This article was first publised here on 20 April 2020.
After the number of international arrivals to Georgia reached a record high of 9.3 million in 2019, most analysts predicted 2020 to be even better. Nobody has predicted a global pandemic.
Tourism industry has already experienced huge losses worldwide due to COVID-19, but for emerging destinations such as Georgia that has seen a rapid growth of tourism in recent years, the loss will feel even stronger. The government of Georgia has been praised for its very quick response to the coronavirus crisis in general – there has only been three deaths so far – but what’s its response to mitigate the blow to Georgian tourism?
In the last few years, tourism industry in Georgia has been booming. In the country of 3.7 million people, the number of international arrivals grew from 2.8 million in 2001 to 9.3 million (including 5.1 million of tourists) in 2019. From a relatively unknown little place a decade ago, the country has topped numerous international rankings of best place to visit since 2016. Tbilisi has recently scored high as one of the best city worldwide for female solo travellers to visit in 2020. The city of Batumi on Georgia’s Black Sea coast won the 2019 “Europe’s Leading Emerging Tourism Destination” at the prestigious World Travel Awards. Airbnb supply in Tbilisi has increased 2.5 times over 2016-18, generating a market worth US$ 23mn in 2018 (up from US$ 4mn in 2016). Adventure and wine tourism have also been booming with further predictions to grow.
The 2020 forecasts
Tourism revenues in 2019 reached US$3.3bn (compared to 1.7bn only five years earlier). In January 2020, tourism research analysts Galt and Taggart forecasted US$ 3.7bn tourism revenues in 2020, growth of 12.3%. They also forecasted that the number of tourists will increase by a further 10.5%.
In the first few weeks of 2020, the mood for the rest of the year was still very positive. Total international visitor (tourists and same-day combined) growth accelerated to19.8%y/y in January, after growing 16.3% y/y in December 2019. Arrivals from Russia – the country with the most international arrivals in 2018 – also grew, despite a ban on direct flights to Georgia imposed by President Putin in July 2019. In summary, it is fair to say that in the first weeks of 2020, Georgia was well on course to meet the target of 11 million of international arrivals by 2025, set in its National Tourism Strategy.
And then the coronavirus came.
Response to the virus
On 29 January, Georgia suspended direct flights with China to prevent the spread of coronavirus. The impact on tourism didn’t look significant yet, Chinese represented only 0.6% of total visitors to Georgia in 2019. Besides, the ban was only temporary, until 29 March. After that, the government acted quickly with a long list of effective measures to limit the spread of the virus, which (as of 17 April) resulted in 370 cases and only three deaths. The Eurasianet news portal reported that ‘by the time epidemic broke out in nearby Iran in mid-February, proactive border checks, which included temperature tests and reviews of travel history, were already well in progress in Georgia’.
Inevitably, shutting down all hotels, restaurants, cafes and bars; closing all ski resorts in the middle of the skiing season; closing the borders to passenger travel; banning all foreign nationals from entering the country until at least May 10; and suspending all air traffic was what hit the tourism industry most.
Economic impacts on tourism
The Georgian authorities say the coronavirus is likely to threaten the country’s economic growth forecast of 4.5% this year and tourism will suffer most. ‘Further spread of coronavirus may impact visitors’ inflow and, therefore, the whole economy,’ the central bank head Koba Gvenetadze told Reuters at the end of March. On 8 April, the World Bank also stated that ‘The Georgian economy will be severely impacted, as transport restrictions affect the travel and tourism sectors, while containment measures dampen domestic demand.’
The ban on travel also means widespread cancellations of accommodation bookings through Airbnb or booking.com. Considering that more than 10,000 rentals were supplied monthly in Tbilisi on Airbnb in 2018, this has already affected hundreds of individual landlords.
The impacts on the Georgian hotels, restaurants and catering sectors are already quite visible: according to the March report by TBC Capital, payments with TBC Bank terminals in hotels have decreased by 40% compared to the previous year, and payments in food service facilities by residents and non-residents have also gone down significantly.
In the most recent report, Galt and Taggart analysts calculate that in the most optimistic scenario (the economic recovery from June), the tourism industry will lose US$1.2bn in 2020 vs 2019; in the mild (recovery from June but downturn from Oct) and in the pessimistic (continued economic downturn from March) scenarios, the loss will come to US$2bn and US$2.8bn respectively. They suggest that Georgians stopping to travel abroad could compensate US$0.2bn-0.5bn of these losses. That means a focus on domestic tourism.
The stimulus for tourism
In March, the Georgian government has prepared an Anti-Crisis economic stimulus package worth around 1 billion Lari (about $330 million). The measures include tourism-related infrastructure spending, and exemptions from property and income taxes for tourism businesses, covering around 18,000 companies and more than 50,000 employees. 2000 guesthouses, small and medium size hotels (up to 50 rooms) will receive bank loan interest rate co-financing for six months. Additionally, Tbilisi City Hall exempted open cafes from paying rents in 2020, and small and medium enterprises are exempted from paying rents for three months.
In the last few weeks, the Georgian National Tourism Administration (GNTA) has been predominantly responsible for managing the Georgian residents coming back from abroad. The First Deputy Head of GNTA Rusudan Mamatsashvili told me that GNTA has been organizing transport from different borders, placing people in mandatory 14-day quarantine in different hotels throughout Georgia, and looking after them while they were quarantined. ‘From March 10 until 13 April, we have had over 10,000 people in around 90 quarantine hotels. Half of the people have already left the hotels after finishing quarantine’, she said.
Road to recovery
These are the much-needed, urgent responses to the current urgent needs. In mid April, it is still too early to speculate on any specific dates to reopen the borders or lift the air travel ban. However, time has come to look ahead, beyond the most-pressing current needs, and start working on a longer-term recovery plan.
‘Currently we are having broad discussions with private sector and discussing further actions for the post-crisis period. We will also focus on domestic tourism first,’ Rusudan Mamatsashvili told me. She also confirmed that the focus now will be on domestic tourism. It can be assumed that international tourism to Georgia will pick up again in 2021, but with so much uncertainty at the moment, it is still a conjecture.
However, there is also a huge opportunity for the Georgian government to redefine tourism, look at the consequences of the rapid growth of the last few years and reassess where the challenges were, and how best to mitigate the negative impacts. There is an opportunity to shift towards a more socially and environmentally sustainable tourism, ensure more benefits for the local communities, focus more attention to ecotourism, diversify the tourism product offer, repurpose the marketing into promoting more local experiences. Time will show whether there is a will for a more sustainable tourism in Georgia, and I will explore the roads to recovery in my next article.