HOTEL BUSINESS IN THE BACKGROUND OF BIG POLICY

BY, Keti Mikeladze

God has endowed Georgia with favourable geographic location. Everywhere, from East to West, there are health resort zones, mineral waters, historical monuments, moderate subtropical climate and many other interesting things for tourists.

We can hardly put up with the division of population into social layers. At this time, hotel business is “well-acquainted” with these layers and welcomes them accordingly. We should know seven classifications of hotels: SUPERIOR DELUXE – for customers with high needs; BUSINESS – for middle class (the Georgian hotels “Simpatia” and “Vere Palace” have also been included in the catalogue); SUPERIOR TOURIST for customers with low needs (hotels “Classic”, “Tabakhmela”, “Argo”, “Ipari”) and, finally, ECONOMY – for not so rich customers (“Intourist” in Batumi).
There is competition even within Georgia. There were more than 200 hotels in Tbilisi before October revolution (according to some sources, more than 517). We can not argue about the reliability of the data, but the fact is that some people started hotel business in the past ( to tell the truth, these were rather 2-3 local taverns). They could have developed, expanded this business if they had had necessary conditions. i.e. peaceful political situation. Revolution put an end to this business. For several years, visitors to Georgia stayed at state hotels, and diplomatic corps at Krtsanisi Residence.
What does hotel business look like in Georgia? What are the conditions for tourism? What is the influence of political events on it?
According to the data of Statistics Departments, 404,5 million people came to Georgia in 1960-65. If we compare these data with present ones, we will see a great difference (though there were not all tourists and visitors of hotels in these data). Abkhazian conflict and civil war largely decreased the number of visitors to Georgia. According to statistic indices, 85490 foreigners came to Georgia in 1995, in 1996 there were 116 980 people. In subsequent years the number of visitors gradually increases, in 2002 there were 387 274 people, in the year of terrorist act in America the number of visitors decreased by 87 thousand people.
Vaja Shubladze, chairman of Tourism Department speaks to us: “In 2001, tendency of decrease in the number of tourists is observed in the whole world. 11 September terrorist act caused panic in people. War in Middle Asia made its influence on it, too. Transatlantic flight decreased by 36%. Yet, small number of visitors to Georgia is not only caused by this symptom. We have internal reasons. This year, we first published a booklet highlighting many issues. It is called “2002 chronology of the negative influence of some events and facts on the image of Georgia in foreign countries. The pages of the booklet contain events and facts. The society does not remember most of them, but it is a direct blow to potential tourists who come to know about it. The last link of these negative events was intrusion of Russian helicopters into the territory of Georgia. This was followed by the refusal of Thailand, Switzerland, Arabian emirates, Iran and Belgium to attend the opening of “Tourist exhibition of Silk Road”. Such events have negative influence on the development of tourism and, accordingly, on hotel business. This kind of exhibition was organised last year; this year the number of countries participating in the exhibition has decreased. Yet, five countries were missing due to the above-mentioned factors; there were 15 ones left. If anything else happens, this number may decrease again. The events taking place in Georgia are “widely-advertised” by Russian mass media. How can we attract tourists in these conditions? I would like to express my gratitude to firms dealing with tourist business. These are the following firms: “Caucasustravel”, “Saktour”, “Visit Georgia”, “Intourist”, etc. Performing this work in such conditions is tantamount to a heroic deed. Hotels, too, work in the same way”.
As a matter of fact, Russia’s military actions (or demonstration of it) involuntarily spooked potential visitors from Georgia. Where would a tourist go if he learned that there were terrorists in the Caucasus and narcotics road passing through it? Certainly, to Russia… Visitors to their numerous hotels and development of tourist infrastructure is suitable to Russia.
Intensive construction of hotels in Georgia was observed in 1998-99, and it has gone on till now. It is difficult to establish the exact number of hotels functioning in Georgia nowadays. Yet, it is easy to obtain official data of Statistics Department: the total number of hotels in Georgia is 208, of which 81 are legal. Some representatives of hotels say that there are, in reality, 120 hotels in Tbilisi, but according to some other data the number is much greater. No one can establish the exact number because, first of all, requisites of illegal hotels are not usually made public; secondly, no one is inclined to spoil relations. One way or another, hotels continue to co-exist and have even gained particular experience of late years. Precise conception is important for the hotel management. According to some hotel managers, both hotels and thei owners resemble a horseman without his head. An owner either incessantly counts an approximate number of customers or worries about an outward look of hotels, commitments of hotels, specifics of customers and plans to change it into a restaurant or something else… If political climate in the country changes for the better and number of tourists rises, he will, probably, change this restaurant into a hotel again… In spite of it, many hotels are not afraid of any political changes and are even planning expansion.
David Motsonelidze, director of “Old Metekhi” speaks to us: “I will not be justified in saying that political situation is strained in Georgia. You, probably, remember the Israel-Palestinian endless conflicts. People die in the countries where a kamikaze explodes himself. No one knows where a certain terrorist will explode something… Everything depends on the importance of groups dealing with hotel business. Naturally enough, a visitor needs guarantees, and we give these guarantees to them. Hotel visitors do not only consist of people “attracted by the sights from some side of Metekhi”. Much work is performed in order to attract customers. Impressions received by them are helpful; a visitor gives recommendations to others. Generally speaking, a network of hotels is directly connected with the situation in all kinds of tourism ranging from automobile and tourist camps. Unfortunately, these camps are full of refugees”.
Refugees caused problems to the country that are as acute as 8 years ago.
Vaja Shubladze: “In word everyone admits that tourism is a priority branch for taxation system, but the matter does not go further than that. There are three ways of the development of tourism and hotel network”.
1. Local long-term credits. It is not worth to go this way. Internal and external debts of the country totalled 2 billions, of which not even a single tetri was assigned for tourism.
2. Participation: when a company says: ” I will build a hotel in this place and attract tourists, but you (state) should only solve energy, water-supply and road problems. The state cannot do even this; it cannot even become a contributor.
3. The third way is left: enactment of law suitable for investors. With this purpose a bill was prepared in the department. It was approved unanimously. No one opposes it except the Ministry of Finance, its argument is not clear. The legal framework that we think to be a positive change for the tourism and hotel business would help to avoid dependence on officials. It is not the way with other countries where a special certification agency deals with certification. Two firms function – private sector controls a private one. This makes the work of hotels easy.
It is true that a private limited liabilities companies are guided by the rules of “Sakstandard”, but the relations of hotel managers and officials is not quite all right. For instance, Tamaz Shavgulidze, owner of “Sympathy” hotel thinks that in the complex business of hotel management officials try to “look in” and by grubbing in the papers impede the work of people who make more business , worry more about the image and standards of hotels than these very officials.
Lia Gutashvili, manager of “Sympathy”: “A hotel will not be able to function without an orientation. From the very start we have been oriented on business contingent. It has all conditions ranging from conference halls and open and closed swimming pools. We create such conditions in order to attract visitors here again. As for political situation, it, certainly, has a negative effect on the business. A certain negative information on CNN is enough to turn a visitor back from Georgia. Visa regime with Russia has also produced a negative effect once. Generally speaking, Russia is a big market for Georgia in all aspects. If this market is restored, great perspectives will be open for the hotels…”
Some managers of well-known hotels suspended their comments on the business and its problems. Discontent towards illegal hotels is more and more observed. Some say hotels like “Pent house” (meaning “closed house” in English), hotels with less than 11 rooms can hardly be called a hotel no matter whether they are high rating hotels or not. Some think that there is not a great number of visitors in legal hotels because they usually go to illegal ones. Price per night in such “pent houses” costs mush less than in legal hotels that bear the burden of high taxes. Thus, legal hotels that pay taxes to the budget feel downtrodden because their unofficial rivals fight them by means of methods forbidden by the competition.
Ioseb Batiashvili, administrator of hotel “Muza? was the first to rise his voice against the taxes: “Our hotel is the “oldest” one. It was privatised in 1994. There were not so many private hotels then. Apart from great competition, there are also great taxes. I could talk about the problems incessantly. The main thing is that tax code stands in the way of the development of small business in Georgia as well as existence of middle layers. Society without a middle class is always doomed for poverty!”.
Generally speaking, hotels decorated with new design and materials do not express their discontent towards taxes. Manager of hotel “Tori” Lina Tserodze says: “Unlike many foreign high-class hotels, prices in most Tbilisi hotels are rather expensive. Visitors try to find cheap and good hotels. I think that opening of “Marriott” hotel cut bring prices down. They have their own contacts and customer exchange methods. There will be hotel room in business centre of Freedom square, too. This will, probably, cut down prices, too. As for our hotels, they are not only confined to military visitors. There are different kinds of visitors even local ones. The positive feature is that a hotel has the right to elect certification agency. Generally speaking, some hotels do not approve of the idea of reducing prices. As for “Marriott” hotel, neither the managing agency from abroad represented by Oto Schtoll nor the Georgian party, company “GMT” represented by Gia Tavadze consider it necessary to provide any information for mass media. Managers of foreign party and Nino Samsiani, realisation and marketing manager, gives the prerogative of answering all questions to the Georgian party. Yet, the Georgian party considers the owners competent to provide answers. The questions were like this:
1. When do owners of “Marriott” plan to gain profit from his investment;
2. What is the share of Georgian and foreign parties in the hotel assets;
3. What objects do the “Marriott” owners plan to build?
4. How many people were employed in the hotel from the Georgian and foreign side.
We will learn about these and other issues in the nearest future as soon as “Marriott” starts to function.
Private hotels work in the Georgian region, too. According to the data of Statistics Department, there are 28 hotels in Ajara, 1 in Guria, 3 in Svaneti-Racha_Lechkhumi, 16 in Samegrelo and Zemo Svaneti, 22 in Imereti, 10 in Kakheti, 15 in Mtskheta Mtianeti, 18 in Samtskhe-Javakheti, 10 in Shida Kartli. As for revenues, in accordance with 2000 data they were the following: budget revenues from hotel business in the Republic totalled 35,4 million GEL, but in 1998 it was comparatively less – 24,9 million GEL.
Vaja Shubladze: “No country has ever been damaged by the problems of refugees. There were more than 600 sanatoriums and holiday houses in the Republic with 120 thousand beds. Old and great hotels of Tbilisi are also full of refugees. Many of them were privatised and changed into partnerships. The famous resort in Tskhaltubo is also full of refugees. As a matter of fact, the development of tourism and construction of hotels started from nothing. More than 200 hotels were built. It is quite a good sign. A hotel must represent a strong tourist center, locomotive. Visitors should be attracted from the world, but not from the streets. Who would live in a hotel with dozens of rooms occupied by refugees. In the long end, market will regulate everything; prices will be regulated, too, f.e. as soon as “Marriott” starts to work.
We will not exaggerate by saying that the above-mentioned competition and agiotage in “Sheraton Metekhi Palace” is not even obvious. Disorders began from the very first year of the functioning of the hotel (1991). They have abated some years later. In fact, internal cataclysms had no influence on the visitors, world famous politicians and businessmen.
“Sheraton” is the first five-star hotel in Georgia. It is a part of “Starwood Hotels and Resorts” corporation. This corporation comprises six classes of hotel networks (“Saint Rija”, “Lashkari Collection”, “Sheraton”, “For Faintsa”, and “W-hotels”). On the whole, the corporation owns or controls up to 750 hotels in the five continents of the world. Tamar Vardiashvili, social relations manager speaks to us about the effect of private sector expansion and other issues: “Generally speaking, mass media does not represent hotel business objectively. In view of it, society receives a mistaken impression of the notion of hotels. This business contains many strata that it tries to develop. Hotels help the economy of the whole country; they give employment to the representatives of small business, operational staff, cooks, barmen, etc. This business is profitable in Georgia. A Georgian is hospitable by his nature. Therefore, functioning of numerous hotels is welcome here. Certainly, there will not be all five-star hotels, but also small ones. Finally, it will be determined by market which small or middle hotel will survive… Every year, representative of “Starwood” corporation comes to Sheraton to make audit. Visitors are questioned, too, but not by means of questions-answers means. They fill in forms that go to the head office. The head office considers the forms and makes a conclusion about the work of six class hotels and necessary changes. As for security, it is clear how the matter stands with 30 organizations located in the hotel, including Embassy of Great Britain and many others. In short, development of hotel network is not only in the interests of hotel personnel, but also in the interests of the whole country. Up to 3