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Georgia's Tourism Sector - Tourism Market Watch | September 2017

10 Oct, 2017

Turnover in hotels and restaurants increased 17.5% y/y to US$ 553.8mn in 2016, according to Geostat’s annual figures. Turnover reached US$ 271.7mn in 1H17, as strong visitor growth has boosted hospitality sector revenues. The sector has also posted significant gains in employment, with over 37,000 people employed in the hotel and restaurant industry in 2016.

Branded hotel supply outside of Tbilisi is set to increase significantly in coming years. Adjara Group Hospitality plans to open a 100-room Rooms Hotel in Kokhta-Mitarbi, the mountain resort near Bakuriani, which opened to visitors last season. With locations in Batumi and Sagarejo also in the pipeline, the Rooms brand could potentially have a portfolio of five hotels across Georgia by 2019.

The Agency of Protected Areas has published visitor statistics for 9M17. The number of visitors to protected areas was up 32.7% y/y to over 856,000 in 9M17 and already surpassed the 2016 annual figure. The number of domestic visitors increased 30.3% y/y to nearly 486,000, while the number of international visitors was up 36.0% y/y to nearly 371,000.

The number of international arrivals was up 20.9% y/y to 0.76mn in September 2017. Out of the top four source markets, there was strong growth from Armenia (+11.8% y/y), Azerbaijan (+15.6% y/y), and Russia (+32.0% y/y). The number of visitors from Turkey also increased (+10.5% y/y) for the third consecutive month.

The tourist category continues to drive arrival growth in September 2017. The number of overnight visitors (‘tourist’ category) was up 24.8% y/y and accounted for 49.9% of international arrivals. Same-day arrivals and transit visitors posted 12.7% y/y and 22.6% y/y growth rates, respectively. The number of tourist arrivals in 9M17 is up 28.8% y/y to 2.78mn, already higher than the number of tourists in Georgia in all of 2016.


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Georgia's Energy Sector - Electricity Market Watch | August 2017

29 Sept, 2017

Georgia’s net import of electricity in 2017 is expected to come in at 1,007.4GWh. By comparison, Georgia was a net exporter of electricity in 2016, albeit with only 80.1GWh of net export. Electricity export was up 22.6% y/y to 684.7GWh in 8M17, while imports more than doubled to 962.3GWh. Based on the updated annual forecast, electricity import in 2017 is expected to reach a historical high of 1,692.0GWh (+253.3% y/y), with net import of 1,007.4GWh.

Turkey remains the main export market, with a 41.4% share in total exports in 8M17. Exports to Turkey were down 3.6% y/y from an already low base in 8M16 (-15.9% y/y), largely due to lower average prices on the Turkish market. Electricity exports to Armenia and Russia posted significant growth. Export to Armenia was up 23.3% in 8M17, from an already high base in 8M16 (+57.4% y/y), and accounted for 20.1% of total electricity exports. Electricity export to Russia was up 77.5% y/y in 8M17 and accounted for 38.3% of total exports, with ESCO being the sole exporter. The reason behind the increase in export to Russia was an unexpected surplus of generation in June and July and inflexibility of other markets to import additional electricity on short notice. Overall, ESCO accounted for over half (53.6%) of the electricity exports in 8M17.

TPP tariffs were revised downward for the rest of 2017. The reductions varied from 6.9% for Mtkvari Energy (down to 11.358 tetri/kWh) to 25.4% forGPower (down to 10.537 tetri/kWh). The reason behind the reductions, as stated by GNERC, is the difference between planned and actual data, including exchange rates. While changes in US$ terms were insignificant for Mtkvari Energy and Gardabani CCGT, the tariff for Blocks 3 and 4, owned by Georgian International Energy Corporation Ltd (GIEC), was lowered 13.6% in US$ terms and 23.0% in GEL terms.

Georgia’s overall energy security was rated 3.7 out of 5, according to a study conducted by World Experience for Georgia, a non-profit organization specializing in energy security, economic sustainability, and environmental issues. The highest risk category (E) was assigned to natural gas, due to the highest import dependency (99.7% in 2016) and lack of reservoir capacity. The lowest risk category (A) was assigned to hydropower, taking into consideration variability, risks, and resilience associated with hydro supply.

Domestic consumption increased 14.4% y/y in August 2017. Consumption by eligible consumers, up 66.0% y/y, was a key driver, with Georgian Manganese doubling its consumption (+102.4% y/y) to 114.9GWh, a historic maximum for the company. Consumption of distribution companies, up 10.5% y/y, also played a significant role in overall growth. Consumption was up 8.6% y/y by Telasi, 11.7% y/y by Energo-Pro, and 8.7% y/y by Kakheti Energy Distribution. The Abkhazian region’s electricity usage was up 1.7% y/y and accounted for 11.2% of domestic consumption. 

Electricity import accounted for 6.6% of total electricity supplied to the grid in August 2017. Domestic generation increased 8.1% y/y, with HPP generation up 5.5% y/y (85.2% of total). Thermal generation increased 31.3% y/y (7.5% of total) from the low base in 2016 (-33.9% y/y), while the new wind power plant accounted for 0.8% of total electricity supply. 2.3% of total electricity supply was exported. Deregulated HPPs posted a significant increase in generation (+37.6% y/y), due to the addition of Dariali HPP (108.0MW) and Khelvachauri HPP (47.5MW). The commissioning of Shuakhevi HPP (178.7MW) in late August 2017 will result in higher growth in this category in the coming months.


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Georgia's Tourism Sector - Tourism Market Watch | August 2017

15 Sept, 2017

Growth in the number of international hotel guests in Georgia outpaced tourism growth in 2016. The number of tourists was up 19.2% y/y to 2.7mn in 2016, while the number of international guests at hotels and hotel-type accommodations was up 42.8% y/y to 1.7mn, according to a survey conducted by Geostat. There was also strong growth in the number of domestic visitors staying at hotels in Georgia, up 27.0% y/y to almost 870,000.

Recreation and leisure visitors continue to be the leading driver of growth in the number of international hotel guests in Georgia. In 2016, the number of foreign visitors in this category increased almost three-fold from the 2014 figure and amounted to 1.2mn, or 74.6% of international guests. The number of international business visitors to hotels in Georgia, on the other hand, remains at approximately the same level as in 2014, with almost 270,000 visitors in 2016.

Hotel industry development in Georgian seaside resorts is picking up pace. Notably, the development is taking place outside the previous target areas. Paragraph Resort and Spa, with 220 rooms, opened its doors in Shekvetili in September. The first Best Western hotel, featuring 50 rooms, was also unveiled in Batumi in July 2017, but recent announcements point to investors shifting their attention to other parts of the Adjara region.

The number of international arrivals was up 27.4% y/y to 1.1mn in August 2017. Out of the top four source markets, there was strong growth from Armenia (+11.7% y/y), Azerbaijan (+18.5% y/y), and Russia (+27.8% y/y). The number of visitors from Turkey was up 42.2% y/y, but from a very low base in August 2016 (-41.6% y/y). Arrivals from the EU were up 29.8% y/y to over 47,000 visitors.

The tourist category continues to drive arrival growth in August 2017. The number of overnight visitors (‘tourist’ category) was up 27.2% y/y – after record growth in June and July 2017 – and accounted for 53.1% of international arrivals. Same-day arrivals and transit visitors posted high growth rates of 26.4% y/y and 28.5% y/y, respectively. The number of tourist arrivals is up 29.4% y/y to 2.4mn in 8M17, while the number of same-day visitors is up 1.8% y/y and the number of transit visitors is up 26.0% y/y.


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Georgia's Tourism Sector - Tourism Market Watch | July 2017

9 Aug, 2017

The number of direct flight routes and flight frequency is on the rise, in line with the record growth in the number of international visitors to Georgia. The number of direct flight routes peaked in June 2017, as 38 carriers serviced 87 routes with almost 400 weekly flights. The growth in connectivity goes hand in hand with the increasing number of visitors from secondary source countries.

The Georgian government is trying to incentivize domestic air travel. According to the latest amendments to the tax code, domestic flights are exempt from excise and VAT taxes on aviation fuel and flight service, which should increase their affordability. Furthermore, the government has provided a GEL 10.8mn subsidy to ServiceAir, a company operating domestic flights to Batumi, Mestia, and Ambrolauri. ServiceAir is expected to operate domestic flights year-round.

International travel inflows to Georgia increased 27.9% y/y to US$ 659.0mn in 2Q17, after growing 23.3% y/y in 1Q17. Overall, travel inflows were up 26.0% y/y to almost US$ 1.1bn in 1H17. The share of travel inflows in service exports reached 61.1% in 1Q17, up from 56.4% in 1Q16. Value added from tourism was roughly flat y/y at GEL 480.1mn in 1Q17 and accounted for 6.8% of GDP, compared to 7.4% in 1Q16.

The number of international arrivals was up 28.5% y/y to 0.98mn in July 2017. Out of the top four source markets, there was very strong growth from Armenia (+25.4% y/y), Azerbaijan (+13.8% y/y), and Russia (+60.4% y/y). For the first time in 2017, the number of visitors from Turkey was up, albeit slightly (+0.6% y/y). Arrivals from the EU were up 21.4% y/y to over 45,000 visitors.

The tourist category continues to drive arrival growth in July 2017. The number of overnight visitors (‘tourist’ category) was up 32.9% y/y – after the largest y/y growth on record in July 2017 – and accounted for 52.9% of international arrivals. Same-day arrivals were roughly flat, while transit visitors posted an outsized 53.7% y/y growth rate. 


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