Georgian Hospitality Sector Overview

Georgian Hospitality
Sector Overview
January 2015
Contents
Country profile
4
Sector highlights
5
Upcoming events and projects
10
Tbilisi Branch of KPMG CIS Limited, a branch incorporated under the Laws of Georgia, a subsidiary of KPMG Europe LLP, and a
member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
Basis of preparation
The material presented in this publication is based on information
acquired by KPMG from primary and secondary sources at that time.
The purpose of the overview is to obtain primary information about
the hotel industry in Georgia, including the factors driving changes in
demand and supply of hotel rooms, customer base, and common
services provided by hotels.
Tbilisi Branch of KPMG CIS Limited, a branch incorporated under the Laws of Georgia, a subsidiary of KPMG Europe LLP, and a
member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
3
Country profile
DRAFT
Georgia is a country located in the Caucasus region, at the crossroads
of Western Asia and Eastern Europe, it is bounded to the west by the
Black Sea, to the north by Russia, to the south by Turkey and Armenia,
and to the southeast by Azerbaijan.
The unique culture, delicious cusine and hospitality attracts visitors from
all over the world. One can enjoy skiing down the hills of Caucasus
mountains and sunbathe in just 3 hours time at the coastline of the Black
Sea.
Country facts
Capital
Tbilisi
Population, 2014 (beginning of the year)
4,490,500
Currency
Georgian Lari (GEL)
HORECA share in total GDP (2014*)
Source: National Statistics Office of Georgia
Nominal GDP
contribution
(HORECA)
2%
Key economic indicators
20.0
15%
15.8
14.4
15.0
USD billion
16.1
12.8
10.8
10.2
10.0
12.0
11.6
10%
5%
7.8
6.4
5.0
0%
-
Nominal GDP
(except
HORECA)
98%
-5%
2005
2006
2007
Nominal GDP
2008
2009
2010
2011
2012
2013 2014*
GDP real growth (right-hand axis)
Source: National Statistics Office of Georgia
* Data for 2014 is based on the first three quarters of the year
Source: National Statistics Office of Georgia
Data for 2014 is based on the first three quarters of the year
HORECA – Hotel/Restaurant/Catering
KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
4
Sector highlights
DRAFT
Incoming travelers
6,000,000
Number of travelers
Tourism is amongst the fastest growing industries of the Georgian economy,
which has a substantial potential for further development. In the course of the
past few years the number of visitors to Georgia increased significantly adding
to the growth of other tourism-related sectors. The hotel industry, in particular,
has been growing with an increase of foreign investments and an increase of
foreign visitors to the country. To facilitate the development of the tourism
sector the Government of Georgia invests heavily in the development of
transportation and basic infrastructure, renovation and development of tourism
destinations, which is a stimulus for private investment generation.
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
International Arrivals
Incoming travelers for the year
The number of international arrivals in Georgia amounted to 4,187,595 for the
first three quarters 2014, which is a 2.14% increase from the same period last
year. An average annual growth rate for the last 10 years (2005-2014) was
30%, with the highest growth rate seen in 2012, when the number of
international arrivals increased by 56.9%.
Incoming travelers for the first 3 Q of the year
The graph shows the comparison of growth rates of international arrivals
globally and in Georgia from 2006 to 2012, and indicates the higher growth for
Georgia over the past years. As of 2014 the growth of international arrivals in
Georgia has reduced down to the global rate.
Comparison of international arrivals
World vs Georgia
60%
57%
50%
40%
Growth
A comparison of global growth rates and that of Georgia showed that during
the last five years international arrivals in Georgia increased considerably
faster than in the rest of the world. The number of tourists traveling
internationally throughout the world was growing at a steady rate during
recent years.
Source: Georgian National Tourism Agency
* Data for 2014 is based on the first three quarters of the year
36% 38%
30%
35%
23%
22%
16%
20%
10% 6%
-
39%
7%
2% (4%)
7%
4%
6%
5%
2%
1%
(10%)
2006 2007 2008 2009 2010 2011 2012 2013 2014*
Georgia
The World
Source: UNWTO, Georgian National Tourism Agency
* Data for the world for 2014 is not final
KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
5
Sector highlights
According to the Georgian National Tourism Agency, 65% of foreign visitors to
Georgia in 2014 were from a Commonwealth of Independent States (CIS),
32% from the European Region (including Turkey, excluding the CIS
countries) and 3% from other countries. The visitors from the CIS countries
were predominantly from Armenia (22%), Azerbaijan (23%), and the Russian
Federation (15%) and most of the visitors from the European region came
from Turkey (27%).
The statistics for the past years also demonstrate that the most popular
season among international travelers is summer, while the busiest months are
July, August and September. During this period, in 2014, the number of
international arrivals equaled 1,944,233 (July: 670,256; August: 772,216;
September: 501,761), which is a 2.21% increase from the same period last
year.
International arrivals by countries, 2014*
Iran
1%
Israel
1%
Germany
1%
Other
6%
Poland
1%
Turkey
27%
Ukraine
3%
Russia
15%
Azerbaijan
23%
Armenia
22%
Main Purpose of Visit - International Visitors
International visits were mostly undertaken for holiday, leisure or recreation
purposes (37%). Other frequently observed purposes included visiting friends
or relatives (26%), transit (17%), shopping (9%) and business/professional
trips (4%). Only 7% of visits were for other purposes (Education or training,
health and medical care, etc).
.
DRAFT
Source: Georgian National Tourism Agency
* Data for 2014 is based on the first three quarters of the year
Breakdown of international arrivals, 2014*
Middle East
1%
Europe
97%
Other
1%
Other
3%
East Asia and the
Pacific
1%
Source: Georgian National Tourism Agency
* Data for 2014 is based on the first three quarters of the year
KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
6
Sector highlights
DRAFT
Accommodation, International Visitors
Room Availability
In 2013, the most commonly used type of accommodation for the foreigners
visiting Georgia was Hotels (43%). More than a third of tourists (34%) resided
at a private home of a friend or a relative, 10% stayed in a hostel, 7% rented
an apartment. Less common types of accommodation were private home
(5%) and campsite or trailer park (3%), and other (6%).
As of September 2014 there are 1,146 accommodation units, with a bed
capacity of 39,341 beds in Georgia. The highest concentration of
accommodation units lies in the Adjara region were Georgia’s main sea
resorts (Batumi, Anaklia, Kobuleti, etc) are located. Adjara is followed by the
capital, Tbilisi, which maintains its leadership with the highest number of
international arrivals in Georgia (including transit and overnight travelers).
Main Purpose of travel - Georgian Residential
Population
Accommodation capacity (Q lll 2014)
According to the data provided by GNTA, in 2013 domestic travelers’ most
frequent reasons for travel within Georgia were visiting friends or relatives
(45%), followed by holiday, leisure and recreation trips (15%). Less common
visiting purposes included shopping (12%), health and medical care (9%),
business trips (3%), visiting a second home (4%), and other (12%).
Region
Number of
accommodation
units
Bed capacity
Bed capacity's
percentage to
regions
Ajara
251
10,380
26.4%
Tbilisi
148
6,916
17.6%
Samtskhe-Javakheti
161
6,224
15.8%
.Imereti
129
3,922
10.0%
Guria
55
2,818
7.2%
Mtskheta-Mtianeti
86
2,791
7.1%
Accommodation - Georgian Residential Population
Kakheti
151
2,720
6.9%
Samegrelo-Zemo Svaneti
106
2,140
5.4%
85% of domestic travelers stayed in private homes owned either by them or
by friends or relatives. Only 10% have stayed in either guesthouse (4%), hotel
(3%), or rented rooms (3%). 5% used other types of accommodations.
Racha-Lechkumi
30
723
1.8%
Kvemo Kartli
18
539
1.4%
Shida Kartli
11
168
0.4%
1,146
39,341
100.0%
Total
Source: Georgian National Tourism Agency, 2014, excluding IV Q)
.
KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
7
Sector highlights
.
Factors affecting demand for Tbilisi hotels
Location
4.00
Cleanliness of rooms
DRAFT
We identified the top six most important factors that influence the guests
decision. Based on the survey performed, hotel location ranks number one
while choosing the hotel. It is followed by cleanliness of rooms and staff
friendliness. Availability of fitness and leisure facilities is the least influential
factor.
3.86
Friendliness of staff
3.57
Internationally recognized name
3.50
Price
In addition, we determined the seven economic indicators to have the greatest
impact on the flow of visitors to Tbilisi. Business spending and GDP take the
first two places respectively, while exchange rate has the least influence on
the visitors.
2.86
Availability of fitness/ leisure
facilities
All the hotels participating in the KPMG survey offer the following facilities to
the guests:
2.33
-
1.00
2.00
3.00
4.00
 Restaurant
Level of importance
* Ratings scale based on the level of importance (4-high, 3-moderate, 2-low, 1-none)
Source: KPMG Analysis, Q 4 2014
 Car service
 Laundry
 Free Wi-Fi
Economic indicators
Business spending
 24 hour security
 Refrigerator/ mini bar
3.00
GDP
2.67
 24-hour front desk
FDI
2.67
 TV with local and international channels
Government spending
2.50
Interest rate
2.50
CPI
2.50
Exchange rate
The average occupancy rates of the hotels within the survey are presented in
the table below:
2.00
-
1.00
2.00
3.00
4.00
Level of Influence
* Ratings scale based on the level of importance (4-high, 3-moderate, 2-low, 1-none)
Source: KPMG Analysis, Q 4 2014
Average occupancy rate, 2014
Peak season
85.0%
Shoulder season
71.0%
Low season
56.7%
Source: KPMG Analysis, October 2014
KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
8
Sector highlights
Government policy towards tourism development
DRAFT
The hotel sector together with tourism is further facilitated by supportive
programs and financing from the government of Georgia. Tourism
development is one of the top priorities (third out of twelve state budget
priorities and programs for 2015) for the Georgian government as seen in its
state budget for 2015.
For 2015 the funds assigned in the state budget to the Ministry of economy for
the upcoming years are as followed (in GEL):
2015 – 126 million
2016 – 128 million
2017 – 128 million
2018 – 134 million
The main capital projects on which the budget will be utilized are in the fields
of regional development, infrastructure and tourism: periodic maintenance and
rehabilitation of roads, coastline protection works, transit highways, water
infrastructure, sewage systems, cultural heritage protection program,
rehabilitation of irrigation systems and equipment purchase, etc.
KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
9
Upcoming events and projects
European Youth Olympic Festival 2015
In 2015 Georgia will be hosting the Youth Olympic Festival 2015, summer
edition, in Tbilisi. The number of athletes participating from 49 European
countries is expected to exceed 4,000. Together with spectators the city of
Tbilisi is expected to host more than 10,000 visitors. Considering the fact that
there are only 6,916 bed-places in Tbilisi (including guest houses and family
home stays), there is an immediate need for new hotel investment to fill the
gap in supply.
DRAFT
Opening of the season will not rely on the weather anymore, which will
increase the number of the tourists and boost the resort’s revenues. The
project budget is up to GEL 25 million, out of which GEL 9 million will be spent
during 2014.
According to the Deputy Head of Gudauri Development Agency, Sandro
Onoprishvili, the project will result in a 20-25% increase in the number of
tourists who visit Georgia’s winter resorts annually. Furthermore, the state
budget will benefit from the increased revenues generated by the hotels and
local residents whose main source of income is generated from hospitality
services offered to international and domestic tourists.
UEFA Super Cup 2015
In August 2015, Mikheil Meskhi Stadium (Dinamo Arena) in Tbilisi will host a
mega sport event, the UEFA Super Cup. The UEFA Super Cup is an annual
football match between the winners of the Champions League and the Europa
League. The event is expected to gather football fans from all over the world.
The attendance for the prior UEFA Super Cup events in Prague, Czech
Republic (2013) and in Cardiff, UK (2014) was 17,686 and 30,854
respectively.
EBRD Annual Conference
The European Bank for Reconstruction and Development (EBRD) plans to
hold its 24th Annual Meeting of the Board of Governors and Business Forum
in Tbilisi on 14-15 May 2015. During this event the Bank Officials make key
decisions about Bank’s strategic development.
Euro 2016 Qualifying Matches
Artificial snow on Georgian winter resorts
On August 30, 2014 a contract for the production of the artificial snow was
signed between Gudauri Development Agency and DEMAKLENKO.
According to the contract, geological, geodetic and mapping works will be
carried out on the resorts, as well as projection of the artificial water reservoirs
and snowing of the first skiing tracks of Gudauri and Didveli.
For the Euro 2016 qualifying matches Georgia will host UEFA Group D
members, including Germany, Republic of Ireland, Poland, Scotland, Georgia,
and Gibraltar.
KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
10
Upcoming events and projects
Recent events
Increased room capacity
Best Western Tbilisi and Rooms Hotel Tbilisi with 48 and 141 room capacity
were opened during 2014. Both hotels are managed by Adjara Group.
Temporary closure of Sheraton
Sheraton Metekhi Palace was closed for 1 year in December, 2014. As per
Management of “Ras Al Khaima Investment Authority Georgia” the hotel will
be fully reconstructed, the capacity will be increased by 80 rooms. Also, it will
be upgraded to 5 star hotel.
Hilton Garden Inn
DRAFT
Hilton Hotels & Resorts, together with local partners, are planning to open two
hotels in Georgia starting from 2016. The Project is financed by the European
Bank for Reconstruction and Development (EBRD) with the issuance of $18.7
million loan to the Georgian real estate group Redix.
The first property, the Hilton Garden Inn Tbilisi Chavchavadze, a fourteen
story building, will have a capacity of 165 rooms. The second 247-room Hilton
Batumi includes plans for retail shopping, a casino and a health club.
InterContinental Hotels Group
InterContinental Hotels Group (IHG) announced the opening of the
InterContinental Tbilisi in 2016. The 200-room hotel will operate under a
management agreement with the existing owner-partner Adjara Group, a
Tbilisi-based hospitality company.
Pipeline & forecasts
Information about upcoming hotel projects in Georgia is often difficult to obtain
and even harder to verify. The information below has been obtained from
various media and other sources and may not be completely reliable.
The Radisson Blu Resort Tsinandali
The Radisson Blu Resort Tsinandali, located in the wine region of Kakheti, will
welcome its first guests in the first half of 2016.
Millennium
The construction of the hotel is funded by the UAE Abu Dhabi Group, with a
total investment of USD 40 million. The opening of the hotel is scheduled for
2016.
Park Inn
The mid-market hotel, located on Rustaveli Avenue, operated by Rezidor,
featurs 200 rooms scheduled to open in Q3 2015. Besides guest rooms, the
hotel will comprise all-day-dining restaurants, a lobby bar and surface car
parking.
Rixos Residence
The luxury 5 star Rixos Residence Hotel will be constructed on Gudiashvili Street. The
hotel will consist of 60 apartments and about 40 shops of famous brands
5 Star Hotel on Rustaveli Avenue
In 2017 the opening of 5 star hotel located in the former building of the
Ministry of Justice is expected. The initial investment amounts to USD 60
million. The brand name is not declared yet.
KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
11
The information contained herein is of a general nature and is not intended to
address the circumstances of any particular individual or entity. Although we
endeavor to provide accurate and timely information, there can be no guarantee
that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information
without appropriate professional advice after a thorough examination of the
particular situation.
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Member firms of the KPMG network of independent firms are affiliated with
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member firm has any authority to obligate or bind KPMG International or any
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