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KPMG in Georgia Advisory

Overview of Tbilisi Hotel Industry 2011

About this publication
This publication is based on KPMG’s research and the survey conducted in April-May, 2011. It has been prepared for the organizations which agreed to participate in the survey. The purpose of the survey was to obtain primary information about the hotel industry in Tbilisi, including the factors driving changes in demand and supply of hotel rooms, daily rates and occupancy rates, demographic composition of the customer base, and common services provided by hotels. The participants of the survey were internationally – branded and local hotels, as well as travel agencies operating in Tbilisi. In addition, KPMG met with officials of the Economic Policy Agency from Tbilisi City Hall, the Georgian National Investment Agency and the Georgian National Tourism Agency. 14 hotels and eight travel agencies participated in the survey. Six, out of the total interviewed hotels, were internationally-branded hotels. The 14 interviewed hotels had a total of 1,162 rooms available for stay at the time the survey was conducted, representing around 38% of the total supply of hotel rooms in Tbilisi.
COUNTRY FACTS Capital Population, 2010 Currency USD/GEL exchange rate, 2010
Source: National Statistics Office of Georgia

KEY ECONOMIC INDICATORS Real GDP, 2010 Real GDP growth, 2010 Inflation, 2010 FDI, 2010 FDI growth, 2010
Source: National Statistics Office of Georgia

USD 7,172 million -0.3% 7.1% USD 553 million -16.0%

KEY ECONOMIC INDICATORS
10 8
USD billion

30% 20% 10% 0% -10% -20% 2004 2005 2006 2007 2008 2009 2010

6 4 2 0

Real GDP

GDP real growth (%, USD) (Right hand scale)

Source: National Statistics Office of Georgia

HORECA INDICATORS OF GEORGIA Real GDP contribution, 2010 Contribution growth rate, 2010 Inflation, 2010 FDI, 2010 FDI growth, 2010 Turnover
Source: National Statistics Office of Georgia

USD 231 million 5.8% 4.2% USD 3.5 million -90.7% USD 186 million

Tbilisi 4,436,400 Georgian Lari (GEL) 1.7826

Overview of Tbilisi Hotel Industry 2011 / Advisory / August 2011

business travelers.travelers for other purposes.56 days 3. in 2009.leisure travelers.99 days for the leisure visitors. 2010 Drivers and Forecasts 63% If the political situation remains stable and the economy does not face difficulties. 2011 According to a survey conducted by the National Tourism Agency of Georgia. the increase in the number of foreign visitors to the country and decisions on strategic development of the tourism sector at the government level. 63% of foreign visitors to Georgia in 2010 were from the Commonwealth of Independent States (CIS) countries. business visitors to Tbilisi stayed in hotels on average for 4. on average $151 per day on lodging. This figure represents a 36% increase compared to the previous year and in the last 5 years the number of tourists has grown on average by 29% annually. In 2010. National Tourism Agency of Georgia. Furthermore. The breakdown for Tbilisi hotel guests in 2009 was as follows. business travels spent $198.DEMAND The hotel industry has been growing with the increase of foreign investments in Georgia. while leisure travelers spent $95. 2010 Leisure visitor. LENGTH OF STAY IN TBILISI HOTEL Average visitor. 2010 Business visitor. The visitors from the CIS countries were predominantly from Armenia. Azerbaijan.000 2. 2. 81% of visitors to Georgia were between the ages 25 and 54. 2010 4.500. and 22% . 33% from the European Region (including Turkey.000. DEMOGRAPHIC STRUCTURE OF VISITORS TO GEORGIA 65 + 2% 8% 20% 30% 31% 10% 0% 5% 10% 15% 20% 25% 30% 35% Source: National Tourism Agency of Georgia 55-64 According to the data. and the Russian Federation and most of the visitors from the European region came from Turkey.000 2006 2007 2008 2009 2010 Source: “Survey of International Travelers at National Borders of Georgia”. food and beverage in 2010. Moreover. Furthermore. 2010 Visitors staying in Tbilisi hotels spent. visitors from the CIS spent on average $103 per day on lodging.586 foreigners visited Georgia in 2010.032. which both are lower than the average length of stays in Georgia overall.000 500. CIS Other European Region (w/o CIS) Source: National Tourism Agency of Georgia In our effort to identify the most important factors considered by business and leisure hotel guests when choosing a hotel. FOREIGNERS VISITING GEORGIA 2. National Tourism Agency of Georgia. BREAKDOWN OF VISITORS TO GEORGIA.43 days 4. 2010 4% 33% 45-54 35-44 25-34 16-24 Source: “Survey of International Travelers at National Borders of Georgia”. survey participants expect 1314% annual increase in the number of visitors to Tbilisi in 2011-2020. roughly 23% of the total number of visitors to Georgia stayed in hotels and other hotel-type accommodations. In 2010. food and beverage compared to $202 for visitors from Europe (excluding CIS). 29% were leisure travelers and the remaining 17% visited the country for other purposes.000.56 days compared to 3. 2 . 10% .000 1. 12% of the total number of visitors to Georgia stayed in hotels and other hotel-type accommodations in Tbilisi.000 1.500. 53% of the hotel guests in Georgia were business travelers. we found the top 5 to be the following (listed from the most important to the least important): BUSINESS GUESTS Location Friendliness of the staff Reputation Quality and cleanliness Price Level of Importance Source: KPMG Survey. 68% .99 days Profile According to data provided by the Border Police of Georgia. excluding the CIS countries) and 4% from other countries.

and 2% were executive suites.LEISURE GUESTS Location Price Reputation Friendliness of the… Quality and cleanliness Level of Importance Source: KPMG Survey.5 n/a n/a 3. Georgia Fixed Asset Investments.5 38.3 6.162 rooms including 826 rooms in the six internationally-branded hotels and 336 in the eight local hotels. HoReCa. TBILISI HOTEL STOCK 6000 5000 4000 3000 2000 1000 0 2008 2009 Number of rooms In addition.0 37. standard double. business. junior suites and executive suites were present in all hotels that we surveyed.8 78. July. Tbilisi FDI.9 Double Business Junior Suite Executive suite * Preliminary data Source: National Statistics Office of Georgia Source: KPMG Survey. Furthermore. As a result. June. and December are considered low season. Source: National Tourism Agency of Georgia SUPPLY Investments The demand for hotel rooms has been growing in the last 10 years in Georgia. HoReCa. 2011 Number of hotels Seasonality Survey participants reported the high season in Tbilisi to be the months of May. and March. The six internationallybranded hotels operating in Tbilisi represent 27% of the total room supply in the city and almost all operate in the midscale-upscale segments.280 beds. Additionally. these facilities offer 3. and executive suite. 2011 3 . for the period of 2007-2010. As a result. 30% were standard doubles. April. In addition. HoReCa. it is estimated that there are 114 hotel and hotel-type accommodation providers in Tbilisi with various room capacities.5 Single 39% 242.7 12. Georgia 10.5 36. 14% were business. junior suite. which has stimulated investments in the hotel sector. The latest deliveries in the market were Holiday Inn (opened in 2010) operated by Intercontinental Hotels Group with 126 guest rooms. 2011 Room Availability As of 2010. and August are considered shoulder season. ROOM BREAKDOWN OF LOCAL HOTELS 6% 1% 12% 43% Fixed Asset Investments. restaurant and catering (HoReCa) sector in Georgia and Tbilisi totaled USD 180 million and USD 136 million respectively.6 n/a 48. Most of the hotels use different naming conventions for their rooms based on the room features and sizes. In 2006-2009 investments in fixed assets in the hotel. new hotels were opened and the existing hotels renovated their facilities to service the growing demand.5 84. INVESTMENTS million USD 2006 2007 2008 2009 2010* The 14 surveyed hotels had a total of 1. 9% were junior suites. Combined.1 181. The room breakdown into categories was different between the internationally-branded and local hotels. the survey participants find the following 5 economic indicators to have the greatest impact on the flow of visitors to Tbilisi (listed from the most influential to the least influential): ECONOMIC INDICATORS FDI International assistance Business spending Government spending GDP growth 92 113 114 2010 Number of beds Source: KPMG Survey. September – November. 46% of the rooms were standard singles.050 rooms with 5. regardless of the star level of the hotel. Citadines Apart-hotel (opened in 2009) operated by The Ascott Limited with 66 guest rooms. foreign direct investment in the HoReCa sector in Georgia amounted to USD 465 million. five main room categories were identified: standard single. and Radisson Blu Iveria Hotel (opened in 2009) operated by Rezidor Hotel Group with 249 guest rooms. while the months of January – February.

The conference rooms are rented out for a half or a full day. m. The rate was 60-70% during the peak season and 40-45% during the low season. In addition. m. m. 2011 USD 90 USD 105 USD 138 USD 154 USD 190 Safe (either in the room or the front desk) 24-hour security 24-hour front desk Internet Laundry/dry cleaning services 4 .ROOM BREAKDOWN OF INTERNATIONALLY – BRANDED HOTELS 7% 19% 47% 1% Occupancy Rates Based on our survey findings. 5 out of 14 surveyed hotels have one or more swimming pools. microphones. teleconferencing equipment. breakfast included) were: DAILY RATES FOR INTERNATIONALLY – BRANDED HOTELS Standard single USD 213 Standard double Business Junior suite Executive suite Source: KPMG Survey. compared to 25 sq. and 93 sq. The large conference rooms are equipped with audio/video equipment. while the outside customers are charged a fee for using the facility. 2011 USD 239 USD 264 USD 321 USD 792 DAILY RATES FOR LOCAL HOTELS Standard single Standard double Business Junior suite Executive suite Source: KPMG Survey. shoulder season and low season did not show significant variation for the surveyed hotels. Based on our survey. 83% of the respondents reported that the restaurant is open to hotel guests and outside customers. the average occupancy rate in hotels in Tbilisi was 56% in 2010. Nevertheless. The table below shows what percentage of surveyed hotels offered the following services. it is a common practice to charge a per person flat rate that will include breakfast and/or lunch. amenities and facilities: HOTEL SERVICES AND AMENITIES Air conditioned rooms Heated rooms Telephone connection in the rooms TV with local and international channels 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: KPMG Survey. for a standard double room. m. 7 out of 14 surveyed hotels have a fitness room that is open to hotel guests and outside customers. The average size for a standard single room was 23 sq. a typical rate that will include 2 coffee breaks and a lunch will cost USD 29-60 per person (net of VAT). while the other customers have to pay for this service. In general. such as projectors. respectively. the swimming pools are open to hotel guests and outside customers. 2011 Daily Rates The daily rates for hotel rooms during the high season. 13 out of 14 surveyed hotels have one or more conference/meeting rooms. Generally. etc. The fitness facilities are free of charge for hotel guests. the internationallybranded hotels offered significantly larger rooms than did the local hotels. The seasonallyadjusted average daily rates (net of VAT. Services and Facilities 26% Single Double Business Junior Suite Executive suite 12 out of 14 surveyed hotels operate at least one restaurant on the hotel premises. ROOM SIZES 140 120 100 80 60 40 20 0 Single Double Junior Suite Executive suite 115 60 32 16 32 20 36 50 Internationally-branded hotels Local hotels Source: KPMG Survey. 13 out of 14 surveyed hotels have at least one bar on the hotel premises and 85% of the respondents reported that the bar is open to hotel guests and outside customers. Junior suites and executive suites were 50 sq.6 conference/meeting rooms per hotel. 2011 For all main hotel room categories. A customer on average spends USD 12 in a hotel bar. however. it is not uncommon to see projectors and microphones in the smaller meeting rooms among the internationallybranded hotels. With an average of 4. the average conference/meeting room seats 66 people in a theatre setup. the internationally-branded hotels reported higher occupancy rates than did the local hotels. A customer on average spends USD 21 per person in a hotel restaurant in Tbilisi.

some of the existing hotels are planning to increase the number of the rooms. If you would like more information about this survey or KPMG’s services. a Swiss entity affiliated with KPMG International.com 5 . KPMG in Georgia 3rd floor. please contact us. logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. Tbilisi. KPMG Survey. 0108. which will increase the existing supply in the city by 330 additional guestrooms by 2012.HOTEL SERVICES AND AMENITIES Luggage storage Shuttle services 24-hour room service On-site parking Currency exchange Game room (including Casino) Sauna Car rental Spa Store/Boutiques Beauty salon Children’s room Dedicated coffee shop Source: KPMG Survey. ROOMS IN TBILISI 5000 Number of rooms High Probability Low Probability 4000 3050 3000 2000 2010 3695 4033 2013 PROJECTIONS 2015 Pipeline & Forecasts Some of the high profile projects in the pipeline include the 200-guestroom Kempinski Hotel Rustaveli. Although we endeavor to provide accurate and timely information. there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Georgia Andrew Coxshall Managing Partner Southern Caucasus E: acoxshall@kpmg.ge The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity.com T: +995 (32) 93 57 13 / 93 56 95 F: +995 (32) 98 22 76 E: general@kpmg. 2011 100% 100% 93% 93% 50% 43% 43% 29% 14% 14% 0% 0% 0% Tbilisi and the Park Hyatt Tbilisi Hotel are unlikely to be completed by 2015. the constructions of the InterContinental Source: National Tourism Agency of Georgia. Eduard Avetisyan Head of Advisory Southern Caucasus E: eavetisyan@kpmg. and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). a subsidiary of KPMG Europe LLP. The KPMG name. a Swiss cooperative. There is an indication that three local hotels with 115 guestrooms combined will be delivered in 2012. thus.ge kpmg.910 by 2020. Besiki Business Center. which is expected to be delivered in 2013. a branch incorporated under the Laws of Georgia. 4 Besiki Street. All rights reserved. © 2011 Tbilisi Branch of KPMG CIS Limited. 2011 Our survey participants indicated that they expect the supply of hotel rooms to grow in Tbilisi by 10% annually through the year 2020. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. increasing the number of hotel rooms to 7. In addition. According to survey participants.