Issue 5, 2013. October-November



Considering the small number of international ski visitor and limited local demand, the Georgian market is currently simply too small for large international investors. Given this and the fact that ski resorts are very capital intensive, the social planner's role is to bring the industry to the point where it becomes attractive from the international investor's point of view.

There are several options to develop Georgia's potential as a regional ski destination: Popularize skiing in Georgia, beginning with school education; attract visitors from Ukraine, Russia, Belarus, Baltic countries and Poland for "mass ski tourism; attract visitors from Western Europe (Austria, Swiss, Germany) for niche (heliskiing) skiing, highlighting Georgia's cheaper, less regulated, more attractive landscapes. In addition to two traditional resorts in Bakuriani and Gudauri, the Georgian government has started developing two new resorts in Mestia and Adjara.

Financially, investment in ski resorts may not be commercially viable at this stage, especially not at the going interest rates, but there is an important rural development externality to consider. The industry is very labor intensive: at the 4-star level, the number of beds at a resort is equals the number of people providing hospitality services.

An important way to improve capacity utilization and thus increase productivity of private investment in ski resorts is to enhance summer tourism at the resorts. Bakuriani and, particularly, Mestia, have four-season destination potential, but need additional investment in summer infrastructure, including international airports within a radius of 120km of the resorts.

The Case Of Gudauri

Located on the sunny side of the mountain, Gudauri has a very low risk of avalanches and lots of sunny days. Yet, coordination among individual investors is essential for Gudauri to become an attractive international destination. Construction on the mountain takes time, the landscape is difficult, and the construction season is very short. At present, Gudauri has only 800-1000 commercial beds, whereas the international benchmark for a commercially viable ski resort is about 5000 visitors/day.

The Gudauri Development Fund was created in 2011 to coordinate public and private investments in road access, ski lifts, grooming equipment and a modern pedestrian alpine village providing retail shops, night life, and hotels. The Fund undertook investment in water, electricity, sewage, internet infrastructure, and roads. It also built new ski runs and a gondola lift, bringing total lift capacity from 2,700 to 5,600 person/hour. It is now up to private investors to build new hotels according to available designs. Three private hotels are already under construction (with investment of $5-10 mln each), including Radisson Blue. Total planned capacity is 1,500 beds.

The Fund also rehabilitated all major installations to avoid lift accidents, installed generators, and trained rescue personnel.

Additionally, it improved queue management and increased the number of ticketing booths.
As a result of these improvements and the opening of the Larsi border crossing with Russia, the 2011-2012 season saw a 65% increase in ski visits compared to 2010-11 (including both tourists and locals).