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General effects

1.

Updated: Apr 27, 2021

The reliance of the Georgian economy on tourism

The reliance of the Georgian economy on tourism has increased significantly in the last couple of years. In 2019, tourism made up 8.1% of the Gross Domestic Product of Georgia.

(Source: National Tourism Administration)

Domestic tourism has a small role in the sector overall, and takes up a mere 28.5% (percent of local tourists in the total number of tourists staying at hotel-type accommodations, 2019). With these numbers, Georgia appears in the lower right corner of the graph (close to Greece). It is expected that the crisis will have a significant effect on the hotel industry and the economy in general for countries in the same category, and the recovery period will be extensive.

Domestic tourism relative to Tourism as a percentage of the economy, 2019
Significant impact on the hotel industry and economy, prolonged recovery
Significant impact on the hotel industry and economy, gradual recovery
Significant impact on the hotel industry but less on the economy, slow recovery
Significant impact on the hotel industry but less on the economy, faster recovery
Source: Colliers

2.

Updated: Apr 27, 2021

International tourists in Georgia

Georgia mainly receives tourists from its neighboring countries. Leading countries by the number of tourists in Georgia are Russia, Turkey, Armenia, Azerbaijan, Ukraine, and the EU countries collectively. Georgian government has officially opened the air border to our neighboring countries (and not only, check the full list*) . One the one hand, this decision will be an exhale for the tourism sector. One the other hand, looking at the latest newly confirmed COVID-19 data in the leading countries by tourists, they seem to have higher cases compared to Georgia, which may threaten to the pandemic situation in Georgia. Apart from this, Georgia opted to lift air travel restrictions for fully vaccinated travelers. All visitors, who've received two doses of any COVID-19 vaccine are permitted to enter the nation without producing a negative PCR test.

International Tourists by Country, 2019.
Source: Geostat

3.

Updated: Apr 27, 2021

Daily infection rate in regional countries

Since the around 3 months long restrictions, number of daily infection cases has been significantly decreased in Georgia (from peaking at 5,500 daily cases to 1,000). At this moment, Georgia has relatively low daily cases in the region, however, according, to the Georgia Health Sector officials, third wave COVID-19 pandemic is expected based on the increase in daily cases. This is how global trends are being developed too.


4.

Updated: Apr 27, 2021

Share of people who received at least one dose of COVID-19 vaccine

The following chart shows the share of the total population that has received at least one dose of the COVID-19 vaccine. This may not equal the share that are fully vaccinated if the vaccine requires two doses. By April 2021, Israel remains outperformer with more than 60% of the total population who received at least one vaccine dose. Looking at our neighboring countries, Turkey has the highest performance by 15% of total population and Russia by only 8%. As for Georgia, around 35,000 people has received one does of COVID-19 vaccine, which is only 1% of total population.


5.

Updated: Apr 27, 2021

We have inquired information about vaccination policies and projections of the leading countries, we host tourists from. As said before, the largest share of the tourist visits comes to Russia, Azerbaijan, Turkey, Armenia and EU. As we see from the official statements of leaders and health institutions, vaccination projections ranges from 40% to 70% (only Armenia has limited a vaccination plan) either for summer or the end of 2021. According to the Economic Intelligence unit, previous assumptions regarding the rollout of vaccines in Georgia and Armenia were too optimistic given the current global production bottlenecks and have been downgraded from mid-2022 to later than early 2023.

It is hard to guarantee that these projections will be fully achieved, however we can assume Georgia’s international tourism may have the potential to recover by 30%-35% in 2021 compared to 2019.



6.

Updated: Apr 27, 2021

Incoming Travelers by Airports

According to the European Commission latest paper, By summer 2021, at least 80% of people over the age of 80, and 80% of health and social care professionals , a minimum of 70% of the entire adult population in every Member State should get vaccinated. UK projects around 80% of the adult will receive at least first dose of a COVID-19 vaccination till summer. All these promising data creates a window for Georgia to target activated tourism/air travel with EU and UK from summer. Looking at 2019 performance, Tbilisi and Kutaisi International Airports had around 420k incoming international travelers from EU & UK, out of which EU & UK amounted 78% of Kutaisi Airport’s travelers and 18% of Tbilisi airport’s travelers. Therefore, Our observation is that Kutaisi Airport, will have more potential to recover its flights, while its main segment travelers’ will most probably be vaccinated.

Georgian Civil Aviation Agency has published new flight schedule for summer 2021. Flights from Tbilisi International airport will be performed to 24 destinations, 4 from Kutaisi Int. Airports (fully by Wizz Air), 6 from Batumi Airport. It should be also mentioned that Infrastructure of Georgian airports is being expanded in 2021. Batumi international airport will have capacity to serve 1.2mln-1.5 mln passengers, whereas Kutaisi International airport is tripling its capacity up to 1,000 passengers per hour. These changes create supporting preconditions for recovering tourism without disruptions.

Incoming International Travellers, 2019
Other Countries
EU & UK Citizens

7.

Updated: Apr 27, 2021

GOVERNMENT RESPONSE STRINGENCY INDEX

This index simply records the number and strictness of government policies, and should not be interpreted as "scoring" the appropriateness or effectiveness of a country's response.

The Government Response Stringency Index is a composite measure based on nine response indicators including school closures, workplace closures, and travel bans, rescaled to a value from 0 to 100 (100 = strictest response). According to the given chart, Georgia has been keeping the strictest measures till before the last week and is now dropped between 60-70 points.


8.

Updated: Apr 27, 2021

EXPOSURE OF THE ECONOMIC SECTORS TO COVID-19

Georgia’s economic sectors have experienced exposure to the crisis on different scales. According to the latest data published by Geostat forecasted change of 2020 GDP y-o-y (at market prices) has been corrected to -6.2%. Comparing 2020 to 2019, top 3 sectors with highest decline (-16%) appeared to be (1) Accommodation & food services, and Arts entertainment (-891 mln) (2) Transportation & Storages (-487 mln) (3) Wholesale and retail (-278 mln). These figures at some point are logical as These are the sectors which were mostly exposed to curfews, mobility and other type of restrictions. Slight increase was experienced in Agricultural (+4%), Healthcare (+8%) and Educational Sectors (+3%)

Change in GDP Value (mln) 2020 vs 2019
Agriculture, forestry, fishing
Mining
Manufact.
Electricity
Water
Construction
Retail
Transportation
Accommodation and food service
Information and Technologies
Financial Serv
Real estate
Professional activities
Public Admin.
Education
Healthcare
Arts, entertainment
Other activities

9.

Updated: Apr 27, 2021

DECLINE IN FOREIGN DIRECT INVESTMENT (FDI)

The crisis of pamdemic had a negative impact on FDI inflows too into Georgia, recording a 52.9% decrease in 2020 y-o-y. (Preliminary data, Geostat). The largest decrease in FDI is reflected again in Hotels and Restaurants sector by -284%, which is 342 mln less investment compared to 2019. Another larger affected sectors are Energy (which contributed by 22% in FDI in 2019) decreased by 97.8% and transport and communications (which contributed by 10% in FDI in 2019) by 52.3% y-o-y. We faced stable increase (by 47.1%) in financial sector and significant increase in real estate activities.


Update: June 8.

FDI in Georgia by Economic Sectors (2020 vs 2019)
Source: GEOSTAT

10.

Updated: Apr 27, 2021

INCREASE IN REMITTANCES

Georgia had a positive money inflows in 2020 y-o-y, increased by 9% . The hardest months were April and May 2020, which coincides the world pandemic peak period, however since June, money inflows had increasing trend, achieving USD 1.89 billion at the end of the year. For comparison, the effect of the 2008 recession saw remittances decrease in 2009 by 16% compared to the previous year.

Compared to 2019 performance of money inflows, there is some changes in money transfers by countries. Top 5 countries still remain Italy, Russia, Greece, USA, Israel, however money inflows have been decreased by 15% from Russia, whereas increased by 24% from Italy, by 14% from Greece and by 22% from USA y-o-y.

Money Inflows by months, 2019-2020 (Thsd, $)
2019
2020

Money Inflows difference by top 5 countries 2020 vs 2019, (thsn, USD)

11.

Updated: Apr 27, 2021

CURRENCY DEPRECIATION PERCENTAGE RATE

The depreciation in value of the Georgian currency against the US Dollar, as well as other currencies in the region, continue to fluctuate. In the last week in line with economic crisis in the country and processes in Trade partner countries such as Turkey a Russia, Georgian Lari has set new anti-record an depreciated by 18,1% against the US dollar compared to the beginning of January 2020. As for other the countries of the region, all of them also face economic crisis along with epidemiological situation, which is reflected in depreciation of their national currencies too. Particularly, in March 2021 Turkish Lira has depreciated by 40% and Russian Ruble by 22.5% compared to January 2020.

Depreciation of the national currency of Georgia and neighboring countries against the US Dollar, %, Jan 2020 - Mar 2021
Source: National Bank of Georgia, National Banks of neighboring countries

10.

Updated: Apr 27, 2021

Tourism Recovery Forecast

Based on the economic and tourism trend analysis, insights from Colliers International forecasts, Colliers Georgia has prepared tourism sector revenue recovery projection. According to this proposed model, the effects of the pandemic will last for about 4-5 years, the recovery will be gradual, and the 2019 performance is expected to achieved/restored by 2024.

Georgian Tourism data of 2020 show that international tourist visits have been declined y-o-y by 79% and domestic tourist visits by 10% (Geostat). Low activity in international tourism is expected to be experienced in 2021 too. Low % of recovery trend in 2021 may be also conditioned by low pace of vaccination within our country and in some of the neighboring countries. It is promising that according to the European Commission latest paper, by summer 2021, Member States should have vaccinated a minimum of 70% of the entire adult population. Not as ambitious but there are certain vaccination plans in neighboring countries too. However, looking at the actual pace of vaccination in the target tourism countries, we can assume that vaccination process there will last at least this whole year. Vaccination has started in Georgia, but despite the fact vaccines are available, at this moment only around 35,000 person has taken one dose of vaccine, which is just 1% of the total population. Based on this argumentation, we project that the number of international visitors will be recovered by 30% compared to 2019, we think this will be mainly at the expense of the summer season. In 2022, a higher rate of tourism recovery is expected in accord to increased number of vaccinated people. In our opinion it will reach 60% of 2019 performance. A full recovery will not be possible either this year, as the full end of pandemic is still not expected. By 2023, we think that international tourism will start approaching 2019 results, which will be fully overachieved by 2024.

International and Domestic Tourism Recovery Projections
Domestic Tourists Visits
Internatioanl Tourists Visits

Average Recovery Stabilization forecast, Colliers Georgia
Source: Colliers

The trajectory of domestic tourism change is significantly different from international tourism. Due to the restricted mobility between countries, tourists are choosing and will choose local destinations for tourism purposes. In Georgia domestic tourist visited has decreased just by 10% in 2020 y-o-y. Therefore, It is expected that in the upcoming years, the results of local tourism will not change as dramatically as in the case of international tourism. We should consider first 2 months of winter in Georgia (2021), when ski resorts were fully closed, and the curfew was/is in force. At least these 2 months of closure will negatively affect on the total revenues from local tourism too, although still we predict that this year 80% of 2019 results will be restored, and as for upcoming 2022-2024 – domestic tourism ratio will be stabilized at the rate of 2019.

We have also taken into account the announced forecasts of Fitch, IMF and Georgia Statistics Department for Georgia's economic growth in 2021-2024 years. IMF has decreased 2021 projected GDP growth to 3.5%however projections for following years looks quite optimistic (growth rate ranges from 5% to 6%). As a result of the weighting the forecasts of international and local tourism, projected economic growth (we have used IMF projection in the calculation below), we have obtained that revenues in the tourism sector are expected to be recovered in 2021 (according to 2019 data) by ~ 43%, in 2022 by ~ 73%, in 2023 by~ 93%, and just in 2024 we will exceed the 2019 performance.