Tourism Market Watch: July

Sector research is one of the key directions of Galt & Taggart Research. We currently provide coverage of Energy, Healthcare, Tourism, Agriculture, Wine, and Real Estate sectors in Georgia. As part of our tourism sector coverage, we produce a monthly Tourism Market Watch, adapted here for Georgia Today’s readers. Previous reports on the sector can be found on Galt & Taggart’s website - gtresearch.ge.

For Georgia Today by Kakhaber Samkurashvili

Number of direct flight routes & flight frequency on the rise, in line with record growth in number of international visitors to Georgia

The number of direct flight routes peaked in June 2017, as 38 carriers serviced 87 routes with almost 400 weekly flights. The growth in connectivity goes hand in hand with the increasing number of visitors from secondary source countries. As a case in point, the number of visitors from the Middle East was up 94.0% y/y to over 78,000 in the first seven months of 2017, with Saudi Arabia (+217.5% y/y), Jordan (+398.4% y/y), and Kuwait (+184.9%) driving the growth. Given the above dynamics, air arrivals are gaining share, with 21.3% of international visitors to Georgia arriving by air, up from 16.1% in the same period last year.

Georgian Airport capacity being upgraded to service inbound and outbound growth in tourism

A second terminal has commenced operations at the Tbilisi International Airport and will be fully functional as of September 2017, increasing the airport’s annual capacity to approximately to 4.0mn passengers (previously 2.4mn passengers). Construction of a new terminal in the Kutaisi International Airport is expected to commence in August. On the back of inbound tourism growth and visa liberalization, passenger traffic was up 43.6 % y/y in Tbilisi and 86.5% y/y in Kutaisi in the first seven months of 2017.

Georgian government trying to incentivize domestic air travel

According to the latest amendments to the tax code, domestic flights are exempt from excise and VAT taxes on aviation fuel and flight service, which should increase their affordability. Furthermore, the government has provided a GEL 10.8mn subsidy to ServiceAir, a company operating domestic flights to Batumi, Mestia, and Ambrolauri. ServiceAir is expected to operate domestic flights year-round.

International travel inflows to Georgia increased 27.9% y/y to US$ 659.0mn in 2Q17, after growing 23.3% y/y in 1Q17

Overall, travel inflows were up 26.0% y/y to almost US$ 1.1bn in 1H17. The share of travel inflows in service exports reached 61.1% in 1Q17, up from 56.4% in 1Q16. Foreign card operations of international travelers in Georgia were up 34.2% y/y to GEL 165.1mn in June 2017 and 33.5% y/y to GEL 952.3mn in 1H17.

Value added from tourism was roughly flat y/y at GEL 480.1mn in 1Q17 and accounted for 6.8% of GDP, compared to 7.4% in 1Q16

Value added was up 36.2% y/y in the accommodation units and 5.5% y/y in the food establishments categories, while value added was down 8.5% y/y in the transport segment and 8.3% y/y in the travel companies category.

Number of international arrivals up 28.5% y/y to 0.98mn in July 2017

Out of the top four source markets, there was very strong growth from Armenia (+25.4% y/y), Azerbaijan (+13.8% y/y), and Russia (+60.4% y/y). For the first time in 2017, the number of visitors from Turkey was up, albeit slightly (+0.6% y/y). Arrivals from the EU were up 21.4% y/y to over 45,000 visitors.

Number of international arrivals up 16.8% y/y to 3.98mn visitors in first seven months of 2017

The number of visitors increased from all major source countries except for Turkey (-12.9% y/y). The largest individual contributors to overall growth were Armenia (+18.3% y/y) and Russia (+35.9% y/y). Azerbaijan contributed 2.2 percentage points, as the number of visitors from Azerbaijan posted a solid increase of 8.7% y/y despite the high base of last year. The number of Iranian visitors was up 2.7x to almost 166,000 visitors and surpassed the number of Ukrainian visitors (110,275) in first seven months of 2017.

Share of top four source markets in total international arrivals at 79.9% in first seven months of 2017, secondary sources continue to post robust performances

Arrival growth from secondary (non-EU) source markets contributed 4.0ppts to the overall growth of 16.8% y/y. The number of Israeli visitors increased 43.1% y/y to over 66,000, while the number of Indian visitors was up 100.9% y/y to over 31,000. Arrivals from the EU were up 22.8% y/y to almost 174,000 visitors, with Germany, Poland, and UK driving the growth.

Tourist category continues to drive arrival growth in July 2017

The number of overnight visitors (‘tourist’ category) was up 32.9% y/y – after the largest y/y growth on record in July 2017 – and accounted for 52.9% of international arrivals. Same-day arrivals were roughly flat, while transit visitors posted an outsized 53.7% y/y growth rate. The number of tourist arrivals is up 30.2% y/y to 1.83mn in first seven months of 2017, while the number of same-day visitors is down 1.6% y/y and the number of transit visitors is up 25.3% y/y.