Issue 1, 2015. February-March



According to KPMG's annual analysis of the Georgian hospitality sector, demand for lodging accommodations still exceeds supply.

A recent report on the hospitality sector by KPMG Georgia found several things for hotel and guest-house operators to be excited about.

Occupancy Rates Up

For starters, occupancy rates are up across the board, from peak season to low season - and hotels are even filling more rooms during the "shoulder season" that bridges the two.

Based on KPMG's data, last year hotelsexperienced a 91 percent average occupancy rate during the peak season, compared with an 82 percent average occupancy rate in 2012-2013. The change was equally significant in the low season, which had a 60 percent occupancy rate in 2014, 10 percent more than in 2012-2013.

The increase was a promising development, despite the fact that the number of arrivals has started to stabilize after intense growth from 2005-2012. KPMG's report noted that "The number of international arrivals in Georgia amounted to 4,187,595 for the first three quarters 2014, which is a 2.14 percent increase from the same period last year. An average annual growth rate for the last ten years (2005-2014) was 30 percent, with the highest growth rate seen in 2012, when the number of international arrivals increased by 56.9 percent."

After Georgia's boom in tourism numbers, which peaked in 2012, the country is now moving closer to the international norm for visitors, KPMG Georgia's report found.

Georgia's peak season is still the summer months, KPMG reported in the study. Quoting statistics from the Georgian National Tourism Agency, the study noted that the number of international arrivals increased 2.21 percent in the peak season, compared to the same period last year.

Purpose for Travel

The KPMG Georgia report also looked at who is coming - and why they are traveling to Georgia.

The biggest portion of international visitors - 37 percent - were coming for vacation, leisure or recreation. A second large category, 26 percent, came to visit friends or relatives. The third largest category - transit - made up 17 percent of international arrivals. Shopping attracted just 9 percent, while business and professional travel accounted for 9 percent.

The study also found that 7 percent of visits were for "other purposes" like education, training, and medical care.

Demand for Hotels Exceeds Supply

KPMG looked at where people are staying - and what drives them to select certain types of accommodations.

The report found that, for international visitors in 2013, most people stayed in hotels - 43 percent. Over a third of tourists, however, stayed at private homes with friends or relatives - a significant portion. Just 10 percent stayed at hostels, and 7 percent rented an apartment. Campsites (3 percent) and private homes (5 percent) were also less popular.

The numbers were flipped, however, for domestic tourists, i.e. Georgians traveling in their own country. The study found that 85 percent of domestic travelers stayed in private homes owned by themselves, friends or relatives. Hotels attracted just 3 percent, while 4 percent stayed in guesthouses and 3 percent rented rooms. Just 5 percent used other types of accommodations, like camping.

KPMG Georgia found that, for most hotel guests, location outweighs cost or brand.

The report also detailed upcoming events that will increase demand on hotels and hotel developments in the pipeline.

There are seven new major hotel developments reportedly planned for Georgia, in addition to the Sheraton Metechi expansion (80 more rooms of five-star quality, planned to reopen in 2015), as well as the Best Western and Rooms Tbilisi hotels, which both opened in 2014.

Large projects announced in the media include: Hilton Garden Inn; InterContinental Hotels Group; The Radisson Blu Resort Tsinandali; and Park Inn.

"Upcoming events like the European Youth Olympic Festival 2015, UEFA Super Cup 2015,and EBRD annual conference, etc. will increase the number of international travelers," Andrew Coxshall, the head of KPMG Georgia, told

"On the other hand, after the completion of the upcoming hotel projects, the number of rooms supplied for accommodation will increase by hundreds of units. This may lead to a decrease of the current average occupancy rates."

"Based on our interviews conducted with the tourism agencies, the capacity presented in the sector is not sufficient to ensure accommodation of the expected international tourists. Hence, demand for accommodation exceeds supply. This fact makes us think that the sector is still in the development stage," Coxshall noted.