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Tbilisi: hotel construction not keeping pace with rise in tourism

In 2009 the number of overnight stays in Tbilisi accommodation facilities amounted to less than 700,000. TSBC Consulting (Financial, January 27, 2014) indicated that this was equivalent to Ljubljana in Slovenia, with a quarter of the population of Tbilisi in Georgia. Tbilisi’s population is about 1.5 million.
Tourism has been one of the fastest growing and most significant sectors in Georgia since 2009. To meet this demand, the renovation of hotels and the construction of new ones have been increasing, and subsequently the overnight stays have increased. The estimated number of overnight stays in 2012 was almost 1.7 million - equivalent to Bratislava in Slovakia (with a population of about 460,000) and Riga in Latvia (population 693,000). From 2009-2012 Tbilisi’s overnight stays have surpassed Vilnius in Lithuania (population 537,000) in and Sofia in Bulgaria (population about 1.4 million). It is almost level with Bucharest in Romania (population 1.9 million) and Tallinn in Estonia (population 430,000), reports TSBC Consulting. Both Bucharest and Tallinn each have an annual tourist demand of about 2 million.
The growth rate of overnight stays in Tbilisi, from 2009-2012, is unprecedented. No city in Central and Eastern Europe has increased its hotel stays to this significant extent.


However, the supply of hotels has not caught up with the demand. Although this is good for hotels, which have occupancy rates estimated at 79% (compared with the average hotel occupancy rates for Central and Eastern European cities of 30-50%), tourists are having a challenge to find accommodation.


More hotels are currently being constructed in Tbilisi, with more planned. These are predominantly 4-star hotels. As the number of hotels rise in this segment, the more the competition will intensify for hotels to attract tourists, and their hotel occupancy rate will likely decline as a result of the hotel saturation. Small family hotels supply 70% of the tourist market and these will also face strong competition as the number of 3-star hotel chains increase.


Nevertheless, TBSC Consulting maintains that the hotel market in Tbilisi will continue to offer ample opportunities – if not for tourists, then perhaps for investors. However, for many international investors, Georgia is seen to be a small and unknown market. Current inflow from foreign investment, particularly from Europe, has been minimal. This may change as, according to TBSC Consulting, there is scope to increase supply and particularly to foster diversity in the hotel market.




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