As early as 1998, Georgian government discussed the plan of tourism development that was aimed to increase number of tourists in Georgia up to one million.
According to the data of Department of Tourism and Resorts of Georgia, the figure exceeded half a million in 2005 with 560021 foreign tourists. In 2006, the number of tourists increased by 76% and made up 983 114, while a million margin was overstepped in 2007. Though, the situation radically changed in 2008, after August events. Representatives of touristic companies declare that last touristic season actually dropped through. Forecasted figures of the current season do not look promising either.
ourism development in Georgia is facing serious obstacles and there are several reasons for this – constant military rhetoric in the country, high prices of airline tickets and hotels. Meanwhile, offered conditions and quality do not correspond to the high prices; and of course global financial crisis and its consequences that are already clearly felt in Georgia .
Testing period for international tourism
Tourism is one of strategic fields in the world and in Georgia. It has great importance for economic development of a country. According to the calculations made by experts, 4% growth of world economy increase tourism field by 6.5% and on the contrary – deceleration of economic growth causes chain reaction for tourism segment. According to the data of World Travel and Tourism Council (WTTC), tourism and travel segment amounts 9.9% of global GDP, 10.9% of world export and 9.4% of world investments.
Income of international tourism increased in 2008 by 1.8% and the number of tourists increased by 1.9% (922 million). According to the data of United Nations World Tourism Organization (UNWTO), incomes of international tourism in 2008 made up $944 billion. The same figure in 2007 was $857 billion. France is in the first place by the number of tourists each year (79 million tourists), while the country is on third place by the incomes from international tourism. USA is taking first place by incomes and second by the number of tourists. Spain is holding second place by the amount of incomes derived from international tourism and it is one of the countries with greatest incomes from tourism. It is taking second place in the world after USA, and first place in Europe. China is on the fourth place by the number of tourists and on fifth place by incomes from tourism. On the contrary, Italy is holding fourth place by incomes and fifth place by the number of tourists.
However, according to the data published in June 2009, the number of tourists n January-April of 2009 has decreased by 8% compared to the figures if the same period in 2008. The number of tourists in recent four months made up 247 million people, while last year this number was 269 million. World Tourism Organization has published forecast for 2009 and predicted 4-6% reduction of international tourism in the course of whole year. Hot touristic season is still forthcoming and let’s hope that this will improve the situation. However, negative tendencies will be maintained, as economic crisis decreased the number of tourists and business activities in whole. Moreover, H1N1 virus (Pig Flue) factors are worsening the situation also. World Healthcare Organization is recommending to restrain from traveling in foreign countries.
The number of tourists decreased by 20% in Europe, by 5% in USA, 6% – in Asia and the Pacific Ocean basin, 18% – Middle East. Surprisingly the situation is quite different in Africa, as the number of tourists there has increased by 3%. Europe remains most attractive place for tourists. 500 million tourists visited Europe in 2008 that is 53% of overall quantity. Incomes from tourism for old continent made up $434 billion.
Some changes are noticed in the rating of the world cheapest health resorts. If in the past Thailand, South Africa and Egypt were in the top of the list, now Bulgaria is heading forward. Minimal constitution of “touristic basket” in Bulgaria is 42-Pound Sterling. The cheapest touristic countries are Turkey, Croatia, Malaysia and Malta. In case of selecting right direction, EU member countries can appear in the list either. For instance, the cheapest touristic countries in EU are Spain and Portugal. Among short-length touristic routes, Budapest, Warsaw and Prague are leaders in Europe. Touristic companies are offering thousands of bonuses to the clients.
The situation in Georgia
There is a tendency of reducing prices on touristic services in Europe. However, high prices remain as one of the main problems in Georgia, especially for airline tickets and hotels. Average price of airline tickets in Georgia is 600-700 and this is twice as much as in Europe and in USA. There are high prices on hotels either. World specialists recommend owners of hotels in Georgia to lower prices according to international market prices and work for minimal profit. Experts reckon that everybody in Georgia wants to make a profit immediately and this is wrong perception. At least three years are needed to get a profit out of a hotel.
Incoming tourism manager of Levon Travel is speaking of high prices of hotels in Georgia. One positive thing brought by crisis is that hotels started to decrease prices. It is a pity that such thing was necessary for price reduction. This could have been done earlier too. The last year prices were simply inconceivable. Touristic package of the same quality costed more in Georgia than in Armenia or Azerbaijan. When arranging combined tours in these two countries, Georgia always stood out for high prices. However, we were not offering anything special. We had the same quality and service as our neighbors. High price of touristic packages are mainly defined by high prices on hotels, as all the rest sectors are more or less equal. The price reduction this year did not improved the situation as it was defined by hard situation in the country.
G.E. – What is the dynamics of foreign tourists in Georgia?
R.G. – Actually, it might be said that this year season for inbound tourism has failed. I have been working in this company already for eight years and we had 20-25% increase in tourist number every year. However, after August war at least 70% decrease is noticed.
Besides this, I want to admit that our company doesn’t offer sea resorts to holiday makers. We offer cultural routes with old relics and monuments and local attractions. I reckon that European tourists have no reason of coming to Georgian sea resorts. Our seaside resort zone is not developed so far. Prices for cultural tours depend on various circumstances, for instance, the size of touristic group, duration of the tour. A tour with average one-week duration for 15 people costs $800-900 per person without airline tickets. Touristic package includes hotel expenses with two meals a day, transportation and guide service.
Tourism manager of Levon Travel Mr. Mamuka Gelauridze spoke with us about Georgian tourists that want to spend holiday abroad.
M.G – The number of tourists is decreased. We haven’t calculated percentage statement yet, as the season is actually taking a start now. However, we suppose that in comparison with the previous years, there will be 30% decrease this year. Despite constant discounts offered by Turkish hotels, people simply have no money for holidays. Most popular Turkish resort is Antalya in Georgia. However, we can arrange touristic group in any other location in case of client’s desire.
G.E. – Has the price on airline tickets or hotels decreased considering economic crisis?
M.G – Starting price of airline tickets this year is 250. There are no changes in the price of the airline tickets; the price remains the same more or less. Prices on hotels in Turkey are varying, somewhere they are decreased and somewhere not. Generally, the prices are increased this year in whole. Global financial crisis has not affected the hotel prices, but there are some different reasons of price increase. Prices are attached to Turkish Lira, as the Lira exchange rate fluctuates, the prime-cost of the product is increased in Turkey and thus they increased the prices. Now, when it appeared that the number of tourists is rather decreasing, we are receiving new discount offered every day. However, this year’s standard prices are higher than that of previous one.
Manager of the touristic company N-tour head office, Miss Mari Shengelia Representative of another touristic company confirmed this information.
Mari Shengelia, manager of the touristic company N-tour head office – Of course, the number of tourists is decreased. However, I am not able to name exact numbers at this moment. I can only say that the number of tourists is less than half of what it was in previous years. We have a wide range of choice in resorts, but at the moment most current are sea resorts and Turkish ones. The prices in Turkey are not reduced. There are some hotels offering various discounts for holidaymakers. However, despite the information that Turkish hotels are not crowded, prices in general remain the same.
G.E. – What is average cost of holiday making in Turkey?
M.SH. – One week tour, in a three-star hotel with two meals a day costs 400. There are some hotels where one can rest for $600-800 for ten days. The price depends on the hotel and services that is chosen by a holidaymaker.
Airline ticket prices generally have not changes in comparison with previous year’s prices. Average price of airline ticket to Turkey is 300. Flights from Batumi to Turkey will cost much cheaper, starting price will be 150 and then it will be increased to 200.
G.E. – What situation is at local market and local hotels?
M.SH. – Prices are too high and this is happening under the conditions when none of Georgian hotels is offering the quality service that can be seen abroad. I can say for sure that you cannot rest in Adchara for 400 for week or you won’t receive the same quality service that you would in Turkey at the same price. A night in a hotel in Batumi with normal conditions costs $250 and this is extremely expensive, and at the same time, no services are included in the price. In Turkey, price would include travel expenses, medical insurance, two meals a day, hotel with swimming pool and other conveniences. Moreover, I am not talking about five-star hotel. This is impossible in Adchara. Of course, 400 would be enough for cottages or private houses. I would like to mention government’s initiative to exempt touristic companies from VAT. It would be great if hotels will be exempted from this tax either and maybe decrease the prices. Much more tourists will arrive in Georgia in this case. This encourages tourism development and whole economy either.
Tax exemptions for touristic companies
Together with banking and construction sectors, Georgian government might establish some benefits for touristic companies either. Touristic companies might be exempted from 18% value-added tax. Ministry of Economic Development of Georgia has already elaborated plan of the benefits for touristic companies and now the plan needs to be approved by the government. Minister of Economic Development explained that for mass development of tourism in Georgia, it is necessary either to exempt companies acting in tourism field from taxes or to reduce taxes partially for them. Mr. Lasha Jvania noted that 3-4 days tourist trip in Europe costs as much as one-day trip in Georgia, including airline tickets. “Government should take every measure to maximally encourage tourism development in the country. Otherwise, the sector will fall into decay – noted minister – If we exempt from VAT the companies, operating in tourism field touristic trip will get cheaper by 18%. Georgia becomes competitive toward Turkey, Ukraine, Rumania and Bulgaria”.
However, touristic companies do not share minister’s optimistic mood. They welcome such initiative, but at the same time, they note that other factors for the development of tourism in Georgia are as much important.
Paata Kvidjinadze, director of touristic company Fresh Travel – Hotels were paying value-added tax, but inbound tourism was tax-free. Time shows the consequences of these changes and their actual effect. As I have already mentioned, touristic companies, I mean here inbound tourism were already tax-free. Other factors like stability in the country are much important in tourism. When the constant talks about war will be over the situation improves by itself. Besides this, hotel prices are quite expensive in Adjara region. However, our company does not arrange sea trips. Mainly we work on cultural tours. We do not go beyond Kutaisi.
Another significant problem that considerably decreases number of Georgian holiday makers is that banks stopped issuing touristic installments.
Nino Mjavanadze, director of touristic company “Georgian Express Travel” – about 5-10% of Georgian population are holiday makers, the rest simply cannot afford it. The same people are the holidaymakers every year. The main reason of reduction in the number of holidaymakers is abolishment of touristic installments. Ordinary people were able to take installments with 8-20% interest rate. Every employed people with average salary of GEL 300-500 could have had a vacation and afterwards pay the sum during the next year. There is no opportunity for such people to have a holiday any more. Now holiday has become a luxury and only small number of people can afford it, either upper class or those who receive money from abroad and these people made up very small percentage of whole population.
There would have been more holidaymakers if the ticket prices were less expensive – continues Nino Mjavanadze – For instance, in Turkey one might spend a vacation in a three-star hotel for $700, with two meals included, service package and etc. It is possible to rest even for $350, but quality and service is not guaranteed here. While $50-70 cost to spend a night in Batumi only with one meal included. High prices on airline tickets spoil everything. For instance, we have excellent discounts from Egypt, one can rest even for $25 there in hotel, but flight costs too much. There is a two-hour flight to Egypt, and meanwhile the ticket price is $700. New-year price of the ticket was $900, when flight from Europe to America costs only $950. Despite the fact that Egypt is in two-hour flight from Georgia, ticket prices are just colossal.
Despite all the problems, touristic season has started in Adchara. As the representatives of the Department of Tourism and Resorts in Adchara declare, 66 700 tourists visited Adchara from January to present. 20 thousand tourists visited Adhcra in June 4 242 of which were foreigners. Trousim departments supposes that about 320 thousand tourists visit Adchara during this season. According to the data of tourism department, the overall number of places in hotels, lodging houses and private sector in Adchara is 39 780, 6 thousand of which are in hotels.
As regards lodging houses, a night in Qobuleti in June-July costs GEL 5-10, while the prices increases up to GEL 15 August.
The prices in family hotels increase in August either. This type of family hotels with meals included cost GEL 20, but in August, it increases up to GEL 25-50. However, this mainly is for local holidaymakers.
As Touristic companies noted foreign tourists do not want to spend holiday in sea resorts, as we do not have such quality service as in Europe or even in Turkey. Foreigners mainly want to visit cultural sights. However, Georgia is mountainous country and winter resorts have good potential either. However, there are quite a number of problems also. For instance Svaneti region, which is very interesting and attractive for European tourists. Touristic companies were complaining year ago that they do not plan touristic tours in Svaneti for two main reasons – bad roads and no hotels. Gradually situation is getting better. Road rehabilitation process has been started in Svaneti and this might become cornerstone for Georgia’s future. Road reconstruction works are conducted in Mestia region and village Becho. These are the most frequently visited places in Svaneti.
Tourism infrastructure program has been accomplished with support of the program for encouragement of small and average business of USA Agency for International Development (USAID) and within the framework of the project of employment and infrastructure development in Georgia. Rehabilitation program includes eight projects – reconstruction of hotels Mestia and Svaneti, establishment of various facilities like café and internet café, bicycle rent service, gas station. Some new routes designed by Svaneti touristic centre will become operative either; In addition, souvenir shop will be opened also. Satellite dish has been installed in Mestia that ensures internet services. Several projects have been accomplished in Ushguli either. $190 thousand has been spent on the program accomplished in Svaneti region within the framework of the small and average business support project. Touristic map of Mestia and Svaneti tourism centre booklet has been published. Road signs were installed from Zugdidi to Mestia. In whole $80 thousand has been spent on the project.
Besides state programs, some private investments are made in Svaneti region. Hotel Tetnuldi will be opened in the end of August. The project costed about $2 million for local investors. Georgia Regional Development Fund (GRDF) has loaned major part of the sum. Hotel will be able to receive 70-80 visitors both in winter and in summer. Hotel is ranked three-stars. Its facilities include restaurant, bar, sauna and swimming pool. Tourists will be offered summer and winter tours with guide service, quad bikes, horses and bicycles. The prices will vary from 100-200 GEL for a night, depending on the type of hotel room and service.
We have discussed various places and means of tourism. As it seems there is a lot of work to do in this field in Georgia. Where is the way out? In decreasing taxes for touristic companies or reducing prices on airline tickets and hotels? However, one cannot induce investor or businessman to lower prices on services, as it is his or her own business and one can do what he/she wants with it. The same thing is about banks – issuing touristic credits or not – is only in the competence of their management. Maybe, the solution is to stop military rhetoric. However, this doesn’t depend only on good will of Georgian politician and diplomats. There are other determining factors for this. After President Obama’s visit in Russia, many of us hoped that we were saved, but Medvedev’s “visit” to South Ossetia and then Georgian parliament’s note of protest moved military rhetoric into active phase again. All we are left to do is to count how many tourists are missing since the goal set by Georgia government in 1998 to receive 1 million tourists in Georgia.