Tbilisi Airbnb Market Analysis
Cushman and Wakefield Georgia, a commercial real estate services company, has released their latest monthly report in their Hospitality Series, focused this month on the Airbnb market in Tbilisi. Data for their report came from AirDNA, which provides aggregate data on demand and performance indicators on Airbnb. The report looks only at properties located in Tbilisi for the period from June 2016 – May 2019.
The daily rental, home-sharing website Airbnb, which is operated in more than 81,000 cities in 91 countries, has taken Tbilisi by storm in recent years. As of May 2019, there were 14,438 active listing in Tbilisi, a 7,213% increase on three years ago. Many families own multiple apartments, which they hold as gifts for their children or as investments rather than selling. Now, some families are turning extra apartments into income-generating rentals. Investors are also snatching up small apartments in tourist-friendly neighborhoods and converting them to daily rentals. As the Cushman and Wakefield report explains, however, “A surge in supply has not...been accompanied by the same speedy increase in demand. In the first quarter of 2019, for every booked property in Tbilisi, two other available ones remain un-booked.” While the demand rate has been slowly increasing over the years, still as many as 67% of properties on Airbnb were left un-booked in the first quarter of 2019. The spike in properties on the market really began in July 2016, when listings jumped 1,102%, from 229 in June to 2,753 in July. On the positive side, the “average monthly growth rate of the number of booked properties has outpaced the growth rate of active listings in both 2017 and 2018, and again in the last five months of 2019.”
“Airbnb is not legally regulated in Georgia, and there does not seem to be a threat to Tbilisi communities. The general social climate is positive, underscored by the financial benefits of operating an Airbnb,” the report reads. However, there are many reports anecdotally of people struggling to find long-term rentals or even properties for sale due to the volume of properties being used for daily rentals. Additionally, as the report cautions, the majority of Airbnb listings, at least in the low season, go un-rented. Currently, the most guests by far come from Russia (Moscow and Saint Petersburg), which is likely to be affected by the new Russian flight ban imposed by President Vladimir Putin.
In May 2019, 77% of listing are Entire Homes, 21% are Private Rooms and just 2% are Shared Rooms. Unsurprisingly, the Cushman and Wakefield report finds that demand and occupancy rates for Airbnb properties are “characterized by seasonality...peaking in the third quarter and dropping to the lowest in the first.” While demand for Entire Homes is the highest among the rental types, and growing, demand for shared rooms, although small, is the only category that does not experience strong seasonal shifts. Within the Entire House category, the most popular option is studio apartments, followed closely by one-bedroom apartments. Homes with five or more rooms are the least popular.
Talking money: the monthly average median rates for Entire Homes peaked at $43 a night in the third quarter of 2016, and fell to $32 a night in the first quarter of 2019. In the same period, median rates for Private and Shared rooms have largely held steady around $25 and $11 a night, respectively. The median revenue for an Airbnb listing for an Entire House property was $457 in May 2019. The highest earning quartile of properties made more than $778, and the top 10% took home at least $1,209. The third quarter of 2017 was the most profitable for landlords, on average, with a median monthly income of $573. For the entire 35-period recorded in the Cushman and Wakefield report, the total revenue of the market reached $95.5 million.
“In terms of location, the Old Town is the most popular and highly ranked. This area is populated with old-style, expansive houses, which provide exactly the kind of local, authentic, immersive environment that a typical Airbnb guest is looking for. Geographic proximity to the tourist center is a strong advantage as well,” the report explains. The wider Avlabari and Mtatsminda neighborhoods are also popular, followed by Vera.
Looking ahead, Cushman and Wakefield predict that Airbnb will introduce their Plus and Experience services to the market, that the number of luxury listings will increase “as Airbnb is starting to be seen as a legitimate, profitable business,” and that Airbnb will become more attractive to business tourists. They also warn that while regulation may threaten the growth of the industry, continuing the status quo without regulation may pose a threat to local communities, injecting a “revolving door of strangers” into previously established, family-oriented neighborhoods. One major benefit of the rise of Airbnb in Tbilisi? The “rising recognition of Georgian cities on the world stage,” increasingly important as Russian sanctions take aim at the Georgian tourism industry this summer.
To download the full report: www.cushwake.kz/wp-content/uploads/2019/07/FINAL_MKTB_JUNE_AIRBNB-1.pdf
By Samantha Guthrie
Image source: Airbnb Community