greenfield 20
16 Axis Pullman Hotels & Resort 5International Upscale Brands
37 Chavchavadze Avenue 230 H1 2018 In Progress Greenfield 46
17 Rustaveli Property LLC Hyatt Regency 5International Upscale Brands
30 Rustaveli Avenue 170 H1 2018 In Progress Greenfield 60
18 GCF N/A 5Local Upscale and Middle Class
Erekle II Square 50 H2 2018 Announced Greenfield 10
19 GCF N/A 5Local Upscale and Middle Class
Tabori Mount 100 H2 2018 Announced Greenfield 20
20Old City Development (Panorama Freedom Square)
Autograph Collection by Marriott
5 Undefined operator 7 Freedom Square 220 H2 2018 Announced Greenfield 44
21Old City Development (Panorama Sololaki)
Autograph Collection by Marriott
5 Undefined operator Kojori Highway 187 H2 2018 Announced Greenfield 37.4
Hotel Market Report | Georgia | 201512
Future pipeline in Tbilisi
The Biltmore Hotel Tbilisi
Note: The table above describes hotel pipeline as of December 31, 2015. Marked hotels (*) has already been operating since the report publication.
Grmagele”
Gotsiridze
Delisi
Vazha-Pshavela
Rustaveli
Liberty Square
Avlabari
300 Aragveli
Isani
Samgori
Varketili
Akhmeteli Theatre
Technical University
Marjanishvili
Station Square
Didube
Guramishvili”
Sarajishvili”
Main existing and upcoming hotels in Tbilisi
Source: Colliers International
Hotels & PreferenceHoliday InnBest Western
Rooms Hotel Tbilisi
Intercontinental
Ramada
Radisson Blu Iveria
Courtyard Marriott
Marriot Tbilisi
Sheraton Metekhi Palace
Golden Tulip
Park Inn by Radisson Tbilisi
Radisson Blu Telegraph
Rixos Hotel
Hyatt
International upscale brands
International midscale brands
Main market players
Upcoming projects
Pullmann Hotels & Resort
Millennium
Hilton Garden Inn
Ramada
Panorama Sololaki
Panorama Freedom Square
Moxy
Granat
Hotel Market Report | Georgia | 201513
CitadinesApart 'Hotel
Performance Indicators
In 2015, the Average Daily Rate (ADR) for international upscale brands amounts to USD 177, while international midscale branded hotels recorded USD 118. Local upscale and middle class and local budget/economy hotels are averaging USD 90 and USD 51, respectively.
In comparison with 2014, the ADR dropped significantly (25%) in local budget/economy class hotels. International upscale brands also saw a decrease by 4%, while international midscale and local upscale and middle class hotels ADR increased by 2% and 4%, respectively.
At 68%, the highest hotel occupancy rate in Tbilisi occurs at international upscale branded hotels, followed by international midscale and local upscale and middle class with 65%; local budget/economy class stands at 49%.
As compared to 2014, the occupancy rate increased only in local upscale and middle class hotels, by 6%, while international midscale and local budget/economy class has seen a decrease of 7% and 8%, respectively. International upscale brands remained unchanged.
In 2015, RevPAR (Revenue Per Available Room) in international upscale brands amounts to USD 121, international midscale branded hotels and local upscale and middle class stands at USD 77 and USD 59, respectively. Local budget/economy class amounts to USD 25.
In comparison with the previous year, international upscale brands have seen a 3% decrease, while in the local budget/economy class this figure dropped by 34%. RevPAR for international midscale branded hotels also decreased by 7%, while local upscale and middle class saw an increase of 16%.
Hotel Market Report | Georgia | 201514
Source: STR Global, Colliers International
184
116 87
68
177
118 90
51
0
50
100
150
200
International upscalebrands
Internationalmidscale brands
Local upscale andmiddle class
Localbudget/economy
class
ADR in Tbilisi (USD excl. VAT) 2014-2015
2014 2015
Source: STR Global, Colliers International
125
83
51 38
121
77 59
25
0
25
50
75
100
125
Internationalupscale brands
Internationalmidscale brands
Local upscale andmiddle class
Localbudget/economy
class
RevPAR in Tbilisi (USD excl. VAT) 2014-2015
2014 2015
Source: STR Global, Colliers International
68% 72%59% 57%
68% 65% 65%
49%
0%
25%
50%
75%
Internationalupscale brands
Internationalmidscale brands
Local upscale andmiddle class
Localbudget/economy
class
Occupancy rate in Tbilisi 2014-2015
2014 2015
Batumi Hotel Market Overview
King David Residence
Batumi is an administrative centre of Adjara Region. With a population of 155,000 it is spread over a 65 square kilometre area. Batumi seaport is Georgia's main sea gateway. In recent years, Batumi has increased in popularity as a summer tourist destination. The city has undergone profound changes and reforms and worked hard to enhance its worldwide image to attract foreign investors.
Demand
In 2015, according to Tourism and Resort Department of Adjara A.R. over 223,000 tourists were recorded in Batumi. The holiday, leisure & recreation category form the largest proportion of hotel guests in Batumi (92%), followed by business travellers with 7% and other purposes around 1%.
Supply
Nowadays, three internationally recognized hotels – the Radisson, Sheraton and Hilton - are operating in Batumi, while several more are now under construction, including the Marriott, Le Meridien, Kempinski, Euphoria, Best Western, Swissotel and Pullman Hotels & Resorts.
In 2015, nineteen new accommodation facilities began operating in Batumi, adding 821 rooms and 1,703 beds to the city’s stock. Over the next four years, thirteen internationally-branded, local upscale and middle-class hotels will open, increasing provision by almost 2,000 rooms.
33% of upcoming supply is held by international upscale brands (653 rooms), with 60% (1,177 rooms) to be provided by international midscale brands. Only 6% will be delivered by local upscale and middle class establishments.
87
116
135 141 144 145 148
2,553 3,207
4,028 4,945 5,483 5,683 5,983 5,706
7,079
8,782
10,781 11,954 12,390
13,044
-
50
100
150
-
6,000
12,000
18,000
2013 2014 2015 2016 F 2017 F 2018 F 2019 F
Existing and upcoming supply in Batumi 2013-2019 F
Accomodation units Number of rooms Number of beds
Source: Colliers International
Hotel Market Report | Georgia | 201516
617 (15%)1,270 (21%)
1,177 (20%)
1,025 (26%)
1,150 (19%)2,386 (59%)
2,386 (40%)
-
2,000
4,000
6,000
2015 2019 F
Existing and future hotel room supply by type (rooms/%) 2015-2019 F
International upscale brands
International midscale brands
Local upscale & middle class
Local budget/economy class
Source: Colliers International
Source: National Statistics Office of Georgia, Colliers International
70%84% 84% 92%
17%
14% 13%7%13%
2% 2%1%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015
Breakdown of hotel guests by type 2012-2015
Holiday, Leisure, Recreation Business Travellers Other
Main market players
Black Sea
Upcoming projects
Main existing and upcoming hotels in Batumi
Babillon Tower
Kempinski
Radisson Batumi
Sheraton Batumi
Hilton Batumi
Le Meridien
Crowne Plaza
Swissotel
Courtyard by Marriott
Titanic Hotel
Interstate Hotels & Resorts
Mersin Group
Gazelli Hotel
Hotel Princess
Castello Mare
Divan Suites Batumi
Colosseum Marina
Intourist Palace
# Developer Operator Stars Category Address Number of rooms
Completion date (Year)
Construction status
TypeInvestment
Volume USD/mln
1 Green Cape LLC Castello Mare* 5Local Upscale and Middle Class
Village Tsikhisdziri, Batumi 125 2016 In Progress Greenfield 30
2 Aktiv Batumi LLC Hotel Wyndham 4International Midscale Brand
33 Abashidze Street, Batumi 146 2016 In Progress Greenfield 30
3 GIMG LLC Hotel Kempinski 5International Upscale Brand
Nearby Riviera, Batumi 253 2016 Finishing works Greenfield 65
4 Mgzavrebi LLC Best Western VIB 3International Midscale Brand
New Boulevard, Batumi 54 2016 In Progress Greenfield 2.8
5 Gloria LLC Gazelle Hotel 3International Midscale Brand
Khimshiashvili Street, Batumi 159 2016 In Progress Greenfield 40
6 Adog Georgia LLC Swissotel 4International Midscale Brand
9 Kutaisi Street, Batumi 180 2016 In Progress Greenfield 30
7 Adjara Group Hospitality Rooms Hotel Batumi 4International Midscale Brand
10 Gogebashvili Street, Batumi 170 2017 In Progress Brownfield 15
8 Metro Atlas Georgia LLC Euphoria Hotel 4International Midscale Brand
Khimshiashvili Street, Batumi 200 2017 Early Stage Greenfield 90
9 Tam Geo LLC (Babillon Tower) Undefined operator 5 Undefined Operator 30 Rustaveli Street, Batumi 168 2017 In Progress Greenfield 40
10 RED-CO Le Meridien 5International Upscale Brand
Nearby Riviera, Batumi 110 2018 In Progress Greenfield 22
11 Alliance Group Courtyard by Marriott 4International Midscale Brand
Khimshiashvili Street, Batumi 100 2019 In Progress Greenfield 15
12 AR Meridians LLC Interstate Hotels & Resorts 5International Upscale Brand
Lech & Maria Kaczynski Street, Batumi
200 2019 Early Stage Greenfield 30
13 Dar Building LLC Pullman Hotels & Resort 3International Midscale Brand
13 Pushkini Street, Batumi N/A 2019 Early Stage Greenfield 22
Hotel Market Report | Georgia | 201517
Note: Note: The table above describes hotel pipeline as of December 31, 2015. Hotel Castello Mare has already been operating since the report publication.
Future pipeline in Batumi
Performance Indicators
In 2015, the highest ADR (USD 101) was achieved by international brands. In comparison to the same figure in 2014, this represents a 27% drop. This decline is mainly caused by the fluctuation of the exchange rate. Local upscale and middle class hotels experienced 6% decrease and stand at USD 84. In local budget hotels, the ADR increased by 12% to USD 39.
At 45%, the highest Batumi hotel occupancy rate was seen in international branded hotels. Local upscale and middle class hotels dropped by 11% to 43% compared to the previous year, while the local budget class occupancy rate stands at 33%.
RevPAR in international branded and local upscale and middle class hotels decreased by 17% and 25% and amounts to USD 46 and USD 36, respectively. While the local budget class reflected 22% increase, compared to 2014.
Hotel Market Report | Georgia | 201518
139
90
35
101 84
39
0
20
40
60
80
100
120
140
International brands Local upscale and middleclass
Local budget/economyclass
ADR in Batumi (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
40%
54%
30%
45% 43%
33%
0%
10%
20%
30%
40%
50%
60%
International brands Local upscale and middleclass
Local budget/economyclass
Occupancy rate in Batumi 2014-2015
2014 2015
Source: Colliers International
5649
11
46 36
13
0
20
40
60
International brands Local upscale and middleclass
Local budget/economyclass
RevPAR in Batumi (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
Hotel Colosseum Marina Batumi
Piazza Square, Batumi
Kutaisi Hotel Market Overview
King David Residence
With a total population of approximately 148,000, Kutaisi is Georgia’s third largest city. Since 2012 it has been the legislative capital of Georgia. The construction of Kutaisi’s Kopitnari International Airport was finished in September 2012, with a total capacity of 600,000 passengers per year. Its opening was marked by the launch of the low-cost carrier (LCC) Wizz Air, who began offering direct flights from Kutaisi to Kiev, Budapest, Vilnius, Warsaw and Katowice. In September 2016, seven more destinations will be added, including Berlin, Munich, Dortmund, Milan, Thessaloniki, Sofia and Larnaca.
Demand
The number of hotel guests in Kutaisi has been growing since 2010. In 2014, number of hotel guests increased by 30% compared to 2013.
The holiday, leisure & recreation category accounts for 58% of the total number of hotel guests, with business travelers at 33% and other purposes 9%.
Supply
In 2015, nine new hotels opened in Kutaisi, adding 145 rooms and 335 beds to the city’s stock. In 2016, the internationally-known midscale brand Best Western will open a 45-room hotel able to accommodate more than 90 guests. The total investment value of upcoming hotels amounts to USD 2.8 million.
33% of the existing accommodation units are held by local upscale and middle class hotels (246 rooms), while the other 67% are provided by local budget/economy class establishments.
31 40 41
471
616 661
1,085
1,420 1,510
-
10
20
30
40
50
-
400
800
1,200
1,600
2014 2015 2016 F
Existing and upcoming supply in Kutaisi 2014-2016 F
Accommodation units Number of rooms Number of beds
Source: Colliers International
The Parliament of Georgia Kutaisi
Hotel Market Report | Georgia | 201520
Source: Colliers International
246 40%
370 60%
Number of rooms by hotel type 2015
Local upscale & middle class
Local budget/economy class
Source: National Statistics Office of Georgia, Colliers International
67% 62% 58% 54%
29% 34%33%
32%
4% 4% 9% 14%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015
Breakdown of hotel guests by type 2012-2015
Holiday, Leisure, Recreation Business Travellers Other
Performance Indicators
In 2015, Kutaisi’s local upscale and middle class hotels accounted for the highest ADR (USD 44). In comparison to the same figure in 2014, this represents a 4% decrease. Local budget/economy class hotels experienced a 13% drop and ADR now stands at USD 22.
At 50%, the highest occupancy rate was seen in local upscale and middle class hotels, which reflects a 4% increase compared with 2014. The local budget/economy class also experienced a 6% increase, which can be explained by the strategy of hotel managers who decreased room rates due to the exchange rate fluctuation of the Georgian Lari.
RevPAR in local upscale and middle class hotels increased by 4% to USD 22. RevPAR for the local budget class hotels remained unchanged at USD 10.
46
25
44
22
0
10
20
30
40
50
Local upscale & middle class Local budget/economy class
ADR in Kutaisi (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
46%38%
50%44%
0%
10%
20%
30%
40%
50%
Local upscale & middle class Local budget/economy class
Occupancy rate in Kutaisi 2014-2015
2014 2015
Source: Colliers International
21
10
22
10
0
5
10
15
20
25
Local upscale & middle class Local budget/economy class
RevPAR in Kutaisi (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
Hotel Market Report | Georgia | 201521
Kutaisi International Airport
Upcoming project - Best Western Hotel Kutaisi
Summer Resorts Market Overview
Demand
The number of hotel guests in summer resorts has been growing over recent years. Understandably, the largest category of hotel guests is held by holiday, leisure & recreation with 89%. Then followed by business travellers at 7% and other purposes, with 4%.
Supply
Georgia’s primary summer resorts consist of several Black Sea coastal destinations including: Kobuleti, Chakvi, Gonio, Kvariati, Sarpi, Ureki, Shekvetili, Grigoleti and Anaklia.
There are a total of 125 accommodation units in these cities. Since 2014, sixteen new units have been added to the market, bringing the total number of rooms and beds to 3,383 and 8,135 respectively. In 2015, the number of rooms and beds increased by 12% compared to the same data for 2014.
The summer resort market is dominated by local budget/economy class hotels (82%), with local upscale and middle class hotels providing only 18% of the total rooms and beds.
In May 2016, the internationally-known Autograph Collection, a luxury hotel chain owned by Marriott International, announced plans to operate a new hotel in Shekvetili. The hotel will offer 250 rooms (accommodating over 500 guests) and include a spa and wellness centre, restaurants, conference halls and other facilities typically provided by high-class hotels.
109 125 126
3,018 3,383 3,633
7,292 8,135
8,635
-
15
30
45
60
75
90
105
120
135
-
2,000
4,000
6,000
8,000
10,000
2014 2015 2016 F
Existing and upcoming supply in summer resorts 2014-2016 F
Accomodation units Number of rooms Number of beds
Source: Colliers International
Hotel Market Report | Georgia | 201523
Hotel Dreamland Oasis Chakvi
Source: Colliers International
597 18%
2,786 82%
Number of rooms by hotel type 2015
Local upscale & middle class
Local budget/economy class
Source: National Statistics Office of Georgia, Colliers International
97%
93% 93%
89%
3%
5% 3%
7%
1%
2% 3% 4%
80%
85%
90%
95%
100%
2012 2013 2014 2015
Breakdown of hotel guests by type 2012-2015
Holiday, Leisure, Recreation Business Travellers Other
Performance Indicators
In 2015, the highest ADR was achieved in Gonio, Kvariati and Sarpi, amounting to USD 55. When compared to 2014 it reflects 12% decrease. In Kobuleti-Chakvi resorts the ADR has seen the highest increase - by 62% (USD 50). Anaklia also saw a 14% increase compared to the previous year, amounting to USD 44. In Ureki, Shekvetili and Grigoleti the annual ADR decreased by 2% and as of 2015 stands at USD 43.
The highest annual occupancy rate (30%) occurred in Kobuleti and Chakvi. Anaklia posted a rate of 29%, while Ureki, Shekvetili, and Grigoleti are running 27%. The lowest rates were reported by Gonio, Kvariati, and Sarpi (25%).
In 2015, the occupancy rate in summer resorts on high season ranges from 75% to 85%. The highest figure was occurred in Anaklia (85%).
In 2015, the RevPAR in Kobuleti and Chakvi increased by 71% and amounts to USD 15. Anaklia has seen a 95% increase compared to 2014, amounting USD 13. No significant changes were observed in Gonio, Kvariati, Sarpi and Ureki, Shekvetili, Grigoleti, where RevPAR increased by USD 1.
Hotel Market Report | Georgia | 201524
62
44 39 31
55 43 44
50
0
10
20
30
40
50
60
70
Gonio, Kvariati,Sarpi
Ureki, Shekvetili,Grigoleti
Anaklia Kobuleti, Chakvi
ADR in summer resorts (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
28%24%
21%17%
30%27% 25%
29%
0%
10%
20%
30%
Kobuleti, Chakvi Ureki, Shekvetili,Grigoleti
Gonio, Kvariati,Sarpi
Anaklia
Occupancy rate in summer resorts (annual) 2014-2015
2014 2015
Source: Colliers International
13 11
9 7
14 12
15 13
0
5
10
15
Gonio, Kvariati,Sarpi
Ureki, Shekvetili,Grigoleti
Kobuleti, Chakvi Anaklia
RevPAR in summer resorts (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
Georgia Palace Hotel & SPA, Kobuleti
Winter Resorts Market Overview
Demand
In 2015, the total number of visitors in winter resorts equaled to 228K. In 2016, this figure increased by 29% and amounted to 295K. As compared to 2015, Bakuriani and Gudauri has seen 53% and 17% increase, respectively.
The number of hotel guests in Georgia’s winter resorts has been growing over recent years. In 2011, the number of hotel guests increased by 114%, which was a result of adding the refurbished Mestia to the winter resort map. In 2015, the number also grew significantly by 25%.
The vast majority of visitors fall into the holiday, leisure & recreation category (92%), followed by business travel purposes with 2% and other category at 6%.
Supply
In addition to the picturesque summer tourist destinations on the Black Sea, Georgia boasts several unique winter resorts, including Gudauri, Bakuriani and Mestia. In recent years, these resorts have benefited from important infrastructure improvements, to which the government made a sizeable contribution.
In December 2015, a new resort opened in the Adjara Region. Goderdzi Pass is located 2,200 metres above the sea. The resort comprises two ski lifts and the total length of ski runs is 8 km. Currently, the Goderdzi resort operates one hotel for 35 guests and seven cottage type accommodation units. In the 2015-2016 winter season 7,000 visitors were hosted. The first phase of the Tetnuldi Resort development was finished in February 2016. The resort will comprise the longest vertical drop (1.7 km) in Georgia and the longest ski run in the Caucasus at 9.5 km. Currently, Tetnuldi operates one ski lift with a 3.5 km run; by the end of 2016 three new lifts will be added. The total investment value of the project is $ 39.3 million.
Gudauri
As a result of larger hotels replacing smaller establishments, the supply of rooms and beds in Gudauri has increased by 15% and 24% respectively during 2015, though the number of hotels/accommodation has remained unchanged. Gudauri is expected to add two international branded hotels. The Radisson Blu Gudauri will offer 105 rooms and is scheduled for completion in 2017, while the Best Western Plus will offer 80 rooms and should begin operating by the end of 2016.
Bakuriani
The supply of rooms and beds in Bakuriani increased by 6% and 18% respectively during 2015. Such a large increase was caused by the expansion of several existing hotels. Looking forward, the supply will increase by 68 rooms by the end of 2017 with the new Mgzavrebi LLC project announced, to be operated by international midscale brand Best Western Plus.
Mestia
Mestia’s supply remained the same in 2015 . By the end of 2016 the supply of rooms and beds is expected to increase by 142 and 230, respectively.
56 57 58 60
1,281 1,331 1,411 1,584
3,274 3,415 3,620
4,064
-
15
30
45
60
-
1,500
3,000
4,500
2014 2015 2016 F 2017 F
Existing and upcoming supply 2014-2017 F
Accommodation units Number of rooms Number of beds
Source: Colliers International
3561%
1730%
59%
Supply distribution (number of hotels) in winter resorts 2015
Bakuriani
Gudauri
Mestia
Source: Colliers International
Hotel Market Report | Georgia | 201526
Goderdzi Resort, Zemo Adjara
Source: Colliers International
767 58%
564 42%
Number of rooms by hotel type 2015
Local upscale & middle class
Local budget/economy class
Source: National Statistics Office of Georgia, Colliers International
91%81%
93% 92%
7%13%
6% 2%
2%
6%1% 6%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015
Breakdown of hotel guests by type 2012-2015
Holiday, Leisure, Recreation Business Travellers Other
Note: number of visitors in winter resorts is provided by Mountain Resorts Development Company
Performance Indicators
The highest ADR occurred in Gudauri (USD 67) and compared with 2014 it reflects a 14% decrease. Mestia and Bakuriani also saw a decrease of 6% and 10%, respectively. Mestia stands at USD 54, while in Bakuriani the ADR amounts to USD 52.
The most significant growth in the annual occupancy rate was achieved in Bakuriani, reaching a high of 50%. A major factor in this elevated rate was the use of artificial snow. Mestia also saw a substantial increase to 46%. Gudauri’s occupancy rate decreased by 1% compared with 2014.
At USD 29, RevPAR in Gudauri saw a 16% decrease compared to the previous year. In Bakuriani this figure increased by 32% (USD 26) compared to 2014, followed by Mestia which saw a 9% growth to USD 25.
Hotel Market Report | Georgia | 201527
Tetnuldi, Svaneti Region
78
58 58 67
54 52
0
20
40
60
80
Gudauri Mestia Bakuriani
ADR in winter resorts (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
44%39%
34%
43% 46%50%
0%
10%
20%
30%
40%
50%
Gudauri Mestia Bakuriani
Occupancy rate in winter resorts (annual) 2014-2015
2014 2015
Source: Colliers International
34
23 20
29 25 26
0
5
10
15
20
25
30
35
Gudauri Mestia Bakuriani
RevPAR in winter resorts (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
Destination Cities’ Hotel Market Overview
Demand
The number of hotel guests in selected destination cities has been growing significantly. This was mainly caused by infrastructure improvements of Telavi, Sighnaghi and Kvareli. In 2012, the rehabilitation of Tskaltubo and the opening of the Rooms Hotel in Kazbegi also impacted the market positively. In 2015, the number of hotel guests in destination cities increased by 27% compared to 2014.
With 76%, the largest hotel visitor category is holiday, leisure and recreation, followed by the business travellers with 13%, after which the other category share amounts to 10%.
The destination market is growing rapidly. Besides the researched destinations, there are several other cities and resorts which could be allocated to this segment, including Abastumani, Shovi, Sairme, Bakhmaro and Ganmukhuri.
Proposed International Upscale Hotel in Tsinandali
Hotel Market Report | Georgia | 201529
Telavi is the main city and administrative centre of Kakheti, Georgia’s eastern province. The city is 500-800 metres above sea level. Lopota Resort and Chateau Mere are among the main hotels in the Telavi region. Telavi has undergone infrastructural refurbishment in past years.
Kvareli is a town in northeastern Kakheti, near the foothills of the Greater Caucasus Mountains. Kakheti is the wine-producing region of Georgia and the town itself is known for its Kindzmarauli wine. Infrastructure in Kvareli has been refurbished in past years.
Sighnaghi is a town in Kakheti and is the administrative centre of the Sighnaghi Municipality. It is one of the smallest towns in Georgia with population of 2,146 as of the 2002 census. Sighnaghi and its environs are also known for their landscape and historical monuments. Sighnaghi has recently undergone a fundamental reconstruction and has become an important centre of Georgia’s tourist industry.
Stepantsminda (former Kazbegi) is a small town in the Mtskheta-Mtianeti region. It is the centre of Kazbegi Municipality. Stepantsminda is known for its scenic location in the Greater Caucasus Mountains and is a main centre for trekkers and mountain climbing. Local attractions include the Kazbegi Museum and Ethnographic Museum, Gergeti Trinity Church, Mount Kazbegi itself and the forests of the surrounding Kazbegi Nature Reserve. The Rooms Hotel Kazbegi is the only high quality hotel in the area.
Borjomi is a resort town in south-central Georgia with a population estimated at 14,445. It is one of the districts of the Samtskhe-Javakheti region and is situated in the northwestern part of the region in the picturesque Borjomi Gorge on the eastern edge of the Borjomi-KharagauliNational Park. The town is famous for its mineral water industry (which is a major export of Georgia), the Romanov Summer Palace in Likani and the Borjomi-Kharagauli National Park. Borjomi mineral water is particularly well known in those countries which were part of the former Soviet Union. Because of the healing properties of the area's mineral springs, it is a frequent destination for people with health problems.
Tskaltubo is a spa resort in west-central Georgia. It is the main town of the Tskaltubo district of the Imereti province. It is famous for its radon-carbonate mineral springs, whose natural temperature of 33–35°C enables the water to be used without preliminary heating. The resort's focus is on balneotherapy for circulatory, nervous, muscular-skeletal, gynecological and skin diseases. Tskaltubo was especially popular in the Soviet era, attracting around 125,000 visitors a year. In recent years, significant reconstruction and infrastructure works were performed in the city, which was contributed by the Government of Georgia.
Source: National Statistics Office of Georgia, Colliers International
93%83%
71% 76%
6%12%
11%13%
1%6%
18%10%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015
Breakdown of hotel guests by type 2012-2015
Holiday, Leisure, Recreation Business Travellers Other
Hotel Market Report | Georgia | 201530
Supply
In recent years, the hotel market in destination cities has experienced a healthy growth spurt. Infrastructure has been refurbished in most destination cities and the number of visitors continues to grow year on year. Some destinations have attracted foreign investors who are also contributing to further improving the destination cities and bolstering the overall hotel market.
The selected destination cities are Telavi, Kvareli, Sighnaghi, Borjomi, Stepantsminda and Tskaltubo.
In 2015, nine new accommodation facilities were added to the market, increasing the number of rooms and beds by 9% and 12%, respectively. As of 2015, the hotel market of destination cities comprise 68 accommodation units, 1,844 rooms and 4,224 beds.
Currently, only two internationally recognized hotels – the Rixos (franchise agreement, operated by local management) and Crowne Plaza are represented in Borjomi. In 2016-2018, three new hotels will be added to the market, including internationally-branded Radisson in Tsinandali (Kaketi Region), a local upscale and middle-class hotel in Abastumani and an additional accommodation unit in the Lopota Lake Resort. This will bring an additional 450 rooms to the market.
51% of the existing supply is held by local upscale and middle class hotels (950 rooms), while 35% (642 rooms) is provided by local budget/economy class and only 14% (252 rooms) are operated by international midscale brands.
49 59 68 69 70 71
1,507 1,686 1,844 1,964 2,134 2,294
3,360 3,784
4,224 4,499
4,888 5,255
-
15
30
45
60
75
-
600
1,200
1,800
2,400
3,000
3,600
4,200
4,800
5,400
2013 2014 2015 2016 F 2017 F 2018 F
Existing supply in destination cities 2013-2018 F
Accomodation units Number of rooms Number of beds
Source: Colliers International
Source: Colliers International
25214%
950 51%
642 35%
Number of rooms by hotel type 2015
International midscale brands
Local upscale & middle class
Local budget/economy class
Royal Batoni, Kvareli
In 2015, the highest ADR was achieved in Kazbegi, amounting to USD 95, followed by Kvareli and Borjomi with USD 87 and USD 75, respectively. The highest increase was seen at Tskaltubo with 62% (USD 53). In Telavi, the increase amounted to 23% (USD 44) and by 10% in Sighnaghi (USD 52) when compared to 2014 data.
The highest annual occupancy rate (as with the ADR) appeared in Kazbegi (60%), but compared with 2014 this reflects a 10% decrease. Kvareli has seen a slight increase to 55%, while Tskaltubo stands at 50%.
The greatest decrease in occupancy was seen in Borjomi(-11%) and equals to 47%. A positive trend in annual occupancy rate was seen in Telavi (44%) and Sighnaghi
(45%), with a 10% and 8% increase compared with the previous year.
At USD 57, Kazbegi holds the leading position in RevPAR for hotels in destination cities, showing a 14% increase compared to 2014. In Kvareli and Borjomi, RevPAR amounts to USD 48 and USD 35, respectively.
Positive changes were seen in Tskaltubo, Sighnaghi and Telavi. RevPAR in Tskaltubo increased by 59% (USD 27), by 49% in Sighnaghi (USD 23) and 33% in Telavi (USD 18) compared to 2014.
Despite the exchange rate fluctuations and other economic factors, the trends associated with hotels in destination cities was positive.
Hotel Market Report | Georgia | 201531
70%
58% 54% 51%
37% 34%
60%
47%55%
50%45% 44%
0%
25%
50%
75%
Kazbegi Borjomi Kvareli Tskaltubo Sighnaghi Telavi
Annual occupancy rate of hotels in destination cities 2014-2015
2014 2015
Source: Colliers International
54 50
34
17 17 12
48
57
35 27
23 18
0
15
30
45
60
Kvareli Kazbegi Borjomi Tskaltubo Sighnaghi Telavi
RevPAR in hotels in destination cities (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
Performance Indicators
100
71 58
47 36 33
87 95
75
52 44
53
0
20
40
60
80
100
Kvareli Kazbegi Borjomi Sighnaghi Telavi Tskaltubo
ADR in hotels of destination cities (USD excl. VAT) 2014-2015
2014 2015
Source: Colliers International
Hotel Market Report | Georgia | 201532
Conclusions & OutlookThe Hotel market in Georgia is being fuelled by a consistent growth in tourist numbers. With y-on-y visitor numbers in H1 2016 some 13% higher than H1 2015, visitor numbers for 2016 should exceed 6 million. This growth is being supported by improving infrastructure, new and international brand hotels and the government’s willingness to invest in hosting a wide range of sporting, cultural and international conference events.
The introduction of flights by Wizz Air from five CEE locations to Kutaisi in 2012 introduced low cost air travel and the Wizz Air’s new proposed new base at Kutaisi and the expansion of its route infrastructure to a further seven European destinations including Berlin, Munich and Milan can only bring huge benefits in terms of further tourism growth. Of course, a more significant step in boosting tourist numbers would be captured if one or more of the budget carriers (Wizz Air, Ryanair, EasyJet, Norwegian) were granted consent to fly into Tbilisi.
Tbilisi is the most profitable location for hotels and this has been recognized by a wide range of developer and operators. Over 20 new hotel developments are scheduled for completion between 2016 and 2018, many for international brands. If all schemes are developed, over 50 per cent of them are in the 5 Star category, bringing more than 2,000 quality rooms to the market. In reality, a number of these developments are likely to be delayed or dropped completely. There is, however, going to be more competition, which will inevitably place existing operators under pressure and potentially result in the unwanted combination of reduced room rates (ADR) and lower occupancy rates at the premium end of the market.
Batumi is a popular tourist destination with holiday, recreation and leisure visitors dominating hotel guests (84%). Through investment the resort is gradually being repositioned to attract more domestic and international visitors – the most recent statement of intent being the June 2016 completion of the 8,700 seater Black Sea Arena, compete with retractable roof. There are 14 hotels in the development pipeline, which will deliver nearly 1,500 International Upscale and Midscale branded rooms by 2019. With 2015 occupancy rates for international brands at 45% in 2015, accommodating this additional supply could prove very challenging. Again, the reality is that a number of these projects will be postponed well beyond 2019 and that completions will be phased to meet growth in demand.
Kutaisi, being the home of the Georgian Parliament, benefits from a relatively high proportion of business visitors (33%) and the annual number of hotel guests has grown strongly. The hotel market is dominated by local operators, with a 45 room Best Western being the first branded hotel to open, in 2016. Occupancy rates remain modest at around 50%, but the development pipeline is limited so, with new air routes scheduled and continued business and tourism growth expected, occupancy rates and ADR should see some improvement.
Georgia’s primary Summer Resorts are located on the Black Sea coast. The market is dominated by local / budget hotels (82%), the exception being the recently opened 250 room Marriott Autograph Collection hotel in Shekvetili, which will include a spa and appropriate high end facilities. Being more of a seasonal market, new supply need to be monitored carefully.
The popularity of winter sports has continued to grow in Georgia. Investment in new skiing infrastructure, combined with the expansion of existing hotels and new entrants is boosting the attractiveness of Winter Resorts. In addition to the three main resorts of Gudauri, Bakuriani and Mestia, new resorts have opened in Goderdzi and Tetnuldi. The market is dominated by local operators, but it is notable that Radisson Blu and Best Western Plus have announced plans for Gudauri, with Best Western Plus also opening in Bakuriani in 2017. There is clearly scope for further growth, but investment in new lift systems and snow making facilities must go hand in hand to capture the full potential. There is also opportunity to further develop summer trade and increase occupancy rates through the promotion of summer programs including outdoor activities, such as walking, hiking, mountain biking, rafting, yoga, mindfulness and the provision of top class spa facilities.
Georgia has a number of “Destination Cities” that attract visitors for reasons related to nature, culture and healthcare. This market is growing strongly and the market is reacting through the provision of an additional 450 rooms in the 2016 to 2018 period. This will include the Rixos and Crowne Plaza in Borjomi and a new Radisson in Tsinandali.
Anaklia Bridge
APPENDIXSUCCESS STORY
Opening date Summer, 2012
Rooms 156
Network Design Hotels
F&B outlets Restaurant, bar, terrace
Other facilitiesIndoor swimming pool, Conference
rooms, Sauna, Gym, Casino
Rooms Hotel Kazbegi4700 Stepantsminda, Georgia
Located in Northern Georgia, across the valley from the iconic 5,047m Kazbegi Mountain in Stepantsminda, the original Rooms Hotel was opened in 2012 in a former Soviet center for regional tourism packages and expeditions.
Since opening, Rooms Hotel Kazbegi has grown in popularity for both domestic and international visitors. With 70% average annual occupancy it has held the leading position for hotels in destination cities since 2013.
Rooms Hotel Kazbegi offers not only exceptional design and picturesque views over the Caucasus Mountains, it also has a casino, indoor swimming pool, conference facility, sauna, gym, Restaurant and bar.
In late 2014, buoyed by the success of Rooms Hotel Kazbegi, the brand opened its second independent lifestyle hotel in Tbilisi. In 2015, the Rooms Hotel Tbilisi was shortlisted for Wallpaper * Magazine’s prestigious Best Urban Hotels Award. In 2017, the brand is going to open its third hotel in Batumi. The hotel will comprise 170 rooms.
© 2016 Rooms Hotels. Daniel Müller / Freunde von Freunden
© 2016 Rooms Hotels. Daniel Müller / Freunde von Freunden© 2016 Rooms Hotels. Daniel Müller / Freunde von Freunden
© 2016 Rooms Hotels. Daniel Müller / Freunde von Freunden
© 2016 Rooms Hotels. Daniel Müller / Freunde von Freunden
Hotel Market Report | Georgia | 201534
APPENDIXREAL ESTATE REGISTRATION, CONSTRUCTION PERMIT AND
GOVERNMENT INCENTIVES
Property Registration
In Georgia, the National Agency of Public Registry is the state institution responsible for the registration of property, registering both transfers between private entities and state-owned properties.
In case of private transfer, the purchaser has two options:
• Via a notary - contract drafting and legalization by the notary and subsequent registration. The notary assumes responsibility for the content of the draft and its legalization. The presence of a translator and his signature on the bilingual purchase document is required and the translator assumes responsibility for the authenticity of texts. Time for preparation of the bilingual document and its legalization varies depending on the notary
• Via the National Agency of Public Registry - direct submission of the purchase contract for legalization and registration. In this case, the bilingual purchase document is to be drafted directly by both parties or by their authorized representatives. The Agency’s representative certifies the signatures and may provide recommendations if the document is not accurately drafted, but does not carry any responsibility for the validity or its content.
• The National Agency of Public Registry is represented in: a) Public Services Halls (Tbilisi, Gori, Kutaisi, Batumi, Ozurgeti, Mestia, Zugdidi, Rustavi, Marneuli, Gurjaani, Telavi, Kvareli and Akhaltsikhe) and b) regional departments of the National Agency of Public Registry (located in cities throughout the country).
In the case the property being purchased from the state/municipality (privatization, auction or other form of purchase) the documents should be submitted directly to the Agency.
Times and fees for registration• 4 working days upon the submitting of documents (ordinary time) -
the day of submission of documents is not counted - GEL 50 (registration fee per one property) + GEL 5 for certifying the document (GEL 5 per each document subject to submission)
• 1 working day - GEL 150 + GEL 5 for certifying the document
• On the day of submitting the agreement in the Agency - GEL 200 + GEL 5
Times and fees for renewal of public registry informationOnline• 1 working day - GEL 10 (USD 4.4)• Same working day - GEL 40 (USD 17.6)Justice House
• 1 working day - GEL 15 (USD 6.6)• Same working day - GEL 50 (USD 22)
Construction Permits
For the purposes of construction, buildings are divided into five types:
1st class buildings - no construction permit is required;
2nd class buildings - buildings with low risk factors;
3rd class buildings - buildings with medium risk factors;
4th class buildings - buildings with high risk factors;
5th class buildings - buildings with very high risk factors.
The permit issuance process is divided into three stages:
Stage I - Statement of urban construction terms;
Stage II - Approval of architectural-construction project;
Stage III - Issuance of Construction Permit;
State organs responsible for the issuance of permits:
Local self-governmental (municipal) organs - for II, III class buildings within the municipal territory (at stages I and II) except from Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi.
Local self-governmental (municipal) organs - for IV class buildings (at stages I and II) with the participation of corresponding state organs
Local self-governmental (municipal) organs - for II, III and IV class buildings (at III stage) independently (including Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi)
Tbilisi City Hall - for II, III and IV class buildings in Tbilisi Municipality (at all stages) independently
Corresponding local organs of Adjara Autonomous Republic and Abkhazia Autonomous Republic - for II, III and IV class (at all stages) on the territory of the Autonomous Republics
Local self-governmental (municipal) organs - II, III and IV class buildings (at stages I and II) for Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi - with the participation of the Ministry of Economy and Sustainable Development.
Ministry of Economy and Sustainable Development - for V class buildings
Ordinary terms per each stage (working days):
Stage I
12 days for II and III class buildings
15 days for all IV class buildings, for Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi (excluding V class buildings), also for all buildings that require ecological expertise
30 days for V class buildings
Stage II
18 days for II and III class buildings
20 days for all IV class buildings, for Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi (excluding V class buildings), also for all buildings that require ecological expertise and for V class buildings
Stage III
5 days for II, III and IV class buildings
10 days for V class buildings
Exceptions:
The special terms for permission process:
Construction permits concerning:
III class buildings with an intensity coefficient up to 1,500 p/m2 and for buildings with a height of up to the 14 meters that will be located on the territories where urbanization regulatory plans do not exist and are organized according to land use or which are organized according to the perspective development regulatory plans on the territory of Tbilisi - the permission process may involve II and III stages only
The simplified permit procedure may involve just two stages and the permit is issued in the second stage.
The terms for the simplified procedure are as follows:
Stage I - 12 days for II and III class buildings
15 days for all IV and V class buildings, for Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi, also for all buildings that require ecological expertise.
Stage II (issue of permit) - 20 days for all classes
Permission fees
The municipal organs determine the permission fees though the maximum limits are envisaged by the Law:
For all territory of Georgia - 1 (one) GEL (USD 0.4) p/m 2 of construction territory
For construction of industrial buildings - 5 (five) GEL (USD 2.2) p/m2 of construction territory
Exceptions:
Investors seeking the construction of hotels in free tourism zones and investing not less than 1,000,000 (one million) GEL (USD 440,494) per each hotel are exempted from paying the permission fee.
Hotel Market Report | Georgia | 201536
Hotel Market Report | Georgia | 201537
Host in Georgia
From 2016 the Government of Georgia provides financial and technical assistance to entrepreneurs involved in hotel industry in all regions of Georgia except Tbilisi and Batumi cities
Hotel Development/Expansion
• 10% Interest Rate Co-financing for the first 2 years – loans in GEL 8% Interest Rate Co-financing for the first 2 years – loans in USD or EURO
• Minimum loan volume – GEL 500,000 (or equivalent in USD/EURO)
• Maximum loan volume – GEL 1,000,000 (or equivalent in USD/EURO)
• Partial collateral guarantee for the first 4 years, 50% of the total loan, with upper limit of GEL 500,000 (or equivalent in USD/EURO)
• Co-financing of consulting services
Development of International Brand Hotels
• Co-financing of Franchising/Management agreements for the first 2 years (up to GEL 300,000 annually)
• 10% Interest Rate Co-financing for the first 2 years – loans in GEL 8% Interest Rate Co-financing for the first 2 years – loans in USD or EURO
• Minimum loan volume – GEL 500,000 (or equivalent in USD/EURO)
• Maximum loan volume – GEL 5,000,000 (or equivalent in USD/EURO)
• Partial collateral guarantee for the first 4 years, 50% of the total loan, with upper limit of GEL 2,500,000 (or equivalent in USD/EURO)
• Co-financing of consulting services
Development of International Brand Hotels
• Co-financing of Franchising/Management agreements for the first 2 years (up to GEL 300,000 annually)
• Co-financing of consulting services
Amendment in the Tax Code of Georgia
Article 1332. Income taxation of individual, owner or partly owner of
hotel assets by tourism venture
Based on a relevant agreement, between tourism venture and individuals, remuneration is charged with 5%.
According to the first part of this article, the income received by the individual, which is taxed at source, will not be included in the gross income of recipient, and will not be taxed.
In 2015, the Government of Georgia adopted several amendments in the Law of Free Touristic Zones Development:
Article 2. The scope of law
The coordinates of Free Tourism Zones can be determined only in the area, where the touristic infrastructure in neighborhood area is not developed, but has the potential for tourism development. (10.12.2015 N4599)
Article 5. Preferential conditions
An investor shall be exempted from property and profit tax provided for by the Tax Code of Georgia with regard to the implementation of activities compatible with the activities of a hotel in a free tourism zone, from the date of putting the hotel into operation up to the period defined by the Tax Code of Georgia, provided that the conditions laid down by this Law are satisfied;
Article 6. The arrangements to be implemented by the government
The Government of Georgia, in accordance with the Georgian legislation, will provide:
a) Development and regulation of existing infrastructure (gas, water, sewerage, electricity) and if necessary construction of new infrastructure;
b) Construction / rehabilitation of the access roads to the hotel;
c) Refurbishment and planting of the land plot on the hotel territory within reasonable limits;
d) Considered under this law, assignment of a special status and a simplified procedure of issuing construction permits to the hotel regulated by the Georgian legislation.
Government incentives
APPENDIXPRIMARY INFORMATION SOURCES
AND DATA USED FOR THE STUDY
Primary Information Sources
In the process of preparing the research, we were guided by the information provided by property managers, owners, developers, governmental institutions (The National Agency of Public Registry, the National Statistics Office of Georgia, the National Bank of Georgia, the Ministry of Economy and Sustainable Development of Georgia, City Halls). Information from Colliers International EMEA office was used for benchmarking. The following web-portals is also used: www.geostat.gewww.nbg.gewww.gnta.gewww.tas.gewww.worldbank.comwww.cia.govwww.uwto.com
Definitions and Assumptions
DCFTA: Deep and Comprehensive Free Trade Agreement
FDI: Foreign Direct Investment
IMF: International Monetary Fund
GDP: Gross Domestic Product
MICE: Meetings, Incentives, Conferencing, Exhibitions
m2: Square metre
USD: The United States Dollar
VAT: Value added tax
ADR (Average Daily Rate): Calculated by dividing revenues by the number of
rooms sold.
Rack Rate: The standard price of a hotel room before any discounting has
taken place and is often a statement of position in the market.
RevPAR (Revenue per Available Room (or Room Yield)): Calculated by dividing
rooms revenue by rooms available for sale in the same period.
Room Occupancy: Calculated by dividing the number of room nights sold
during a period by the total number of rooms available in the same period.
Room nights: Describes the number of rooms that are occupied in a hotel,
regardless of the number of people staying in the room.
Negotiation adjustment rate: Rack hotel room rates are higher than average
daily rates. This means that many rates are individually suggested to
customers. The amount of discount differs according to the hotel type and
management. It was determined that the adjusted rate for local hotels in
Tbilisi was 15%, while the other cities and destinations was adjusted by 20%.
Our determination of ADR takes into account the above mentioned
discounts.
Hotel Market Report | Georgia | 201539
Disclaimer
This document has been prepared by Colliers International for general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s). ©2016. All rights reserved.
Hotel Market Report | Georgia | 201540
Project Team
Mariam BenashviliResearch AnalystGeorgia
Mark CharltonHead of Research & ForecastingUnited Kingdom
Zurab KananashviliHead of Valuation & AdvisoryGeorgia
Nikoloz Kevkhishvili MRICS
Manager | Valuation & AdvisoryGeorgia
Ramaz SharabidzeTeam Leader | Research & ForecastingGeorgia
Hotel Market Report | Georgia | 201541
Eliso BurkishviliJunior Research AnalystGeorgia
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