Issue 2, 2017. April-May



The country's tourism numbers are up, but visitors are leaving less money in the local economy than the international average

Sally White

Georgia has no problems attracting visitors-2016 numbers were up 8 percent at 6.4 million year-on-year and 2017, so far, is even better.

The challenge is enticing them to spend. In TBC Capital's Hospitality & Tourism Sector Overview, published last year, the figures showed Georgia lagging well below its Eastern European peers in persuading tourists to open their wallets.

"[A]verage receipts per visitor remained relatively stable, in the range of $325-400 (vs. $750 average for Eastern Europe) over the past decade, despite a 6.5x increase in visitors," TBC commented.

Most of those 6.4 million were in transit, said the Head of the Georgian National Tourism Administration (GNTA), Giorgi Chogovadze. The number of those spending over 24 hours in the country was 2.7 million, up 19 per cent in 2015. Plus, many of the 2.7 million were not tourists, but diaspora, visiting family (over 50 percent of the total). While that may not change Georgia's ranking, it does improve the real per-capita spending.

Armed with the knowledge that most local visitors, with the exception of Russians, are not high spenders, the GNTA is addressing the problem in its National Tourism Development Strategy 2015-25. Advised by the World Bank and U.S. consulting company Solimar International, the GNTA is tasked with changing Georgia's tourist mix-as well as trying to raise the number of visitors to 11 million.

Currently, Georgia sources mainly from markets that are local and familiar, within easy transport reach and enticed by Georgian marketing campaigns and, as Tbilisi's Georgica Travel says, "good connections with Georgian travel agents." So far this year, out of a total of 755,000 visitors, Azerbaijan, Armenia, Turkey and Russia headed the list, with 222,000, 158,000, 151,000 and 119,000 visitors, respectively. Next come Ukraine, Iran and India with 20,000, 15,000 and 5,000 visitors, respectively. The higher-spending countries of the U.S., Israel and Germany each sent just 3,000 visitors.

While the top four, with 83.6 percent of last year's total, performed robustly (with the exception of Turkey) the secondary markets are growing strongly, too. Iran's rose almost 5.9 times last year, while Israel's is up 1.6 times.

In 2017, the GNTA aims to increase visitor numbers from Europe, Asia and the U.S. "The country will aim to increase the share of visitors from higher-spending source markets from the current 10-12 percent to almost 30 percent. With this, the international receipts from tourism will more than triple, average spending per visitor will increase to almost twice the current amount, and the length of stay per visit will grow," is the latest comment from the Ministry of Economy.

"Good quality" Accommodations

However, there are obstacles. One, for EU, UK and U.S. tourist operators whose clients fall into the "high-spending" categories, has been finding the right accommodations. There is a "lack of good-quality, middle-market, 4-star accommodations," says Jonny Bealby, founder of international travel agency Wild Frontiers, which has offered holidays in the region for around 15 years.

"And by 'good quality,' I mean with good services-it is not a question of price. If anyone wonders why there are so few middle-class Europeans and Americans going to Georgia, that is the reason."

"There are plenty of luxury accommodations, though in Tbilisi and Batumi, and it's okay if you are a student or back-packer or want an adventure holiday. But there is not a lot in the middle range across most of the country," he added.

For him the ideal would be more hotels built and run on the Rooms Hotel model.

"Lack of direct flights has been another factor," he says, consulting his list. On this front, things are happening. The first steps to more non-cut-price direct flights have been taken. Georgian Airways is adding London's Gatwick Airport and Prague to its EU destinations of Amsterdam and Vienna, which also will ease the journey from the U.S., and European cut-price group Rynair is promising routes.

Targeted Marketing

Another obstacle, says Cox & Kings, which offers luxury holidays to middle-aged, middle-class travelers from Europe and the U.S, is a "lack of marketing campaigns. With the whole world offering itself to our clients, no one is telling them about Georgia. There are so many ways to market-in newspapers, magazines, and so on. Nor has anyone from Georgia come to ask us to work with them on marketing Georgian products," it explains.

So, while blogs and social media and occasional newspaper articles may be euphoric about Georgian food, wine and nature, this information is not getting to Cox & Kings' clients. Growing emerging market competition has left Cox & Kings offering only one product for Georgia-an arts tour packaging Georgia with Armenia.

The Problem of Souvenirs

Lack of good shopping, the world's favorite leisure pastime, is also an important gap when it comes to raising tourist revenues. So says a Georgian hotelier, Dito Shvelidze of Tbilisi's Riverside Hotel. "I listen to guests saying that they would buy and spend more in Georgia if there was the opportunity, especially those who travel to the regions. I would think more modern-type shops, including local producers of different products and services, should be available to the guests."

Ambitious Government Program

Some of these gaps are already being addressed by the GNTA's ambitious program for 2017 and beyond. Others have been spotted as investment opportunities by entrepreneurs.

Georgia's future marketing and press campaigns, according to Chogovadze, encompass the existing neighboring markets and Middle East, but also parts of Western Europe, including Germany, Italy and the Baltic countries. The GNTA is also encouraging the development of more hotels and a wider range of tourism-conference business, spas, medical tourism, more ski resorts, culinary and wine attractions and nature reserve stays.

The drivers from the central government are the open-visa regime, the establishment of new transport and resort infrastructure (while respecting the countryside and cultural heritage), and the offering of financial incentives and service and IT training.
Those incentives, and high occupancy numbers, are putting middle-range hotels into the pipeline. Leah Rusia Beselidze, head of Cushman & Wakefield's consultancy, states she can see the prospective supply of hotels "becoming more balanced," with more 3- and 4-star hotels.

Galt & Taggart's Tourism Market Watch February edition list includes planned 4-star developments from Alliance Group in Goderdzi and Tulip hotels in Tskaltubo and Borjomi. Rooms Hotels is planning more outlets, and Schuchmann has set up a boutique hotel franchise operation.

Boding well for this year's tourism revenues is that the number of the "right" kind of tourists seems to be growing, although from a low base.

The highest spenders, says the Ministry of Internal Affairs, are Russians, Europeans, Israelis and Americans. Israeli visitor numbers were up almost 65 percent in January and February and the number of those visitors from the EU rose 22 percent. And numbers of those just passing through fell!