Final Report Task 7. Tourism Development and Investment Plan and Strategy

Transcription

1 Final Report Task 7 Tourism Development and Investment Plan and Strategy Submitted by: The America-Georgia Business Council and SW Associates Washington, DC Submitted to: Government of Georgia Ministry of Economic Development Department of Tourism and Resorts This report was funded by the U.S. Trade and Development Agency (USTDA), an agency of the U.S. Government. The opinions, findings, conclusions, or recommendations expressed in this document are those of the author(s) and do not necessarily represent the official position or policies of USTDA. USTDA makes no representation about, nor does it accept responsibility for, the accuracy or completeness of the information contained in this report. Mailing and Delivery Address: 1000 Wilson Boulevard, Suite 1600, Arlington, VA Phone: Fax: Web site: info@ustda.gov

2 Georgia Tourism Development Plan and Strategy Task 7 Report The U.S. Trade and Development Agency The U.S. Trade and Development Agency (USTDA) advances economic development and U.S. commercial interests in developing and middle income countries. The agency funds various forms of technical assistance, early investment analysis, training, orientation visits and business workshops that support the development of a modern infrastructure and a fair and open trading environment. USTDA s strategic use of foreign assistance funds to support sound investment policy and decision-making in host countries creates an enabling environment for trade, investment and sustainable economic development. Operating at the nexus of foreign policy and commerce, USTDA is uniquely positioned to work with US firms and host countries in achieving the agency s trade and development goals. In carrying out its mission, USTDA gives emphasis to economic sectors that may benefit from U.S. exports of goods and services. Mailing and Delivery Address: 1000 Wilson Boulevard, Suite 1600, Arlington, VA Phone: Fax: Web site: info@ustda.gov 2

3 Georgia Tourism Development Plan and Strategy Task 7 Report Disclaimer The America-Georgia Business Council and SW Associates, LLC endeavored, using their best efforts in the time available, to provide the best possible quality services and have relied on information provided to them by a wide range of primary and secondary sources. We cannot not make any representations or warranties regarding the completeness or accuracy of the information included in this report, or the results which would be achieved by following its recommendations. The opinions and views expressed in the report are those of the authors and not of either the Government of Georgia or the Government of the United States. About America-Georgia Business Council The America - Georgia Business Council (AGBC) was established in January 1998 in response to requests from a number of U.S. companies. The Council's objective is to raise Georgia's visibility in North America as an exciting place to invest and do business, and to maximize opportunities in Georgia for our members. AGBC s strengths lie in the deep understanding of Georgian political and business landscape, direct access to the high-level government officials and agencies, diversified business contacts and strong reputation of the reliable resource both in the United States and Georgia. Contact: Mamuka Tsereteli, Executive Director, AGBDC@AGBDC.com, tel: (202) , About SW Associates SW Associates is a consortium specializing in international tourism development, strategic planning, cultural heritage and community tourism, marketing and research. Drawing upon a global network of experts, SW Associates provides multilingual teams according to client and project needs. SW Associates has managed and participated in a broad range of tourism development programs and projects around the world. These include economic development through tourism, investment promotion, communications and organizational strategy, issues management, coalition-building and international government relations. Contact: Scott Wayne, President, SWAssociates@verizon.net, tel: , 3

4 Georgia Tourism Development Plan and Strategy Task 7 Report Abbreviations AGBC America-Georgia Business Council BISNIS Business Information Service of the Newly Independent States CFC Compact Fluorescent CRM Customer Relations Management DMO Destination Marketing Organization DOTR Department of Tourism and Resorts EBRD European Bank for Reconstruction and Development EIA - Environmental impact assessment EPFI Equator Principles Financial Institutions EU European Union FDI Foreign Direct Investment GDP Gross Domestic Product GEF Global Environment Facility GEL Georgian Lari GIS Geographic Information System GoG Government of Georgia GRDF Georgia Regional Development Fund GTSP Georgia Tourism and Strategy Project GTZ Deutsche Gesellschaft fuer Technische Zusammenarbeit GmbH (German Agency for Technical Cooperation) HACCP Hazard Analysis and Critical Control Point ICAO International Civil Aviation Organization IFC International Finance Corporation ICZM Integrated Coastal Zone Management IMBA International Mountain Bicycling Association ISO International Standards Organization IUCN International Union for the Conservation of Nature and Natural Resources LEED Leadership in Energy and Environmental Design MCC Millennium Challenge Corporation MICE Meetings, Incentives, Conferences and Exhibitions NAICS North American Industry Classification System NATO North Atlantic Treaty Organization NBG National Bank of Georgia NGO Non-governmental Organization NQF National Qualifications Framework OECD Organization for Economic Co-operation and Development OPIC Overseas Private Investment Corporation EuroStat Statistical Office of the European Union PAIR Preservation, Access, Interpretation and Remembrance SAR Special Administrative Region SEO Search Engine Optimization SME Small and medium-sized enterprise SSTH - Swiss School of Tourism and Hospitality STS System of Tourism Statistics 4

5 Georgia Tourism Development Plan and Strategy Task 7 Report SWA SW Associates SWOT Strengths, Weaknesses, Opportunities and Threats TIFA Trade and Investment Framework Agreement TSA Tourism Satellite Account UNESCO United Nations Education, Scientific and Cultural Organization UNWTO United Nations World Tourism Organization USAID US Agency for International Development USSR Union of Soviet Socialist Republics VFR Visits with Friends and Relatives WB World Bank WFTGA World Federation of Tourist Guide Associations WGA Whole of Government Approach WWF World Wildlife Fund 5

6 Georgia Tourism Development Plan and Strategy Task 7 Report Contents Abbreviations...4 Tables...8 Figures...9 Organization of the Report...10 Letter from the Department of Tourism & Resorts...11 Acknowledgements...12 Foreword...13 Introduction...14 The Vision...14 Key Principles...14 The Mission and Responsibilities of DOTR...15 Performance Targets...16 Strategic Objectives...16 Achievements Part I: Tasks Task Task 1.1: Advisory Committee...23 Tasks 1.2 & 1.3: Overall Policy Environment and Investment Trends and Conditions...27 Task 1.4: Assessment of Inventory Efforts...39 Task 1.5: Analysis of Physical Infrastructure...46 Task 1.6: Assessment of tourism-related human resources, including institutional capacity...59 Task 1.7: Review of Environmental Impact Assessment Processes in relation to sustainable tourism...64 III. Energy resources...66 Task 1.8: Overall Initial Recommendations...67 Task Task 2.1: SWOT Analysis...77 Task 2.2: Product analysis...84 Task 2.3: International competition analysis Task 2.4: Analysis of existing customers Task 2.5: Preliminary List of Promising Projects Part II: Tasks Strategies and Actions (Task 3: Prepare Tourism Plan) Attractions and Experiences Georgia s Offers (Task 3.1: Longer range opportunities) Marketing, Promotion and Information (Task 3.2: Marketing and Promotion Plan) Destination management (Task 6a: Infrastructure) Create a well trained workforce (Task 6c: Human Capacity Building) Leadership and management (Task 6c: Human Capacity Building) Create, Sustain and Promote a Positive Tourism Investment Climate Priority Projects (Task 3.1:Opportunities & Linkages) Action Plan for Economic Impact Assessments (Task 3.3)

7 Georgia Tourism Development Plan and Strategy Task 7 Report 9. Preliminary Environmental Impact Analysis (Task 4) Regulatory Impediments and Recommended Market-Oriented Reforms (Tasks 5 and 6b) Development Impact Analysis (Task 6) Annex A: Proposed Basic Data Collection Instrument for Inbound Visitors as they leave Georgia Annex B: Wine Tourism Cluster Strategy for Kakheti Annex C: Tourism Investment Incentive Examples A. Malaysia Tourism Investment Incentives B. Greece Tourism Investment Incentives C. Montenegro Tourism Investment Incentives Annex D: Comparative and Illustrative Country Examples and Levels of Success Annex E: Illustrative List of Prospective US Suppliers Annex F: Map of Georgian Destination Hubs and Spokes

8 Georgia Tourism Development Plan and Strategy Task 7 Report Tables Table 1: Additional Issues Raised by the Advisory Committee Members...25 Table 2: SWOT Analysis...40 Table 3: Analysis of Physical Infrastructure...46 Table 4: Additional Infrastructure Factors...53 Table 5: Key Destinations...85 Table 6: Overall Target Markets Table 7: Arrivals to Turkey Table 8: Comparison of Regional Tourists Table 9: Levels of Success for Bulgaria Table 10: Levels of Success for Croatia Table 11: Levels of Success for Cyprus Table 12: Levels of Success for Montenegro Table 13: Levels of Success for Turkey Table 14: Comparative Levels of Success Table 15: International Arrivals in Competing Destinations Table 16: Average Room Rate Table 17: Average daily hotel rates (US$) in the regions Table 18: Tbilisi Yearly Occupancy Rates Table 19: Yearly Occupancy Rates by Regions Table 20: Purpose of Visit in Regions Table 21: Average Length of Stay, Tbilisi Table 22: Average Length of Stay in Regions during high season Table 23: International Tourist Arrivals in Tbilisi Hotels Table 24: International Arrivals in Regions Table 25: Top Three Tour Operators in Georgia Table 26:Large scale Top Segment Announcements on Georgian Market Table 27: Interviews Table 28: Arrivals to Georgia Table 29: Average 2005 tourism expenditures Table 30: Arrivals ( 000) Table 31: Estimated Expenditures (mn Euros) Table 32: Forecasts Table 33: Comparison of International Tourists to Georgia Table 34: Priority Markets to Turkey that might be extended into Georgia Table 35: Six Key Economic Factors Table 36: Technology Transfer and Productivity Enhancements Table 37: SWOT Analysis of Kakheti Wine Tourism Table 38: Comparative Table of Countries Table 39: Prospective US Suppliers

9 Georgia Tourism Development Plan and Strategy Task 7 Report Figures Figure 1: Map of Destination Hubs and Spokes...18 Figure 2: International Arrivals to Georgia: Figure 3: WEF Index...31 Figure 4: Transport Corridors...53 Figure 5: Assessment example...67 Figure 6: Ecolodge examples Figure 7: Tbilisi Hotel Amenities Figure 8: Regional Hotel Amenities Figure 9: Number of Hotels by Region Figure 10: Distribution of Rooms Figure 11: % of Room Distribution in Tbilisi Figure 12: Type of Rooms in Regions Figure 13: Tbilisi Hotel Amenities Figure 14:Regional Hotel Amenities Figure 15: Georgia Visitor Segments Figure 16: Survey Result: Purpose of Visit among Tbilisi Hotels Figure 17: Regional Distribution of Travelers Figure 18: Top 10 Tour Operators in Georgia Figure 19: Type of Travel Figure 20: % of Respondents by Region Figure 21: Lengths of Stay Figure 22: Ages of Visitors Figure 23: Gender of visitors Figure 24: Education levels of visitors Figure 25: Sources of Information Figure 26: Activities while in Georgia Figure 27: Reasons for Visiting Figure 28: Scoring of Activities Figure 29: Expenditures in US$ Figure 30: Expenditures as % of total Figure 31: Improvements Figure 32: Recommendations Figure 33: Reasons for Recommending a Visit to Georgia Figure 34: Map of Georgia Destination Hubs and Spokes Figure 35: National Geographic Geotourism Figure 36: Results of the GTSP Online Traveler Survey Figure 37: Rating of Reasons for Visiting Georgia Figure 38: Reasons for Recommending a Visit to Georgia Figure 39: Scheme of a potential wine tourism cluster in Kakheti Figure 40: Map of Georgian Destination Hubs and Spokes

10 Georgia Tourism Development Plan and Strategy Task 7 Report Organization of the Report The Tourism Development and Investment Plan and Strategy is structured in two main parts, which are based on the Terms of Reference for the Project. Part I precisely follows the TOR with first an assessment of tourism in Georgia and then an Analysis of the sector, including a SWOT (strengths, weaknesses, opportunities and threats) analysis. Part II is the main Strategy document, which is based on the Analysis. It includes everything required in the TOR, but it has been organized into what the GTSP team believed would be a more logical structure for planning and implementation by the Department of Tourism and Resorts. A detailed Draft Implementation Plan has been prepared for internal use by the DOTR. Following Part II are a series of Annexes, which include a sample visitors survey, a wine tourism strategy for Kakheti, tourism incentive models, a table showing comparable and illustrative country examples and levels of success, and lastly a list of Prospective US suppliers. 10

11 Georgia Tourism Development Plan and Strategy Task 7 Report Letter from the Department of Tourism & Resorts Dear Tourism Partners, On behalf of the Government of Georgia, we are proud to present Georgia s National Tourism Development and Investment Strategy. This Strategy is designed to invigorate tourism development and attract new investment with cutting edge ideas and innovative approaches that will lead us in achieving our vision a uniquely Georgian tourism experience that is high quality, sustainable, and competitive as both an international and domestic destination. The Plan will also help us establish a Tourism Satellite Account to measure the direct and indirect impacts of tourism on the economy. This is truly a time of new realities and opportunities in Georgia, reflected in the dramatic changes we have witnessed in our tourism environment. International arrivals to Georgia have doubled in less than two years, reaching over a million visitors in Tourism now comprises 10% of our exports and generates thousands of direct and indirect jobs all across the economy. These achievements have thrust Georgia into the spotlight, attracting the attention, and resources, of investors from around the globe. We anticipate over US$1 billion in new hotel and resort investments over the next two years. Looking even further ahead, we expect to see the tourism economy in Georgia more than double to 2.5 million international visitors by the year We anticipate export earnings and tourist expenditures will reach at least US$1 billion during the same period. It is our intent to maintain this momentum. Implementation of the Strategy will be conducted in close collaboration with government agencies, the established tourism industry, non-governmental organizations and our donor friends. Infused throughout this Strategy is a focus on sustainability. The Department of Tourism and Resorts recognizes that we have to safeguard our natural and cultural heritage in order to realize the fruits of a vibrant tourism economy. This Strategy emphasizes the importance of cooperation all across Government and involving multiple industry sectors. We are confident that with broad cooperation, the benefits of implementing this Strategy will be realized throughout Georgia and the country will rapidly be recognized around the world as an internationally attractive destination. Otar Bubashvili Chairman, Department of Tourism and Resorts Government of Georgia 11

12 Georgia Tourism Development Plan and Strategy Task 7 Report Acknowledgements The GTSP Team would like to thank everyone who assisted us in the preparation of this report. The Department of Tourism and Resorts, under the leadership of Otar Bubashvili, has been indispensable throughout the process. The dedicated employees and advisors at the DOTR who patiently worked with us and to whom we owe very special thanks include: Professor Dimitri Japaridze, Beka Jakeli, Julie Giorgadze, Mark Hagen, Zurab Gumbaridze, and Lexo, with whom we share a memorable drive to Vardzia in a VW Golf. We also want to thank Saba Kiknadze (Caucasus Travel) and all the members of the Advisory Committee, especially Ms. Tamar Tabidze (Tourism Profile College), Mr. David Lortkipanidze (National Museum of Georgia), Mr. Igael Porecki ( Marriott Hotels, Georgia), Ia Tabagari (Caucasus Travel), George Kalandadze (GeorgiCa Travel), Nick Erkomaishvili (Explore Georgia), Vano Nakaidze, and Toni Toshev (Sheraton Metekhi Palace). We want to extend our gratitude to Steve Johnson (Betsy s Hotel), Giga Makharadze, Irakli Baidashvili and others at the GMT Group, Temur Diasamidze and the staff at the Adjara Department of Tourism and Resorts. Also thanks to Falk Spoerri and Giorgi Marr of Development Solutions, George Kharabadze of the Silk Road Group, David Natadze of the m Group, Zaza Mikadze of the Rakeen Group, Vasil Dzotsenidze and Mamuka Bakhtadze of the Center Point Group, Dan Berkshire and Irina Salukvadze of IESC, Dexter Koehl (Consultant to IESC), Knut Gerber (GTZ), Mikheil Tsereteli and Teona Jakeli (Georgian National Museum), Nino Shapatava of CHF International, Archil Dateshidze of Fresh Travel, Manana Bostoganashvili of Georgian Holidays, Tea Barnovi and Lali Tevadze of the Department of Environmental Protection, Steffen Schülein, Betsy Haskell, Amy Denman (AMCHAM), Robert Wilson (USAID Tbilisi) and many others. Special thanks to Shirley Wayne and Maka Gabelia for their continual support and endless patience helping the GTSP team produce the following report. Thank you to everyone! Sincerely, The GTSP Team: S. Enders Wimbush, President, America-Georgia Business Council Mamuka Tsereteli, Executive Director, America-Georgia Business Council Scott Wayne, President, S.W. Associates, LLC Clive Jones, Investment Analyst/Tourism Development Expert Keith Sproule, Eco-Tourism Expert/Consultant Doug Frechtling, Professor, George Washington University Irakly Chkhenkely, GTSP Project Coordinator Nino Makatsaria, Georgia Hotel Industry Researcher 12

13 Georgia Tourism Development Plan and Strategy Task 7 Report Foreword To assist with developing and maximizing the country s competitive advantages in tourism, the Government of Georgia (GoG) signed an agreement with the U.S. Trade and Development Agency on June 21, 2007 for the America-Georgia Business Council (AGBC) and sub-contractor SW Associates (SWA) to develop a National Tourism Development and Investment Plan and Strategy. The AGBC- SWA team worked with the Georgian Department of Tourism and Resorts (DOTR), hoteliers and tour operators across Georgia to collect information about the strengths and weaknesses of Georgian tourism, as well as the opportunities and threats to sustainable tourism investment and development. Team members visited Georgia several times in In close collaboration with the DOTR, the team held numerous meetings with stakeholders, and conducted field visits throughout the country. The meetings included discussions with Advisory Committee members to identify and prioritize key issues, as well as possible solutions. The team conducted a review and assessment of the policy, institutional, and infrastructure environment for the tourism sector in Georgia. Overall, the team found tremendous opportunities for tourism development in Georgia, but numerous challenges exist, particularly in terms of infrastructure and product development. According to DOTR, tourist arrivals reached over a million in 2007 having doubled in two years. But improvements in room stock, access to the sights and attractions, and access to the country overall, as well as improvements in virtually every other type of infrastructure were severely lagging. The following two part report provides an in-depth assessment and analysis of, and a strategy for Georgian tourism. 13

14 Georgia Tourism Development Plan and Strategy Task 7 Report Introduction The Georgian Way the Georgia National Tourism Development and Investment Plan and Strategy (henceforth, the Strategy ) is a commitment by the Government of Georgia to the future of tourism in Georgia. It is about looking to the future with a firm understanding of the present. This strategy is about taking action immediately and planning for the future, with a view to where Georgia wants to be by The GoG has been actively removing barriers to business and promoting investment in Georgia s tourism sector. Ensuring that the resulting investments contribute to the long-term sustainable development of Georgia and Georgian tourism, however, is a complex endeavor. It is the objective of this Strategy to help guide the country s tourism to the Georgian Way. In developing the Strategy, the team examined issues likely to confront the country as a visitor destination. The following outlines how the GoG can partner and work with the tourism industry to position the country to achieve its potential and deliver ongoing benefit to Georgians. The Vision Georgia establishes itself as a high quality sustainable and competitive international and domestic destination offering memorable cultural and naturebased experiences and beyond, visitors and their host communities embrace Stumartmokvareoba (culture of hospitality), Georgia s natural and cultural heritage is conserved, and the tourism economy is significant and vibrant. Key Principles The following key concepts and principles are central to the ongoing development and implementation of the National Strategy. 1) Private sector driven implementation Tourism development in Georgia should be implemented by investors and developers according to standards established through public-private sector coordination and partnerships. 2) Focus on Priority Markets that yield the highest return on tourism investment A tourism development and marketing approach based on the principle of priority markets. In plain words, it is to go after those market segments that are the easiest to reach and convince to visit Georgia, and at the same time yield the highest revenues, i.e. highest spending per visitor. A development and marketing strategy for Georgia should be focused in terms of serving these high priority markets first and then branching out to wider markets. 14

15 Georgia Tourism Development Plan and Strategy Task 7 Report 3) Whole of Government Approach Tourism development requires the involvement of all parts of the Government from local to national a Whole of Government Approach (WGA). This approach provides the necessary infrastructure, training, public safety and support services. 1 4) Focus on economic, cultural and environmental sustainability and development of close community linkages Georgia s tourism is mainly based on natural and cultural assets that offer diverse opportunities for unique experiences. These experiences are rooted in what National Geographic calls Geotourism tourism that sustains or enhances the geographical character of the place being visited, including its environment, culture, aesthetics, heritage and the well-being of its residents. 5) Extending the culture of hospitality to the business of hospitality Georgia has a strong competitive advantage in realizing this concept. The Mission and Responsibilities of DOTR It is the DOTR s mission to lead the Government in developing tourism and tourism-related infrastructure. The DOTR has a central role in helping the industry and country realize the importance of tourism to the Georgian economy. By implementing this strategy, the DOTR will guide the industry, visitors, government and civil society towards developing or contributing to a sustainable tourism sector. The DOTR s responsibilities include: 1) Collection, organization and distribution of data for investment decisions. 2) Promotion and marketing of tourism internationally and nationally. 3) Facilitation of the development of tourism products by implementing measures to improve existing products and identify new product opportunities. 1 The OECD defines WGA as one where a government actively uses formal and/or informal networks across the different agencies within that government to coordinate the design and implementation of the range of interventions that the government s agencies will be making in order to increase the effectiveness of those interventions in achieving the desired objectives. 15

16 Georgia Tourism Development Plan and Strategy Task 7 Report Performance Targets 1. Export earnings from tourism rose 30% in 2006 to US$312.6 mn, more than double the level in By 2015, tourism generated exports could reach at least US$1 bn. 2. At least 33,000 new jobs created by 2015 for a total of 50,000 jobs as a result of tourism Arrivals increase to at least 2.5 million with 16% (400,000) higher spending visitors from long haul and Western European markets (especially the USA, UK, Germany, Israel, Japan and South Korea) by 2015 in order to achieve economic sustainability for current and planned hotel developments and other visitor services. 5. At least a 100% increase over 2006 in the number of available rooms of an international standard (three, four and five star) by Georgia to receive bigger percentages of European, Americas and Asian visitors to the region by 2015: estimated at 3.3%, 10% and 10% of these markets. Strategic Objectives The strategy outlines six key objectives for Georgia, which are summarized below. 1. Attractions and Experiences Revitalize, protect and improve existing attractions and identify new attractions to meet market demand. 2. Marketing, Promotion and Information Motivate tourists, foreign tour operators and foreign media to visit Georgia and influence their decisions before and while they are traveling. 3. Destination Management - Improve infrastructure and visitor services. Conserve natural environment and cultural heritage through sustainable tourism development. 4. Create a Well Trained Workforce - Create a well trained workforce that becomes a resource hub for the region. 2 Figures for indirect employment as a result of tourism are not yet available. A Tourism Satellite Account is required for more accurate measures of the full impact of tourism on the economy of Georgia. See Annex D for countries with approximately comparable levels of arrivals and direct employment. 16

17 Georgia Tourism Development Plan and Strategy Task 7 Report 5. Leadership and Management - Foster a proactive organization and management culture in the DOTR and in other government agencies. 6. Financial Resources and investment - Create, sustain and promote a positive climate for tourism investors. This whole-of-government-based tourism strategy needs to be complemented by the implementation from other government agency policies, plans and strategies. These more detailed plans provide tactical, day-to-day directions for the development of tourism in the country. Tourism to Georgia is full of potential and opportunities that are only just beginning to be tapped by visitors and investors, as well as Georgians themselves. Tourism is a key to positioning Georgia as a destination not only for business and holiday visits, but also for strengthening the country s image worldwide as a country on the move. The DOTR and the entire GoG drive the vision of the Strategy to establish the country as a uniquely Georgian, high quality sustainable and competitive international and domestic destination. Through implementation of the Strategy, the GTSP team forecasts increases by 2015 of 2.5 million international arrivals from 1 million in 2007, US$1 billion in export earnings, direct and indirect tourism employment of at least 114,000, and a 100% increase in the number of available four and five star rooms. The central recommendation for sustainable growth and investment in tourism is to establish the Georgian Way. As with the Appian Way of the Roman Empire, which connected far-flung destinations across the Empire, the Georgian Way provides a core tourism route based on hub and spoke destinations and links to neighboring countries for regional offers. Six key destination hubs comprise the Georgian Way: Sighnaghi/Telavi, Tbilisi/Mtskheta, Gori, Kutaisi, Borjomi/Bakuriani, and Batumi/ Kobuleti. For each of the strategic objectives, the Strategy recommends short - and longterm strategies and actions, which attempt to address most of the key issues and tourist destinations all across Georgia. While every possible tourist destination is not mentioned in the Strategy, many of the recommended strategies and actions are applicable to every destination. The Marketing, Promotion and Information section examines the current composition of visitors to Georgia. While 73% of visitors came from Azerbaijan, Armenia and Turkey, the remaining 27% represented nearly every other country in the world. Among these 27% are travelers who tend to spend more per trip globally than visitors from the neighboring countries. The GTSP team 17

18 Georgia Tourism Development Plan and Strategy Task 7 Report recommends that the travelers from this higher yielding segment be targeted. By implementing the Strategy and targeting this segment and reviewing past trends, the GTSP team estimates that international tourism to Georgia could more than double between 2008 and Figure 1: Map of Destination Hubs and Spokes (Full page version of the map is in Annex F) One of the key strategies is to tap the higher yielding segment, focusing on long haul and Western European traffic to Turkey. The GTSP team also believes that increased interest in tourism based on quality experiences, which the National Geographic calls Geotourism, can drive increasing number of arrivals to Georgia. There is fast growing interest globally in culturally and socially-related travel. These travelers also tend to seek educationally and socially oriented experiences and are socially and environmentally conscious. Geotourists are seeking experiential offerings -- authentic experiences that focus on local culture, learning, closeness to nature and wellness is on the rise, especially among older, better educated, higher spending groups. 18

19 Georgia Tourism Development Plan and Strategy Task 7 Report Marketing to these groups can be boosted by the Europe Started Here campaign, which launched in 2008, especially if it can be coordinated with the other marketing strategies and actions mentioned below. Participation in selected travel trade shows is highly recommended as a key marketing strategy. Market research is touted as an extremely important component. Other critical marketing strategies include an emphasis on events, improved distribution of collateral materials, linking with international celebrities, well organized media relations, and a comprehensive internet marketing strategy. The latter is described in detail in the Strategy. Destination management is highlighted as a strategic objective with an emphasis on the management of a destination s natural and cultural heritage and infrastructure for tourism. Sustainable tourism development can be used as a means of improving the infrastructure and visitor services, as well as conserving the natural environment and cultural heritage. Environmental awareness is a critical part of this picture. The team has also focused on using tourism as a way to protect cultural heritage through an emphasis on the concept of PAIR (Preservation, Access, Interpretation and Remembrance). Tourism is highly dependent on a well-trained workforce, which is lacking in Georgia. The Strategy cites the creation of a well trained workforce as a strategic objective. There are several activities underway by the GoG, donors and the private sector to improve the workforce, which should be coordinated and encouraged as much as possible. The DOTR has a key leadership role to play in ensuring the coordination and implementation of this Strategy. The private sector, of course, has a key partnership role, but it cannot be expected to drive the process at a national level. To ensure that the DOTR has the means to carry out this role, the Strategy recommends that the DOTR status be increased in the Government. Related to leadership, especially in coordination, is that the GoG, private sector and non-governmental organizations (NGO) need to work together in attracting and sustaining investments for hotels, hospitality services and infrastructure. There are a number of both short-term and long-term strategies and actions described for achieving this. Based on implementation of the Strategy, the team has recommended several key projects. These include: Regional Chains of Hotels Rest Areas and Welcome Centers Wine Centers in Kahkheti and Racha Regional Airline Rail System Expansion and Improvements Culinary Institute 19

20 Georgia Tourism Development Plan and Strategy Task 7 Report Gudauri Ski Resort Development Four Season Attractions National Park Visitor Services Casinos Special Interest Tours Handicraft/Souvenir Development Gonio Resort Development Cultural Heritage Preservation Program The Strategy also includes an action plan for economic impact assessments. The team believes that it is essential to the sustainability of tourism and implementation of the Strategy to understand the direct and indirect impacts of tourism on the country s economy. The development of a Tourism Satellite Account is critical to this analysis. The summary analysis of the development impact of the implementation of the Strategy includes consideration of environmental issues, regulatory impediments and market-oriented reforms, foreign direct investment in Georgia, and a discussion of an alternative model for tourism-related regulatory reform. The latter focuses on policy-making, which emphasizes the tourism investments that drive forward and backward economic linkages. Infrastructure and human capacity building impediments to tourism development are also reviewed. Lastly, possible technology and productivity enhancement actions are described. Achievements Tourism investment has grown substantially to over $1 billion in Major hotel projects are under construction, including such international brands as the Kempinski, Park Hyatt, Inter-Continental, Meridien, Radisson, and Marriott Executive Suites. Additional extensive hotel development is being planned and underway throughout Georgia by businesses such as the Silk Road Group/Development Solutions, GMT Group, M Group, Rakeen Group, and the Center Point Group. New airports opened in Tbilisi and Batumi. Tourism arrivals reached over 1 million in 2007, the first time there have been over a million arrivals since the 1980s. In 2006, 124 new hotels opened, representing double the number compared with There was a 25% increase in new hotels in Tbilisi and more than a 50% increase in the Samtskhe-Javakheti region. 20

21 Georgia Tourism Development Plan and Strategy Task 7 Report Eight hundred 4 and 5 star international brand hotel rooms were under construction as of early Tourism export earnings more than doubled from US$126 million in 2003 to US$312.6 million in 2006, which is almost 10% of total exports. Jobs in tourism reached almost 17,000 in 2006, a 12% increase while wages per job climbed 50% from the previous year. Note: this is comparable to Montenegro, which employed about 16,000 people directly in tourism and received almost a million visitors in Two new tourism colleges opened their doors to help meet industry demands for a trained tourism workforce. Government has disbursed 2.5 million GEL (US$1.6 million) in 5 year low interest rate loans and is disbursing an additional 10 million GEL (US$6.4 million) in International Arrivals to Georgia: Series1 Series Figure 2: International Arrivals to Georgia:

22 Georgia Tourism Development Plan and Strategy Task 7 Report Part I: Tasks 1-2 Task 1 For Task 1, the team conducted a review and assessment of the policy, institutional, and infrastructure environment for the tourism sector in Georgia. Overall, the team found tremendous opportunities for tourism development in Georgia, but numerous challenges remain, particularly in terms of infrastructure and product development. According to DOTR, tourist arrivals reached over 1 mn in 2007 and promotional efforts were increased, but improvements in room stock, access to the sights and attractions, access to the country overall, as well as improvements in virtually every other type of infrastructure were severely lagging. Following the rapid assessments conducted by the team, we developed recommendations in each of the following Task 1 areas. With the Advisory Committee, we received their recommendations, which are described below. All of these are summarized in Task 1.8 and divided into short term, immediately actionable and longer term recommendations. While the list is long, this is the first of a three phase process with the final phase resulting in a national level tourism development and investment strategy. We see this as equivalent to pulling together the pieces of a jigsaw puzzle. Task 1.1 Advisory Committee Tasks 1.2 and 1.3 Overall Policy Environment and Investment Climate Task 1.4 Inventory of Tourism Assets Task 1.5 Physical infrastructure Task 1.6 Human resources Task 1.7 Environment Removing barriers to business and promoting investment in Georgia s tourism are thriving. Ensuring that the resulting investments contribute to the long term sustainable development of Georgia and Georgian tourism, however, is a complex endeavor with many pieces to assemble tantamount to a jigsaw puzzle. 22

23 Georgia Tourism Development Plan and Strategy Task 7 Report Task 1.1: Advisory Committee An Advisory Committee (Committee) of stakeholders was created by the DOTR with input from the team with local representatives from government, business and the non-governmental sector. All of the following tourism sub-sectors were either directly or indirectly represented on the Committee: Lodging hotels, B&Bs, other Travel/Transportation Air, sea, rail, ground Food Restaurants, concessions Recreation Museums, parks, cultural/performing arts, sports, special events, campgrounds, historic sites, wineries Retail - Gift shops, souvenirs, handicrafts Support Services Human Resources (training and education), Visitor Services, Financial Infrastructure Utilities (water, roads, electricity), Internet, Media, Government (local and national), residents and the community. The Committee was established to ensure that the strategy addresses tourism industry and related sectors needs as closely as possible. The Committee offers a structured vehicle through which to receive and request feedback as the strategy develops. On July 31st, 2007, DOTR and the Georgia Tourism Strategy Project (GTSP) team organized the first meeting of the Advisory Committee. The purpose of the Advisory Committee was to provide the GTSP team with advice and recommendations for the course of the project. The Advisory Committee is comprised of individuals from the private and public sectors representing key stakeholders in the tourism industry. As such, the Advisory Committee can provide invaluable information that will assist the GTSP team in producing a tourism development and investment plan for the Georgian Government. Mr. Otar Bubashvili, Chairman of the Department of Tourism and Resorts, opened the meeting and was followed by Mr. S. Enders Wimbush, President of the America-Georgia Business Council. Following their brief remarks, Mr. Scott Wayne, President of S.W. Associates, offered a concise introduction of the GTSP and outlined the format of the meeting. The Advisory Committee was divided into three groups with each group consisting of five or six members. First, the attendants discussed the issues presented by the GTSP team. Second, the individual groups discussed the issues among themselves and added issues. Third, the Advisory Committee members were asked to vote on the issues in order to better understand their priorities. Lastly, the Advisory Committee with the GTSP team discussed some possible solutions to the priority problems and examples of best practices. 23

24 Georgia Tourism Development Plan and Strategy Task 7 Report The committee voted on four categories of issues with the top six emerging as follows: I. Top Six Issues Identified by Advisory Committee In order of importance from most to least: 1. Protection of cultural heritage 2. Lack of trained staff and shortage of qualified people 3. Lack of image about Georgia in the international market 4. Government involvement in the Tourism Sector, i.e. tax holidays and other incentives 5. Maintenance of structures at historical monuments and sites 6. Tourism schools/faculties are not yet teaching the right skills for the industry Within each category, the issues in order of votes were as follows: Physical Infrastructure Category Protection of cultural heritage 9 votes Maintenance of structures at historical monuments and sites 6 votes Garbage collection and bins at sights 6 votes Road quality and driver safety 4 votes Communication 4 votes Restrooms 3 votes Water supply 3 votes Sewage Leaks 2 votes English language signage 2 votes Information centers 1 vote Adequate, international standard rooms 1 vote Winter ski facilities need upgrading 1 vote Banking Services no votes Electricity no votes Human Resources Lack of trained staff 7 votes Tourism schools/faculties are not yet teaching the right skills for the industry 6 votes Minimum customer service mentality 4 votes Product and Marketing Category Lack of image about Georgia in the international market 8 votes Lack of market research 3 votes Availability of information in English and other foreign languages 2 votes Absence of international standards and amenities at hotels 2 votes Interpretation at historic sites 1 vote Souvenirs, things to buy 1 vote 24

25 Georgia Tourism Development Plan and Strategy Task 7 Report Table 1: Additional Issues Raised by the Advisory Committee Members Issue Votes Government involvement in the Tourism Sector, i.e. tax holidays and 7 other incentives. Access to credit, financing a problem 3 Lack of international standards at hotels, restaurants, parks, etc. 3 Lack of rescue services 3 Need for a policy of tourism education by Ministry of Education and 3 Private Sector Access air travel to Georgia too expensive 2 Shortage of qualified people 2 Lack of rental car agencies 1 Funding for upgrade of guest houses, smaller hotels (international monetary institutions) System of regional hotels More resorts (i.e. golf courses, etc.) Casino development Entrance fees too high at museums Protect Cultural Heritage (part of PAIR), i.e. copyrights, brands and trademarks Statistical data, i.e. inventory, number of visitors, more frequent reports, forecasts Government plans, i.e. what are they? Donor plans and objectives Cooperation with regional authorities Build on experience Access domestic and regional travel a problem roads in bad shape, sea access limited, and railroad overwhelmed in summer season/poor conditions (e.g. lack of a/c) Lack of access to info Lack of trainers No link between educational institutions and industry Lack of entertainment Events signature, media exposure Border/customs training No domestic flights Trains (poor quality) National parks regulation (fees, etc.) 25

26 Georgia Tourism Development Plan and Strategy Task 7 Report II. Possible Solutions 1) Protection of cultural heritage: a. Improve neighborhoods around protected areas (e.g. zoning). Strive for increased emphasis for UNESCO World Heritage Site designations. b. Related to neighborhood improvement is the establishment of protective zones around cultural heritage sites and monuments in which there would be no or minimal development. 2) Lack of trained staff: a. Educational exchanges with foreign universities for improved training and education. b. Promote awareness about the importance of the tourism industry to the country among Georgian youth. Emphasize temporary and longer term employment opportunities as guides, hotel staff and management, etc. 3) Lack of image Image development must be led by the Government. Georgian embassies should be used more effectively for distributing tourist information. 4) Physical infrastructure a. A concerted effort to improve the roads would be a big boost to tourism development. b. Waste management, including improved toilets, is critical. c. Increased public awareness about the environment would facilitate the maintenance of physical infrastructure. 5) Human infrastructure a. Bring international trainers to conduct train the trainer and guide training programs. b. Increased vocational training is essential. The Ministry of Education is taking action on this. 6) Product and Marketing a. The DOTR mapping initiative needs to be maintained with continually updated information. The team is planning to convene the next Advisory Committee meeting on September 10 th to review the results of Task 1. 26

27 Georgia Tourism Development Plan and Strategy Task 7 Report Tasks 1.2 & 1.3: Overall Policy Environment and Investment Trends and Conditions Tasks 1.2 and 1.3 provide an assessment of the overall policy environment and investment trends, including the identification of barriers, incentives and optimal conditions for tourism-related development in Georgia. This section also identifies conditions which can generate acceptable financial returns for the investor based on investment risk in the short and long term, as well as serving as catalysts for stimulating multiplier effects for tourism investments in Georgia. I. Comments on the overall policy environment From our perspective at the America-Georgia Business Council (AGBC), at the broadest level, the Government of Georgia has succeeded in creating an attractive image of Georgia as a vibrant emerging market and a stable democracy. We see this image reflected in a constant stream of largely positive international reporting, visits by important foreign dignitaries to Georgia and Georgian officials visiting many foreign countries, and, as noted below, in the assessments of a number of the world s principal economic institutions. With respect to business and tourism, Georgia s newly-found self-confidence and the sense of forward momentum created by the current government has had the direct consequence of stimulating the number of business and tourist visitors to Georgia. Just a few years ago, visitors accounted for no more than a few hundred thousand per year. In 2006, this figure is estimated to have reached or surpassed one million. The AGBC strongly believes that Georgia has made significant progress in recent years in bringing on line important economic and policy reforms that are conducive for investments in general and especially in tourism by AGBC. For the Council and, we believe, especially for the tourism industry, the following policy priorities are particularly important: Liberalizing registration procedures and licensing. For example, in the area of construction licenses and permits Georgia has created a one-stop shopping process so that applicants do not have to struggle through a labyrinth of ministries to receive essential permissions and support. Strengthening administration and enforcement. This has been a very reassuring reform, particularly for the AGBC s efforts to encourage foreign investment in Georgia. 27

28 Georgia Tourism Development Plan and Strategy Task 7 Report Lowering the cost of business operations. Creating a competitive trade regime and preferential access to the markets of the United States, the European Union, the Commonwealth of Independent States and Turkey. Progress has been made in all areas. We have noted with great interest the fact that the World Bank in 2007 recognized Georgia as the world s fastest reforming economy and as a leader in the fight against corruption since the Rose Revolution in The AGBC has promoted the fact that the World Bank rated Georgia 37 th in the world for the ease of doing business as a platform for trade and investment. And that notably Georgia was also ranked 35 th in the Index of Economic Freedom ahead of Israel, France and Italy and it jumped from 112 th to 37 th in the World Bank s ranking of business-friendly countries. A. Economy, Investment Environment and Conditions related to Tourism Investments It seems clear to the AGBC that the overall policy environment is becoming friendlier to potential investors in general and specifically tourism investors. Evidence comes from many sources, which we have shared with our members. For example, the International Finance Corporation (IFC) noted in a recent assessment that Georgia was the leading reformer in three specific areas. Reforms in these areas are positive developments for tourism: Dealing with licenses: The report looks specifically at construction licenses and permits, and in 2007 Georgia created a one-stop shop for building permits. Shorter time limits for the issuance of permits were introduced, and several unnecessary procedures were eliminated. As a result, compliance with building regulations in Tbilisi is as now as easy as in Hong Kong. Enforcing contracts: Georgia established specialized commercial sections in the courts. Also, the Supreme Court can now decide which cases to review. Previously, it dealt with every case sent by the lower courts. In addition, Georgia has been striving to reduce corruption in the courts by increasing judges salaries and more aggressively investigating corruption and taking disciplinary measures against judges. Employing workers: The new labor code eases restrictions on the duration of term contracts and overtime work. The new law provides for one month s severance pay, replacing complex rules requiring varying notice periods and the involvement of labor unions and the Ministry of Labor. Georgia also reduced the social security contributions paid on wages by businesses from 31% to 20%. Together, these changes make 28

29 Georgia Tourism Development Plan and Strategy Task 7 Report Georgia the sixth easiest place to employ workers globally (after the Marshall Islands, United States, Singapore, Tonga, and the Maldives). 3 The results of these measures and others have been to push Georgia s economy into rapid growth. In August 2007, the International Monetary Fund (IMF) observed that Georgia's economic performance has been impressive in recent years, with rapid growth maintained over the last year despite the loss of major export markets. Such resilience reflects the authorities' pursuit of consistently strong policies, allowing them to achieve macroeconomic stability and remarkable improvements in fiscal performance and the business environment. 4 Georgia s economy grew at 8 percent in 2006, despite restrictions on key Georgian exports imposed by Russia. An IMF team stated in February 2008 that GDP growth was 12% for B. Overall investment trends and conditions for acceptable financial returns Growth is particularly strong in foreign direct investment. According to the Business Information for the Newly Independent States service (BISNIS) of the U.S. Department of Commerce, FDI reached $539 million in 2005, inflows of investment exceeding $1 billion are expected in A growing rate of FDI accelerates the growth of confidence among potential investors. More investors translate into more travelers to Georgia, which causes an exponential growth in awareness of Georgia s exceptional tourism opportunities and, hence, more investment. FDI also is usually accompanied by a better management culture and efficiencies, especially when FDI comes from Western, notably American, sources. At the time of this research in the summer of 2007, we did not have the data yet as to how much FDI can specifically attributed to tourism, but based on 3 Doing Business, In addition, Georgia made strides in increasing the ease of starting a business. Georgia reduced the minimum capital required to start a new business from 2,000 lari to 200 (US$85). As a result, business registrations rose by 55 percent from 2005 to 2006, reflecting both the creation of new businesses and the registration of companies formerly operating in the shadow economy. In the area of getting credit, Georgia also has made some legislative changes to facilitate the exchange of credit information, and a private credit bureau began to support the exchange of information among banks. 4 IMF press release, August 20, BISNIS, 29

30 Georgia Tourism Development Plan and Strategy Task 7 Report interviews with AGBC members, DOTR officials and Advisory Committee members, there is certainly increased tourism-related FDI flowing into the country. One recent example was the sale of the Sheraton Hotel to the Al- Rakeen Group. This could be a very positive signal to the marketplace that will reassure potential investors among AGBC members and reinforce efforts at investment promotion. Strong economic growth is punctuated and aided by a number of other factors that derive directly from Government of Georgia policies. These policies are creating conditions for acceptable financial returns, especially in the tourism industry: Higher tax collection rates as a ratio to GDP, despite lower tax rates generally Dramatic reduction in corruption Constant availability of basic resources, such as electric power and water Infrastructure development (e.g., roads, transportation) on both the national and regional levels A vibrant banking sector has emerged that has introduced larger product lines (e.g., mortgages, credit cards) which facilitate the development of a strong tourism infrastructure. Of particular note is a policy initiative from the Government of Georgia s Department of Tourism and Resorts (DOTR) to connect small and medium size tourism businesses to banks by providing subsidies that lower the resulting interest rates. Worldwide context Worldwide, other fast-growing destinations have undertaken similar liberalizing measures and reforms to catalyze tourism investment and development. The World Economic Forum s 2007 Tourism Competitiveness Index is a useful source for comparison. While Georgia jumped dramatically forward on the World Bank Doing Business index from 112 th to 37 th and 35 th in the Index of Economic Freedom ahead of Israel, France and Italy it did not do as well on WEF s Tourism Competitiveness Index. It ranked 66 th out of 124 countries behind Indonesia, Bahrain, Tunisia, and Egypt. However, it is notable though that Georgia did rank ahead of the fast growing and popular tourism destinations of China, Peru, Vietnam, and Nepal. FDI for tourism in China and Vietnam is rocketing forward. 30

31 Georgia Tourism Development Plan and Strategy Task 7 Report Georgia ranked as follows on the main categories of the index: Figure 3: WEF Index Georgia ranked high on the availability of human resources and national tourism perception critical conditions for sustainable tourism development and generating positive conditions for maximum returns on investment. However, on the other categories, there is room for improvement compared with competitors. Identifying Barriers General barriers. In terms of policy barriers that could affect tourism development and investment in that industry, AGBC concurs with the most pressing barriers as identified by several international agencies. We agree with the IFC s Doing Business Report that tax administration and simplification are particular problems. The Doing Business report notes: In the ease of paying taxes, for example, Georgia ranks only 104 globally. Although tax reform in previous years has simplified taxes and decreased rates, a company still spends about 53 days per year to pay taxes. 31

32 Georgia Tourism Development Plan and Strategy Task 7 Report BISNIS observes: Laws and regulations, especially in the areas of tax and customs, are subject to uneven and arbitrary interpretation and enforcement by bureaucrats and courts. Language and culture. A number of reports, which support our personal observations, point to difficulties caused by language and cultural barriers. Most laws and official documents are still printed only in Georgian, even though English is widely understood at all levels of the Georgian government. Perhaps no sector is more sensitive to this than tourism, where a lingua franca that is understood to most of the world s investors and travelers is essential. English, obviously, is that language. We would strongly recommend creating a capability attached to the tourism development process for translating all key documents, regulations, signage of all kinds, websites, and so forth into English. Finding the right level. Within the Government of Georgia, where tourism clearly has become one of the government s priorities, we would point to what could become a formidable barrier for moving rapidly and coherently forward. The consolidation of a number of activities by the Department of Tourisms and Resorts is underway, although it is not clear that an effective inter-agency process has yet been started to coordinate the many pieces. Right now, it is easy to conclude that tourism activities are largely tactical, that they are spread widely, and that a strategy is necessary to pull the pieces of the jigsaw puzzle all together. That said, the Department of Tourism and Resorts an entity of the Ministry of Economy may not be placed high enough in the government hierarchy to discharge these strategic responsibilities effectively. The Head of the Department of Tourism and Resorts probably should be at least a deputy minister. Human capital. Throughout our discussions, we detected a strong emphasis on developing physical infrastructure and a limited focus on developing human capital within the tourism industry. For example, we received a briefing about the plans for a new college to train tourism professionals that emphasized its need for model kitchens and classrooms. Professional faculty received no attention, though it is clear that the college will not succeed without acquiring a capable group of teachers. As the WEF index shows above, the human capital is available it needs to be better tapped and applied though. Section 1.6 provides more details on this critical area of need. Industry Representation. The DOTR would benefit substantially, in our view, if it had better interaction and coordination with investor communities in the private sector. For example, no private sector organization exists to help plan and coordinate strategic initiatives with respect to hotel and lodging construction. 32

33 Georgia Tourism Development Plan and Strategy Task 7 Report DOTR could take the lead in creating such groups, whose expertise in many areas is broader and deeper than the government s. Supply and infrastructure deficiencies. Sections 1.4 and 1.5 consider this risk area in greater detail. In general, the Government is pursuing a broad range of infrastructure improvements, several of which described below will positively impact tourism, i.e. privatization of the railroad, road transport improvements, increased air transport, signage, and toilets. These are basic factors that if not addressed weaken conditions and thus increase risks for investors. Political risks. Domestically, political risks are relatively limited. The Rose Revolution ushered in a more positive, more forward-looking climate, which as the indexes mentioned above have demonstrated are resulting in growth and development all across the economy. For the AGBC, domestic political stability has been a strong counter-balance to negative regional geo-political pressures particularly in neighboring South Ossetia and Abhkhazia. There has also been ongoing pressure from Russia with occasional provocative incidents that seem intended to goad the Georgia into providing excuses for Russian intervention. The Russian embargoes, meant to punish Georgia, have actually become a blessing in disguise with Georgia actually growing faster in spite of or rather probably because of the Russian actions. Market risks Changes in demand. Our initial assessments find that Georgia has substantial opportunities for tapping market demand and thus encouraging investments in at least the following growing segments: cultural tourism (especially wine tourism), ecotourism, adventure travel, winter sports and possibly spa tourism and gaming. The Black Sea coast will probably continue to be popular with a regional market, which is no doubt why groups such as the Silk Road Group and investors from Kazakhstan are investing heavily in hotels along the coast. However, the sun and sand segment is a highly competitive, pricesensitive segment in which price rather than product differentiation is the main factor motivating holiday decisions. Identifying Incentives & Conditions Government of Georgia policy is to create the general conditions that will allow many industries to grow and succeed. While the government clearly is paying more attention to tourism, there appear to be no special plans for creating specific incentives for tourism s growth. From the perspective of outside investors, higher and quicker returns are possible by investing in other sectors of the economy, for example in real estate. This is to say that, if all sectors are given the same priority in a general competitive environment by the government, the more appealing opportunities are most likely to receive the lion s share of investment. This may delay needed tourism infrastructure development. Two consequences are likely to flow from failing to provide extra incentives for tourism development. 33

34 Georgia Tourism Development Plan and Strategy Task 7 Report First, the government s efforts to increase tourism through advertising and other outreach activities may be disappointed because insufficient infrastructure has been created to accommodate the growing number of tourists. This risks a backfire that could damage the attractiveness of tourism in Georgia for some time. Second, the government s ambitious plans for developing the country s broader economy, especially outside the few large cities, are likely to be delayed. In the non-urban economy, tourism constitutes a quick economic stimulus. In the countryside, in particular, tourism will almost certainly play an important role in generating jobs and career opportunities. For these two reasons, among others, the government should consider special incentive packages to boost investments directly into the tourism sector. As such, tourism could be a quick stimulus to the economy, especially in the regions that are not good candidates for other kinds of investment. In interviews with a wide range of government officials, we learned that government in fact may be willing to give incentive packages to priority projects. However, we could find no consistent understanding of what these packages might contain, how they are to be developed, and who should do it. In fact, in our discussions we were constantly struck by the inconsistencies in approaching the idea of incentive packages among different government officials and agencies. For example, we heard from some officials that tax incentives might be used to attract investors; yet from other officials, we learned that tax incentives would not be used under any circumstances. The policy of the government seems to be the latter, but, if so, this position has not been articulated consistently to all of the parties involved in tourism development. Obviously, such a misunderstanding has the potential to dissuade investors and cause confusion. While tax policy constitutes a particularly complex issue, we encountered similar confusion with regard to other possible incentives. At this moment, the two other major incentives appear to be government s investment in infrastructure development to facilitate specific projects and concessions on the purchase and use of land. But here, too, clarity is needed to make the opportunities attractive. C. Catalysts for stimulating multiplier effects of tourism investments Tourism investments and developments in Georgia have tremendous potential as drivers of further investment and development in other sectors all across the Georgian economy. Economists consider these drivers as forward and backward linkages. There are a variety of ways that these linkages, additional investments and spending related to tourism can be stimulated and induced in Georgia. A single 34

35 Georgia Tourism Development Plan and Strategy Task 7 Report tourism investment such as a new resort hotel in Kakheti or spending decisions by a group of visitors can lead to several other investments or spending decisions, thus creating multiplier effects which amplify the original amounts invested or spent. The concept of the tourism multiplier derives from a desire to summarize the amount of change in some economic benefit variable (income, employment, etc.) generated by a given amount of visitor spending in an economy. There are several different types of tourism multipliers: Transactions multiplier - one of the most common forms, it is the ratio of the total change in business sales in an area to the initial visitor expenditure that generated them; Income multiplier considered to be the most useful of all multipliers, it is the ratio of income (labor income, business profits, dividends, interest and rent) to the visitor spending that generated them; in many studies the numerator is limited to wages and salaries paid to employees of visitor-serving businesses. Employment multiplier - the ratio of jobs, either actual or full-time equivalent, produced by visitor spending to the amount of the spending. Government revenue multiplier the total amount of tax, fee, fine, license, public enterprise, and other such revenue generated by one dollar in visitor spending for all governments. There are at least six key factors suggested by regional economic theory that could affect the size of tourism s total, or multiplier, impact on an economy such as Georgia s: Six key factors 1. Size and distribution of visitor expenditures in the area; 2. Supply constraints in the economy - if there is insufficient capacity to meet the tourism demand, the expenditure will generate local inflation and a rise in imports; Comments in regards to Georgia For now, most spending seems to be concentrated in Tbilisi and Batumi with far less expenditure in other parts of the country. As the number of hotels increases in Georgia, demand for capacity such as human resources, furniture and technology will grow, which will mean increased imports to fill demand because of insufficient capacity in Georgia. 3. Size of the area economy; With a population of 4.6 mn, there is some capacity for domestic tourism, albeit limited. 4. Value added in the first round - the more This is a good argument for ensuring that maximum of the initial expenditure that is translated economic opportunities for residents in Georgia are into income for area residents, the higher included as part of the strategy. the multiplier will be; 5. Tourism industry linkages with the area economy - the more industry requirements As tourism demand grows, so will demand for the many types of industries that supply the tourism 35

36 Georgia Tourism Development Plan and Strategy Task 7 Report to meet tourist demand can be met by area businesses, the higher the multiplier impact; 6. Leakages - the less that leaves the area economy in each round of transactions, the higher the multiplier; leakages have an inverse relationship to linkages in the local economy. industry, thus creating many new business opportunities. To the extent possible, the strategy will emphasize the creation of local tourism businesses in order to maximize linkages and minimize leakages. As a practical matter, a number of economists focus most on supply constraints and leakages in calculating multipliers. To the extent that the economy grows the capacity of Georgia s businesses to supply the tourism sector, the lower the leakages will be and the higher the total impact of the initial visitor spending..an industry in a country with strong backward and forward linkages is a key, strategic industry for that country s development. Georgia has yet to exploit and leverage even a fraction of its potential linkages. Understanding these linkages helps industries all across an economy realize how tourism can help grow their businesses and vice versa. Backward linkages indicate how much input the industry requires from other industries in the country to produce a unit of output. Forward linkages indicate how much of the output of the industry is sold to other industries in the country as their inputs or intermediate consumption. Investment in a strategic sector so defined initiates a chain of economic development through its tight connections with other production sectors. For Georgia, forward linkages will be limited especially as domestic air access between Tbilisi and Batumi and other destinations in the country is established. Instead, Georgia can be expected to sell most of its tourism sector output to international visitors, thus boosting the value of exports. Domestic travel is considered important, but more revenue can be generated by the same or even lower numbers of international visitors. So we can relax the requirement that a key industry must demonstrate strong forward linkages to other sectors in the economy. Instead, we can focus on tourism s ability to grow exports through inbound visitor spending. A second concern for tourism as a strategic industry is that it not requires many intermediate inputs imported from other countries. Unlike some other sectors, such as manufacturing and extractive industries, the tourism sector is wellpositioned to avoid generating demand for imports. In Georgia, imports of goods and, to some extent, services, will be necessary as the industry evolves. For 36

37 Georgia Tourism Development Plan and Strategy Task 7 Report example, high quality kitchen equipment may need to be imported from Italy, buses from Germany, management expertise from the EU and North America, etc. In the United States, for example, a large and well-developed economy, hotel and other lodging places and eating and drinking places required no imports in 1998, the last year for which there are detailed input-output tables. And amusements industry demand for imports was miniscule. This contrasts with manufacturing industries that in total required more than $820 billion in imports for intermediate consumption. Lacking inter-industry transactions data on the Georgian economy, we can look to the United States accounts to suggest what could be some of the most important backward linkage industries for the tourism sector in Georgia. In order of importance to the tourism sector, the top ten out of 130 industries are: 1. Food products 2. Real estate 3. Wholesale trade 4. Performing arts, spectator sports and museums 5. Advertising and related services 6. Beverage products 7. Credit intermediation/insurance carriers 8. Electric power 9. Franchise agreements and other non-financial intangible rights 10. Plastics and rubber products For Georgia, linkages to these sectors and others, except perhaps plastics and electric power, hold great potential. As tourism grows, demand and employment in these sectors will also grow. When the visitor purchases goods and services in a country, he/she produces direct economic benefits in terms of business receipts, employment, wages and salaries and other forms of income, and government revenue. But it is important to note that direct visitor spending produces secondary economic effects as well that add to the economy s economic well-being. These secondary economic benefits of travel activity include indirect benefits, and induced benefits. The indirect benefits occur as the tourism business operator, say a restaurateur, purchases goods, such as food, and services, such as electricity, in order to serve his patrons. These purchases generate economic output by food wholesalers and electric utilities. In order to supply the restaurateur, the wholesalers and utility must, in turn, purchase goods and services from their 37

38 Georgia Tourism Development Plan and Strategy Task 7 Report suppliers. This chain of purchasing goods and services in order to produce continues in an area until the amount of the restaurateur's initial purchase "leaks" out of the area through taxes, purchases from suppliers outside the area (imports), business savings, distributed profits, and payments to employees. The faster the initial spending leaks out of the economy s re-spending process, the smaller will be this indirect impact. The measures of indirect impact of travel activity in an area are the transactions, income, employment, and tax revenue generated as businesses purchase from suppliers in order to support the initial sale to the visitor. The other type of secondary impact is the induced economic impact of the visitor expenditure. Induced economic impacts result as the employees of the tourism businesses, and those of suppliers along the chain of indirect impact, spend a part of their earnings in the area under study. This spending itself generates output and additional induced and indirect effects throughout the area. The sum of indirect and induced effects constitutes the total secondary impact of travel activity. In sum, Georgia s tourism sector will fulfill its promise as a strategic sector for national economic growth if backward linkages can be expanded. By doing so, employment can be increased, dependence on imports reduced and unit costs lowered for final users. II. Recommendations We strongly recommend that the Government of Georgia clarify this situation. What kinds of incentives are possible? Who is authorized to offer them? What organization(s) of government have responsibility for implementing the terms of incentive packages? Developing such a process for key priority investment projects is vitally important. Everyone should be speaking from the same script. Elevate the status of the Department of Tourism and Resorts. Define laws and regulations clearly, leaving less room for arbitrary interpretation and enforcement by bureaucrats and courts. Institutionalize the government s approach to incentives, and articulate a common message. Emphasize building human capital and training, which often takes a back seat to infrastructure planning. 38

39 Georgia Tourism Development Plan and Strategy Task 7 Report Facilitate the creating of the business associations representing key parts of the tourism industry. The DOTR has a critical role to play in providing market and economic impact research to the tourism industry. The industry does not have the capacity to conduct such research. The development of a research plan should begin immediately for the longer term, objective capacity of the DOTR. Task 1.4: Assessment of Inventory Efforts Task 1.4 provides an assessment and evaluation of the Georgian Government s inventory of tourism resources and assets. While the original intention was to conduct an inventory, that was unnecessary because DOTR and the American Chamber of Commerce began the inventory prior to the launch of the Tourism Strategy Project. As their process began, they had requested copies of the team s worksheets for data collection. They then created their own more detailed questionnaires for use by four teams of five researchers each of whom covered 54 districts in all nine administrative regions of the country. The inventory included photos of attractions throughout the country matched with GPS coordinates. The resulting database of travel information will be very useful to travelers when it becomes available online. I. Quantitative Assessment and Inventory The AMCHAM-supported part of the assessment covered the following destinations: Samtskhe-Javakheti Borjomi Akhaltsikhe Aspindza Vardzia Abastumani Racha-Lechkhumi Ambrolauri Oni Tsageri Lentekhi Shovi Kakheti Sighnaghi Telavi Gurjaani Kvareli Sagarejo Lagodekhi Akhmeta Imereti Tskaltubo Kharagauli.. Samegrelo-Zemo svaneti Zugdidi Martvili Senaki Mestia Abasha Tsalenjikha Shida-Kartli Khashuri Surami Guria Poti Bakhmaro 39

40 Georgia Tourism Development Plan and Strategy Task 7 Report Sachkhere was not considered in the assessment, but potential opportunities are worth exploring there. From May 28 until June 14, 20 hired field researchers gathered the following types of data as much as possible: visual materials (i.e. pictures), accessibility evaluation, infrastructure condition, services provided, service rates, opening hours, level of service/ product quality and customer service, capacity of inventory (e.g. number of beds), load factor (estimated number of visitors), seasonality, and other relevant information whenever available. The teams surveyed the following types of establishments: Hotels, Restaurants, Shopping, Internet cafes, venues, Hospitals, Museums, Theatres, Movie theatres and Conference halls. Field researchers extensively liaised with local officials, site administrators, hoteliers, etc. during the information gathering. AMCHAM had continual telephone check-ins from the teams to keep abreast of their schedules. The DOTR compiled data on additional sites and then began entering all of the data into a database, which is supposed to become accessible to the Department and 13 tourism information centers that are planned for the country in II. Qualitative Research Report Tourism Inventory Assessment Project In parallel with the quantitative inventory, a qualitative assessment was conducted by expatriate residents of Tbilisi. The expats participated in two-day trips conducted by Levon Travel and Caucasus Travel to six main Georgian tourist sites and identified a number of critical issues, which are very much in line with what the GTSP team found. The areas toured by both groups included the Imereti Province, the Kakheti Province, the Borjomi Region, a Kutaisi Archaeological Tour, and the archaeological site at Danish. The groups visited roughly three major categories of tourist destinations: cultural/historical, religious, and archaeological. The following is a summary of the results of the qualitative assessments: Table 2: SWOT Analysis o o o Strengths Weaknesses Opportunities Threats Scenery and Geographic Diversity Distinctive Georgian Culture, Folklore, and Hospitality Quality o o o Environmental Degradation/Tras h Unsanitary Restrooms and Toilets Insufficient Access to o o o Distribute Garbage Cans and Benches Upgrade Infrastructure (Roads, Fences, Trails, etc.) Launch Public o o o Continued Building of Unattractive Hotels Makeshift and Impermanent Fixes to Infrastructure Lack of Coordination 40

41 Georgia Tourism Development Plan and Strategy Task 7 Report o o o o o Strengths Weaknesses Opportunities Threats craftsmanship Rich Cultural, Historical, Archaeological Heritage Unique Tourist Sites (e.g. Stalin Museum) Cuisine and Wine Culture Low Incidence of Crime Tremendous Opportunity for Growth o o o o o o Information Inadequate Signage Poor Infrastructure, especially roads Lack of Understanding About Western Tourists Wants, Needs, and Preferences Deficient Customer Service (No English, limited marketing, no price listings) Missed Opportunities for Commerce, especially with souvenirs (and frequently sub par quality of souvenirs) Lack of Professional Marketing of Tourism in Georgia o o o o o o Relations Campaign on Importance of Tourism to Georgian Economy Information Dissemination to Hoteliers on How to Cater to Western Tourists Upgrade and Supplement Existing Signage, especially in English. Further develop Niche Tourism (Wine, Health, Archaeological, Cultural, Religious, etc.) Governmentsponsored Park Rangers to Give Tours and Monitor Littering (as well as create tour-guide standards) More Englishlanguage Information Dissemination Support of Local and Regional Tourist and Hotel Associations o o o Between Donors on Activities Related to Tourism Development in Georgia Political and Economic Instabilities in Georgia and Region International Perceptions on Safety of Georgia Prohibitive Transportation Costs in Getting to Georgia III. Observations and Recommendations The GSTP team participated in a series of intensive field visits and several meetings with stakeholders in order to conduct a rapid assessment of Georgian tourism and the strengths and weaknesses faced by the sector. A number of opportunities were identified, which will be discussed with investors and considered for inclusion in the strategy. 41

42 Georgia Tourism Development Plan and Strategy Task 7 Report A. Strengths Attractions and Product Offers We were impressed by those aspects of our visits that were distinctly Georgian for example, visits to roadside bakeries and churchkhela sellers, witnessing a wedding at the medieval fortress church of Gelati, experiencing the hospitality and sampling the homemade wine and yogurt of the border police chief of Mestia and his wife, etc. These are special experiences that foreign visitors crave and make a tour successful. The natural scenery was equally impressive and definitely requires special attention to protecting and preserving this asset. Overall, Georgia has a wealth of natural and cultural heritage that offers unique selling propositions, which can position the country well as an internationally competitive destination. The challenge will be to sustainably leverage these propositions and turn them into competitive advantages. The DOTR should be commended for recognizing the weaknesses listed below and beginning to take serious actions to address these weaknesses. Infrastructure and Services The DOTR is addressing several of these issues directly themselves by increasing the number of garbage receptacles and clean public toilets. They have launched programs this summer to tackle these issues. Human Resource Capacity Georgia is at a turning point in tourism education and training with the opening this year of tourism and hospitality schools in Tbilisi and Kobuleti. These schools are really just getting started and thus should receive as much support as 42

43 Georgia Tourism Development Plan and Strategy Task 7 Report possible from both the Government and tourism industry. They have the potential of becoming regional hubs for tourism education and training. B. Weaknesses The GTSP team found the following issues serious weaknesses that diminish the quality of a tourist s experience: Attractions and Product Offers Archaeological, natural and historic sites are unprotected Our team visited the caves of Vardzia, but arrived too late for a guided tour because the road was full of pot holes and not well marked. Nevertheless, even though we arrived at 6.30 pm after the ticket taker had left, there was still someone at the entrance happy to put 10 LARI in his pocket for us to park and enter the grounds. The AMCHAM team also visited and was surprised when a local guide offered to break off a stalagmite as a souvenir for them. It is also worth noting that the Advisory Committee, as mentioned above, found this issue to be a top priority. The World Heritage sites of the 12 th century Monastery and Academy of Gelati and Bagrati Cathedral have just been added to the endangered list of the World Monument Fund. A lack of resources to maintain the site has been cited as one reason. Lack of signage and information Signage in general and especially in English are lacking for everything cities, towns, historic sites, facilities, interpretation, and opening hours. For example, in driving from Kutaisi, our driver had to ask for directions five times in order to locate the nearby Monastery and Academy of Gelati. In Gori, there was no signage directing us to the Stalin Museum and at the museum itself, there were a few items labeled in English, but not enough for a self-guided tour. An English-speaking tour guide did provide a helpful tour of the exhibits. In Vardzia, there was no information posted about the cave city and monastery and no printed information available nothing to indicate, for example, that this was originally founded by Queen Tamar in the 12 th century as protection against invading Mongols. Guesthouses are inadequate for foreign groups Most of the available accommodations outside Tbilisi, Telavi, Borjomi, Kutaisi, and Batumi are guesthouses. And most of these are inadequate for foreign visitors. Shower-toilet combinations in guesthouses In one guesthouse visited in Mestia, this was the standard even after having been operating for over eight years. A minor upgrading would bring this up to an international standard. 43

44 Georgia Tourism Development Plan and Strategy Task 7 Report Lack of shopping opportunities Aside from a few roadside stands, there were minimal souvenirs available in cities and at the airport. Abandoned buildings In nearly every city and town we visited across the country, decrepit hulks of buildings were often the first sites we saw. As we entered Kutaisi, for example, our immediate reaction to the buildings on the outskirts was that the city had been bombed Infrastructure and Services Road quality and safety In driving around the country, we found the road quality and drivers on the roads to be downright dangerous. Driving across the country is a game of chicken in which the line down the middle of road is a third lane for passing in both directions! Driving to Vardzia was slow and grinding along a pot-holed road. From Borjomi, the drive required about four hours. And on the way into Sighnaghi, which is in the process of getting a $30 mn facelift, a temporary road diverted around the tangled remnants of a collapsed bridge. A better more permanent road was expected to be finished soon. Proliferation of garbage and absence of receptacles While we noted some progress in this area particularly in the cities of Tbilisi and Kutaisi, we are inclined to agree with AMCHAM that this issue needs to be addressed. A pile of garbage in the foreground of a beautiful landscape or scattered near the entrance of Sighnaghi overrides the positive images and experiences of a visit. Lack of clean modern toilets In four field visits around the country, the team found the lack of toilets to be a weakness in general and specifically for foreign visitors. As the AMCHAM report stated, aside from the unattractive look and feel, the toilets also pose a health hazard. Market research The DOTR does not have the necessary staff and resources to conduct research about which generating markets and market segments could be interested in Georgia. Consequently, there is no marketing plan to guide expenditures on marketing and promotion. And there is no means of monitoring and measuring the impact of current marketing efforts. This severely limits the ability of Georgia to maximize the effectiveness of their marketing efforts and compete internationally for tourists. In May 2007, BCG Research in Tbilisi conducted a survey in the duty free zone at the airport of visitors to Georgia. The results were useful, but these efforts are insufficient for developing an ongoing institutionalized capacity within the DOTR. The same could be said about the very useful USAID-sponsored study on domestic tourism, which was prepared in March

45 Georgia Tourism Development Plan and Strategy Task 7 Report Human resource capacity While tourism certainly depends on the availability of attractions, sights, and accommodations, the human element is paramount. As far as we could tell, has not a survey has not yet been conducted of the current state of education and training for tourism in Georgia. There is a lack of understanding about what the industry needs from the new Tourism School in Tbilisi and the Tourism Education College in Kobuleti. Audits have been conducted of both institutions by the Swiss School of Tourism and Hospitality, which show that these schools will be challenged in providing the necessary trained personnel for tourism businesses, especially hotels. Both audits cited shortages of faculty, equipment, and teaching materials. Relationships with hotels and tour operators also seem to be lacking. C. Recommendations The DOTR assessment process is currently focused on mainly taking stock of what facilities are available in each main tourism destination. This is a very valuable exercise, which should result in a national database of tourism information that improves access to destinations. Both the industry and visitors will be better served when more and better quality information become available. However, as the GTSP team s field visits showed, there is also a need to generate a detailed national needs or gap assessment, one in which local level needs and gaps in services are specifically identified for activities, shopping, events, attractions, guesthouse renovations, etc. and matched with locally driven action plans. An action plan template should be provided by the DOTR. It could be based on the current assessment DOTR questionnaires and the worksheets provided by the GTSP team. The DOTR has undertaken this type of assessment for signage and clean toilets. They have selected 800 tourist sites that require signage and are trying to determine the number and placement of signs. In addition, as part of their tourism infrastructure improvement initiatives, they are planning to build 140 bathrooms throughout the country. The needs assessment could become a campaign in which travelers are invited to help improve the places they visit in Georgia by completing online surveys or surveys at the tourist information centers. Rather than attempt to cover the entire country, though, the surveys should be destination specific. Travelers could be recruited via sites such as Lonely Planet s Thorntree, TripAdvisor, IgoUgo, and 45

46 the InfoHub Specialty Travel Guide. Those who complete the surveys could be entered into a drawing for a return trip to Georgia that includes a helicopter tour. In addition, they could be asked to submit Google Earth mash-ups and photos competing for the most creative depictions of Georgia. The contest should be conducted via the new DOTR website and the winners could be announced and presented on the DOTR website. Task 1.5: Analysis of Physical Infrastructure Table 3: Analysis of Physical Infrastructure I. Transportation General Conditions Locations Served Connections Reliability and Safety Environmental Sustainability Highways, secondary roads and other roads The GTSP team s road assessment is in line with the following reported by the World Bank: 1,474 kilometers of main roads with about 70 per cent in good to fair condition; 3,392 kilometers of secondary roads of which over 60 percent are in poor condition and need rehabilitation; 15,429 kilometers of local roads most of which are, in very poor condition We agree with the WB that poor roads are a serious constraint to the movement of The country is well connected east to west with improvements underway through the efforts of the Georgian Government and the World Bank. The Georgian Military Highway is a main access thoroughfare from Tbilisi northward. Georgia is a vital east-west transit corridor. The Millennium Challenge Corporation is helping to improve this corridor with the Samtskhe-Javakheti Road Rehabilitation Project, which will cost over US$102 mn and rehabilitate 245 kms of main road and technical assistance to the Road Department of Safety is a big concern. International road safety elements are lacking, i.e. appropriate signage, railings, roadside and embedded reflectors, and shoulders. Traffic accidents that have resulted in fatalities in Georgia have steadily increased an average of 17% a year since 2002 for a total of 499 in The World Bank has required environmental impact assessments in its road support, but based on the team s inquiries with the DOTR, this does not seem to be the case for other road projects.

47 Georgia Tourism Development Plan and Strategy Task 7 Report General Conditions Locations Served Connections Reliability and Safety goods and people between Georgia s cities, ports, and rural areas. Long transit times add to transport costs and thus discourage transit through Georgia. This is also a serious obstacle to the development of sustainable tourism in the country. Georgia for development of a road master plan. World Bank assistance is also being provided to the following routes: Chokhatauri-Ozurgeti- Kobuleti, Ozurgeti- Tsvermagala, Zugdidi-anaklia, Cholaburi-Terjola-Tkibuli, Pantiani-Manglisi, and Tbilisi- Tckhvarichamia. The Roads Department has been on a fast track of repairing over 165 kms of road and 12 bridges just since the beginning of The President s program aims at providing more than 200 villages with new modern access roads. Toll roads are also planned for major thoroughfares. Airports New airport terminals opened this year in Tbilisi and Batumi, both of which are expected to be increasing domestic and international service. Tbilisi and Batumi Airports are operated by a Turkish company, TAV Holdings. Georgia and Turkey have All tourist destinations are included in the Roads Department plans. Tbilisi has direct connections with the following cities: Almaty, Amsterdam, Astana, Athens, Baku, Dubai, Frankfurt, Istanbul, Kiev, London, Minsk, Munich, Odessa, Paris, Riga, Tel Aviv, Vienna and Yerevan. Batumi has direct connections with cities in Turkey and Tbilisi and Batumi Airports are according to ICAO standards. There has been one air crash in the last 10 years a Russian military aircraft in Batumi in Environmental Sustainability No mention of environmental policies or management systems in regards to the airports.

48 Georgia Tourism Development Plan and Strategy Task 7 Report General Conditions Locations Served Connections Reliability and Safety signed an agreement whereby Batumi Airport is considered part of Turkey s domestic network. Airlines An Open Skies Agreement was signed with the US in June 2007, which is expected to help start airline connections between the US and Georgia. A similar agreement was signed with the EU, which is helping to boost airline connections to the EU. Car Rental Although Hertz and Avis both offer car rentals in Tbilisi, they could not be found via Kayak.com. In trying to arrange a car for a week in September via Hertz, the team was informed that all cars have been rented until October! Ukraine. There is no scheduled domestic service. Batumi is, however, considered a domestic destination for Turkey. 16 airlines including Georgian Airways (Airzena) and Georgian National Airlines operate to and from Tbilisi. Aeroflot Austrian Airlines AviaExpressCruise Azerbaijan Airlines Byelorussian Airlines British Airways Caucasus Airways Georgian Airways Georgian National Airlines Germania Flug KLM Lufthansa Siberia Airlines TbilAviaMsheni Turkish Airlines Ukrainian-Mediterranean Airlines The Hertz franchise in Tbilisi is owned and managed by Caucasus Travel; they cannot keep up with demand. Avis has offices at the airport and the Courtyard Marriott. Concord Motors is based in 48 Environmental Sustainability

49 Inbound and Foreign Tour Operators Georgia Tourism Development Plan and Strategy Task 7 Report General Conditions Locations Served Connections Reliability and Safety No other international agencies are listed or could be found even via a Google search. Tbilisi. No information was available about car rentals in Batumi. Europcar is present in Azerbaijan and Armenia, but not in Georgia. A local agency called Concord Motors was found on a Google search and offered a limited number of cars. There are also 12 other companies listed by DOTR. A Google search for foreign tour operators offering Georgia first offers the Open Directory website, which does not list any operators. Then bugbog.com offers the UK-based operator Explore. The third option listed is via the highly reputable website of the Association of British Travel Agents, which first shows the following: Scott s Tours (Matched on 'Georgia (USSR) ( ons/georgia.html) It is difficult to determine who is selling Georgia overseas. A comprehensive list was not available. Google searches are ineffective several foreign operators and even Georgian operators do not appear in the search results. The Specialty Travel Index 49 Environmental Sustainability

50 Georgia Tourism Development Plan and Strategy Task 7 Report General Conditions Locations Served Connections Reliability and Safety lists only the Adventure Center in the US, which offers six tours. DOTR had a list of inbound operators and lists of operators in Israel. Taxi Services Service in Tbilisi and Batumi is straightforward. Taxis are mainly privately owned cars but taxi services are readily available in Tbilisi and Batumi. The price for airport service is clearly marked in most taxis. Bus Terminals and Service Railway Service 1,600km (987 miles) of track, much of it recently upgraded. Buses, regularly running from Tbilisi to regional centers in Georgia as well as to Armenia, Azerbaijan, Russia and Turkey, are in fair to poor condition. Timetables change frequently and cannot be relied upon. The Transcaucasian Railway connects branches from Baku and Yerevan. The main line stretches towards Russia through Georgia, along the Black Sea coastline. Tbilisi to Batumi runs twice daily. The Silk Road Express also runs from Baku to Tbilisi. The Kars-Akhalkalaki-Tbilisi- Baku railway project, run by Azerbaijan, Georgia and Turkey, has become a UN priority. New tracks became active in February Tbilisi Airport will have a new railway station in September 50 Environmental Sustainability

51 River or Sea Ports/Ferries Georgia Tourism Development Plan and Strategy Task 7 Report General Conditions Locations Served Connections Reliability and Safety Ports: Batumi Port is a priority with development scheduled through It is expected to result in substantial cargo growth. An active rail ferry is in operation which is helping to grow cargo trade, especially with the Black Sea. Poti Cruise Ship Market for the Black Sea According to Batumi Sea Port Limited, there is growing interest in Batumi as a cruise port. Seabourne Cruises and Princess Cruises are both considering Batumi as a possible destination. In August 2007, Silver Seas ship the Silver Cloud called at Batumi., See map below. Major transit hub for the Caucasus and Central Asia. Through Batumi shortens cargo transit time in the region. Cruise Ship Ports in the region Batumi, Georgia Constanta, Romania Istanbul, Turkey Nasebur, Bulgaria Odessa, Ukraine Samsun, Turkey Sevastopol, Ukraine Sinop, Turkey Sochi, Russia Trabzon, Turkey Varna, Bulgaria Yalta, Ukraine Yalta-based cruise destination management company Select Black Sea Company, is the main regional company for Black Sea cruises. Through them, Batumi is marketed as a destination to most of the major lines. 51 Environmental Sustainability

52 Georgia Tourism Development Plan and Strategy Task 7 Report General Conditions Locations Served Connections Reliability and Safety Other Boats Boat rentals are possible along the coast, but information was difficult to obtain. Bicycles Bicycle rentals, especially mountain bikes, are a possible business opportunity for SMEs in Georgia. Caucasus Travel offers mountain bike tours. In the summer, independent bicycle trips were being reported in the local Tbilisi media. Motorcycle Rental We were not able to find any motorcycle rental opportunities. Other Parasailing and jet ski rentals are possible on the coast, but safety standards are questionable. Limited opportunities. In fact, the team was hard pressed to identify any possibilities for renting bikes in Tbilisi or elsewhere. Again, though, mountain bike tours can be arranged through Caucasus Travel and other agencies. Biking along main roads is definitely not recommended, but in the countryside on less traveled roads, conditions are safer for bicyclists. As with biking, we would not recommend motorcycle travel along the main roads especially since motorcycles are not common and thus drivers are not used to them. Safety standards are questionable. This is an area for further inquiry, especially given an accident in August in which a jet ski collided with a swimmer. 52 Environmental Sustainability

53 Georgia Tourism Development Plan and Strategy Task 7 Report Figure 4: Transport Corridors II. Additional Infrastructure Factors Table 4: Additional Infrastructure Factors Infrastructure Comments Related developments Traffic See comments above concerning traffic fatalities and road development. Signage Signage throughout the country of virtually every kind is a concern. For tourism, this is especially a concern because visitors cannot easily locate attractions and sights. And when they arrive at the sights, there are almost no descriptions of what they are visiting. Visitor Information Information is critical to developing tourism. Web sites are, of course, one of the most cost effective ways of distributing information. Currently, it is very DOTR has targeted 800 tourist sites for signage and in the summer began adding signs. The DOTR is establishing a network of 13 centers; three centers have already been established at Borjomi, Batumi and Kobuleti. They plan to link all 53

54 Georgia Tourism Development Plan and Strategy Task 7 Report Infrastructure Comments Related developments difficult to find practical information about tourism offers, especially tour operator information. A search engine optimization strategy is needed as soon as possible. 13 centers to a central computer system and enable each center to maintain local databases, which will feed into maintenance of a national database and website based on the database. Establishing visitor information centers is an important aspect of helping to develop tourism at a local level. The current situation is too limited to sustain any additional influx of visitors. Safety Since the Rose Revolution, things here have vastly changed, NATO now has a large program to professionalize the military, and most corruption has now been eliminated from day to day life. Indeed, Georgia has been declared to be the worlds #1 reformer. As the MC Saatchi campaign moves forward, the branding and designs they develop will help with structuring information for worldwide distribution. According to the Ministry of Interior, the number of crimes recorded has increased from 15,662 in 2001 to 62,283 in Emergency Services Since the Rose Revolution, Georgia s police forces have undergone dramatic improvements. They are a vastly different force, considered a fully professional force. Tbilisi is well covered with ambulance services with 62 teams active throughout the city. Restrooms A shortage of toilets in general and when they are available, they are usually not clean or in sanitary condition. The DOTR is pursuing a program to add 140 toilets at tourist destinations a development that is welcomed. Water supply and sewage system Responsibility for creating and maintaining toilets is a key issue. Is this a local level responsibility? Water Access to safe water 77.0 Percent Population with access to improved sanitation, rural 69.0 Percent The Tbilisi water supply has been privatized. The Government is planning the same for other municipal water supply systems. New filtering technology has been installed in Tbilisi and is being installed in other regions. 54

55 Georgia Tourism Development Plan and Strategy Task 7 Report Infrastructure Comments Related developments Population with sustainable access to an improved water source: Rural 61.0 Percent Population with sustainable access to an improved water source: Urban 90.0 Percent Urban population with access to improved sanitation 96.0 Percent Many of the cities suffered from aging municipal infrastructure, insufficient or no water and waste treatment facilities, and inadequate water/waste management facilities and practices. Most water treatment plants have not been operating or work at a very low level of efficiency. Surface water, on which municipal areas depend, has been heavily polluted with sewage and industrial discharges, although the latter has declined under current economic conditions. The Government is addressing all of these issues as rapidly as possible. Solid waste management The waste management system of Georgia is being overhauled. Tbilisi is leading the way with a number of developments including new collection equipment, receptacles, and inspection processes. The city has also set up a city cleaning hot line for citizens to report cleanliness issues. Communications GSM 900 and 1800 networks. Coverage is excellent throughout the country. SIM cards and calling cards can easily be purchased calling cards are available everywhere. Mobile service has increased dramatically over the last four years from GEL 322 mn in revenue and 7.8% of GDP in 2002 to GEL 650 mn and 13.4% in The number of subscribers has increased from 430k to 1.7 mn in the same period. Source: (Georgian National Communications Commission) Broadband internet service exists in most cities. According to the UN, there are over 175,000 internet users 4% of the population. Wi-Fi access is becoming more prevalent in Tbilisi. Internet cafes exist but they are not listed on yahoo s international internet directory or on cybercafés.com. Banking ATM machines are readily available in Tbilisi and HSBC obtained a license to operate in Georgia on 55

56 Georgia Tourism Development Plan and Strategy Task 7 Report Infrastructure Comments Related developments Batumi. July 30 th, Société General is involved through Bank Republica Loans and deposits of commercial banks have steadily increased from GEL 650 mn and GEL 500 mn respectively in January 2003 to almost GEL 1.2 bn and GEL 1 bn in July The DOTR Employment Program that is being implemented by Pro-Credit Bank loan program for SMEs in Georgia is quickly proving to be a success. Launched on June 18 th, 2007, the program received 500 loan applications and was processing 51 loans worth GEL 1.5 mn as of early August. Seven loans had been approved. 56

57 III. Recommendations A. Transportation Roads If this is not already happening, meet with the Roads Department on a regular basis as they develop and implement their roads master plan. Minister Arveladze stated in August that priority is being given to those roads that serve key tourism destinations and attractions such as Vardzia and Mestia. Meet with the MCG Samtskhe-Javakheti Road Rehabilitation Project team on a monthly basis to stay informed about the possible tourism aspects of the project. It is in the interest of the DOTR to see how the project could boost tourism to destinations along the road. Coordinate with the Roads Department on a safe driving awareness campaign. Airports The airports of Tbilisi and Batumi are both under-utilized, capable of increased service. Currently, charter flights are minimal, but as Batumi grows, there is increased potential for more regional connections, as well as domestic service. Conduct a Market Diagnostic Report, which analyzes information on traffic patterns, capacity, fares, and market demographics, thus helping to target tourism markets more precisely. It would be useful for such an analysis to assess traffic flows to determine how either charter or scheduled service might be viable. This could contribute to the development of incentive programs to stimulate increased interest of carriers. Airlines Market research for increasing the volume and quality of tourism into Georgia should be conducted according to air traffic connections and flows. Car Rental Agencies Tbilisi would benefit from offering additional international car rental agencies. While there are several local options, these are not known to foreign visitors. Incentives for attracting franchises for Sixt Rent a Car, Europcar and others should be considered.

58 Taxi Services Taxi drivers in Tbilisi would benefit from a Taxi Host training program similar to what has been organized throughout the US and Canada. The program is designed to help taxicab drivers increase their income, create more customer satisfaction and become more familiar with tourist destinations. The program lasts about nine hours. Railway Services Schedules and fares need to be added to the Georgian Railways website. The site should be linked to as many other Georgian tourism websites as possible, including the DOTR website. Development of railway tours into wine country should be encouraged. Bicycles Encourage the development of bicycle rental businesses in Batumi and other destinations. Promote mountain biking opportunities to the International Mountain Bicycling Association. Invite the IMBA Board Members to visit Georgia and experience mountain biking. Water transport Cruise potential for Batumi Port should be further analyzed jointly by the Adjara and national tourism departments. The heads of development for several of the major cruise lines should be contacted, invited to the investment forums and invited to visit Georgia. The GTSP team can assist with this. The director of Yalta-based Select Black Sea Company should be invited to Batumi and Tbilisi to discuss adding Batumi to more Black Sea cruise itineraries. B. Inbound and Foreign Tour Operators An immediate effort at search engine optimization (SEO) for Georgia tours is needed. Google searches produce a bare minimum of listings; one such listing from the Association of British Travel Agencies still refers to Georgia and the Soviet Union (Scott s Tours). 58

59 C. Signage Tour operator lists from each of the destination countries where flights to Georgia originate should be generated immediately. Records for past participation in travel trade fairs should be studied and analyzed. Did participation in certain past travel fairs result in increased tourism to Georgia? To maximize the number of visitors able to benefit from signage, signs should be in English and/or follow UNWTO and ISO guidelines for international signage. Shops that sell things tourists might want or need should also be encouraged to have signage in English. D. Visitor Information Each tourism information center should be responsible for maintaining individual destination-specific web pages on the DOTR website according to a template set by DOTR. E. Safety and security The UNWTO provides guidelines for tourist safety and security, an adaptation of these guidelines could be helpful for visitors to Georgia. This adaptation should be made available via the DOTR website. F. Restrooms Roadside rest areas similar to what are found in Europe and North America should be considered. Task 1.6: Assessment of tourism-related human resources, including institutional capacity I. Availability and Effectiveness of Institutions There are supposedly three levels of tourism education and training in Georgia, which as Beka Jakeli reported in his paper, National Qualification Framework in Tourism, are: Preliminary Vocational Education, Mid-level Vocational Education, and Higher Education (university level). However, all of this is questionable 59

60 because as Jakeli states the quality of acquired knowledge doesn t correspond to market demands and people are mostly noncompetitive on the market. In effect, there is no tourism training in Georgia other than that conducted by the few major hotels in Tbilisi for training their own staff. In fact, a couple of local hotel executives did not even know that the following programs existed. They rely on their own internal programs for staff training. However, they were interested to know about the new, more vocational oriented schools that the Ministry of Education opened this year (2007). There are several Georgian universities offering tourism courses, as well as bachelors and master s degrees in tourism, but these did not appear to be meeting the needs of the tourism industry in the country. The universities and their programs include: Ivane Javakhishvili Tbilisi State University Georgian Technical University Ilia Chavchavadze State University Tbilisi Economic Relations State University Shota Rustaveli Georgian State University of Theatre and Cinema Tbilisi Independent University "Adjara" Georgian State Academy of Physical Culture and Sports Caucasus University Grigol Robakidze University "Alma-Mater" Georgian Quality Management University Georgian Sport Academy Kutaisi Akaki Tsereteli State University Iv. Javakhishvili Tbilisi State University Meskheti Branch Georgian Subtropical State University Senaki Branch Batumi Technical Institute of Georgian Politechnical University Tourism Management Tourism Tourism Management Commerce and Marketing of Resorts-Hotels and International Tourism Tourism Management Tourism and Resort Infrastructure Management Mountaineering and Skiing Tourism Management of Tourism and Hotel Business Tourism Organization and Management Tourism Manager, Organization and Management Tourism and Sport lawer Social-Cultural Service of Tourism and Resorts Tourism Business Tourism Business Social-Cultural Service of Tourism and Resorts Among these institutions, 73 courses are offered, which include all aspects of tourism. Some of the offerings include: Basics of Tour Operating, Basics Tourism Planning, Dining Facility Management, Excursion Management, Expertise and Certification Procedures of Tourism Agency, Tour Operator's Management, Tour Excursion Business, Tour Formalities, Compiling and Organizing Tourist Itineraries. According to statistics from DOTR, there are over 1100 Bachelor s degree students in tourism and 60 Master s degree students who are being taught by 77 lecturers. 60

61 The mid-level is served by the following institutions: # College name Specializations 1 Tbilisi Industrial Pedagogical College Service Organization at Hotels and Tourist Complexes 2 Tbilisi College of Economy and Law Tourism and Marketing 3 Sokhumi Technical College 4 Ozurgeti Industrial-Pedagogical College Service Organization at Hotels and Tourist Complexes 5 Kutaisi Financial-Economic College Tourism Business and Management 6 Telavi Technical College Service Organization at Hotels and Tourist Complexes 7 Batumi Industrial-Pedagogical College Service Organization at Hotels and Tourist Complexes 8 Batumi Multiprofile College Service Organization at Hotels and Tourist Complexes 9 Martvili Agri-Economic College Tourism Management 10 Borjomi Politechnical College Service Organization at Hotels and Tourist Complexes 11 Tbilisi Tourism College Restaurant and bar staff, sales staff In 2006, the DOTR surveyed the tourism industry to understand their staffing needs and found extremely high demand for vocational tourism education and training. In response to this demand, in 2007 the Ministry of Education and Science and DOTR with donor support opened tourism schools in Kobuleti (Center of Tourism Vocational Education, reopened in September 2007) and Tbilisi (Tourism Multi-profile College). The Tbilisi school also received support from the Greek Government. These schools are expected to produce restaurant, front office and housekeeping staff for restaurants and hotels. The Tourism Multiprofile College program is focused on three areas of training: hotel operations, restaurant operations and culinary arts for the development of the following certified positions -- hotel operations specialist, restaurant operations specialist, and cook. There are no other formal tourism training institutions or programs currently offered in Georgia. Donor agencies such as EBRD, USAID and GTZ have conducted a variety of training programs mostly aimed at building skills for tour guides and bed and breakfast owners. Jakeli rightfully emphasized in his paper the need for a National Qualifications Framework similar to what has been established in Italy and Spain. This Framework would ensure that Georgian tourism and hospitality training and education standards are in line with international and EU quality standards. The establishment of this Framework is being guided by the Law of Vocational 61

62 Education, which into effect at the end of Below are recommendations in regards to establishing the Framework. Related to this process, the Eurasia Foundation commissioned the Swiss School of Tourism and Hospitality in mid-2007 to conduct detailed audits of the schools in Kobuleti and Tbilisi. It is worth reiterating some of the highlights from their audit reports. Kobuleti Courses are missing true practical lessons, near real world experience that could be gained from a practice restaurant and kitchen, and demonstration hotel room. Tbilisi There should be a module included on food safety hygiene, food handling and HACCP standards and certification. Computer courses should be required for all students. A sufficient number of toilets need to be provided. GTSP team members visited the College in early August along with representatives from donor agencies and a number of embassies. They found the following deficiencies, which were also highlighted in the SSTH audit: The building housing the College is newly renovated with room for expansion. As of early August 2007, the College was not ready to open in September. Equipment, books, curtains for the restaurant and bar were missing. The Director asked the visitors for whatever additional support they could provide to ensure that the College was fully operational. The College also seemed to be lacking faculty with hotel and restaurant experience, as well as relationships with the tourism industry. Practical lessons need more emphasis and need to be more closely integrated into the programs. 62

63 II. Recommendations An immediate outreach awareness effort needs to be undertaken with industry managers in general and especially hotel managers and key staff in Tbilisi and Kobuleti regions so that they know what each College is offering and trying to develop Industry advisory boards should be created at each College, which involve local industry as much as possible in College curricula. Internship programs should be required as part of the curricula. These should be developed closely with industry according to their needs. Sister relationships with international tourism institutions such as the Swiss School should be sought in which these institutions provide visiting lecturers, perhaps via donor support or sponsorship. If the many tourism programs at other Georgian universities and schools are not producing employable candidates, then the Ministry of Education at the urging of DOTR might consider redesigning the curricula and/or scrapping certain programs so that scarce resources are not wasted. Full implementation of the National Qualifications Framework should be encouraged by the DOTR in close cooperation with the Ministries of Education and Labor. The UNWTO s TedQual program could provide some guidance on implementation of the Framework. Practical lessons need more emphasis and need to be more closely integrated into the programs. We recommend that this be done in close coordination with DOTR and the industry. DOTR can be a facilitator in this process and thus demonstrate increased practical value for the industry. Tour operators and other industry representatives should be invited on a regular basis as guest lecturers. Based on the GTSP team s assessment and discussions with industry representatives, the highest priority tourism labor profile for the industry is one that is oriented to vocational skills development. These skills should include the hotel and restaurant subjects covered by the Tourism Colleges in Kobuleti and Tbilisi. With every course that is offered, the College administration and faculty need to consider how these courses will contribute to the employability of the students. Would the courses strengthen the skills of students while working? Are the courses providing knowledge and experience that employers need? Are the employers being asked their opinions and input on the courses? The latter is essential to a successful and sustainable program. If a student can move directly 63

64 from graduation into a job and not require much additional training, then the College s program has succeeded. Task 1.7: Review of Environmental Impact Assessment Processes in relation to sustainable tourism I. Comments on existing environmental impact assessments (EIA) The GTSP team is continuing to investigate this area with the Government. As best as we can so far determine from our assessments and discussions with DOTR officials, other Government officials, Advisory Committee members and other industry representatives, EIA requirements are minimal, perhaps nonexistent for tourism. However, there was a comprehensive EIA process related to construction of the BTC pipeline, which would be worth reviewing for tourism development. And there are laws related to environmental protection in Georgia that provide some safeguards to tourism growth. The following images of sprawl and congestion do not seem to represent what Georgians, especially the DOTR, want to see happen with tourism development in the country: Without consideration in advance of development of the environmental impacts and pressures on infrastructure of tourism, the destination can easily become a victim of its own success. The attractiveness and aesthetic appeal of the destination is diminished, thus driving down the value and quality of the place, especially with higher value, higher spending tourists. And consequently, the attractiveness for investors is also diminished. Multi-lateral lending agencies such as the International Finance Corporation recognize this and try to address these deficiencies by encouraging international financial institutions to build in environmental and social protection requirements into their lending practices. One key set of recommendations is contained in the Equator Principles. 64

65 The AGBC has noted with great interest that there is a growing trend towards including sustainability criteria in investment decisions, as highlighted by Lars Thunell, Executive Vice President of the International Finance Corporation on July 6, On this day, the Equator Group, a group of about 40 financial institutions that together represent more than 80 percent of global project financing pledged to strengthen their environmental and social risk management. They met to adopt the revised version of the Equator Principles, which follows IFC's approval of its new social and environmental performance standards, upon which the Equator Principles are based: 1) Review and Categorization 2) Social and Environmental Assessment 3) Applicable Social and Environmental Standards 4) Action Plan and Management System 5) Consultation and Disclosure 6) Grievance Mechanism 7) Independent Review 8) Covenants 9) Independent Monitoring and Reporting 10) EPFI Reporting Planned carefully with a long term perspective of sustainability and quality from the start, tourism has proven to be a great source of financing for conservation. Visits to national parks in which visitors pay entrance fees and spend money at carefully developed concessions generate much needed financing a mutually self-reinforcing and sustaining process. Low impact tours based on appreciating the natural environment such as bird-watching, nature walks, river rafting can attract a high end visitor, who are seem willing to spend in proportion to the degree of pristine and protected conditions. The Law of Georgia on Protective Sanitary Zones of Health Resorts and Resort Localities provides some environmental guidelines for investment and development. While the provisions of the law are very specific in regards to areas of development, it seems that those areas which do not have medicinal or health resources are excluded from the environmental requirements. The 1996 Law of Georgia about the system of protected areas, which provides more specific protection for the country s natural and cultural areas offers further guidelines for potential investors and developers in areas near protected areas. The Law has resulted in the creation of protected areas for protecting and recovering the most important heritage, unique, rare and characteristic ecosystems, flora and fauna and cultural habitats, for ensuring of their usage for development of save economy of scientific, educational, recreational and natural resources. These areas, which comprise 6.7% of total land in Georgia, have

66 been created in conformity with the international standards and requirements of the IUCN. There are 18 state nature reserves, five national parks, nine habitat species management areas, three natural monuments and one protected landscape in Georgia. Management of these protected areas (except the protected landscape) is provided by the Department of Protected Areas, the Environment Protection and Natural Resources State Dependent Institution of Georgia. As a result, potential negative impacts on flora and fauna, critical habitats, ecosystems, and biological corridors are mitigated. According to the US State Department, about 50% of the population of 4.6 mn lives below the poverty line and more than half live in rural areas. In these areas, nature-based tourism has great potential as a source of job creation and income generation for local communities. As we progress through the strategy development, we will be encouraging development that boosts opportunities for residents in towns, villages and rural areas around Georgia. Much of this type of tourism depends on protecting the environment. For communities, the protecting environmental assets can be regarded as protection of job-creation, incomegenerating assets. In other words, there is tremendous economic value in protecting the environment. Examples of where this is happening already in Georgia abound: Lagodekhi, Borjomi, Kobuleti, Kolkheti, Svaneti and Tusheti all of which depend on well protected environmental assets to attract visitors. In fact, it is the natural environment in these places that is the attraction, along with Georgian culture of course. II. Water resources The country s water supplies have been severely underdeveloped, but this is being addressed through privatization. The Tbilisi water supply has been successfully privatized and along the coast similar plans are being pursued. III. Energy resources Measures to conserve energy and encourage the development of renewable energy sources would benefit the country as a whole. Georgia s natural gas supplies have been curtailed severely by Russia in recent years. Tourism, especially hotels and transportation, are tremendous energy consumers. The following matrix will be adapted for consideration by the team when potential Georgia tourism investments are identified at the end of Task 2: 66

67 Figure 5: Assessment example IV. Recommendations Extend the applicability of the Law on Protective Sanitary Zones to all types of tourism, particularly tourism in or around protected areas and national parks. Ensure that the Law of Protected Areas factors in tourism as a source of financing, income and employment for local communities in and around protected areas. A proactive approach should be encouraged with tourism investment and development whereby measures to reduce energy and water consumption and better waste management are presented as cost-savings and thus ways to increase profits. Water and energy conservation programs for tourism businesses should be encouraged, especially since tourism is a major consumer of energy and water resources. Task 1.8: Overall Initial Recommendations At the time of writing in early September, the GTSP team had visited most of the major tourist sites in Georgia, and tasted, drank, seen and heard some of the best the country has to offer. We were all impressed by the diversity of the tourism experiences. Georgia has comparatively much more to offer than countries of similar size and historical legacies. This diversity is definitely a competitive edge and attraction for investors and visitors, but the country is unknown as an international destination. And even if suddenly hoards of visitors began descending on Georgia, its infrastructure would be seriously strained. This is not a grand revelation everyone we met seemed to realize that Georgia is not yet on the map of international tourism and that infrastructure and the raft of other issues mentioned above need to be addressed. For now, the tourism situation is tantamount to having the pieces of a beautiful jigsaw puzzle before you. During this first phase of the strategy 67

68 development, the GTSP team needed to see what pieces of the puzzle existed, what issues needed to be addressed. During the next phase, we will work with the DOTR and the Advisory Committee in connecting some of the pieces -- determining those products and opportunities that could offer the most competitive and attractive investment possibilities and destination attractions. Lastly, the strategy will be pulled together such that the sum the full jigsaw puzzle -- will be greater, more impressive than its parts. Based on our assessment of the pieces and input from the DOTR and Advisory Committee, we have the following initial immediately actionable and longer term recommendations, most of which will probably be integrated into the strategy: I. Immediate and short term recommendations A. Investments Easy access to a database of feasible tourism development projects in Georgia. The recognition that, within budget decisions, improving and conserving natural and cultural environments is essential to the development of sustainable tourism strategies. B. Institutional and policy Elevate the status of the Department of Tourism and Resorts so the Chairman is at least a Deputy Minister. The DOTR has a critical role to play in providing market and economic impact research to the tourism industry. The industry does not have the capacity to conduct such research. The development of a research plan should begin immediately for the longer term, objective capacity of the DOTR. C. Marketing, product development and promotion Market research for increasing the volume and quality of tourism into Georgia should be conducted according to air traffic connections and flows. An immediate effort at search engine optimization (SEO) for Georgia tours is needed. Google searches produce a bare minimum of listings; one such listing 68

69 from the Association of British Travel Agencies still refers to Georgia and the Soviet Union (Scott s Tours). Tour operator lists from each of the destination countries where flights to Georgia originate should be generated immediately. Records for past participation in travel trade fairs should be studied and analyzed. Did participation in certain past travel fairs result in increased tourism to Georgia? Promote mountain biking opportunities to the International Mountain Bicycling Association. Invite the IMBA Board Members to visit Georgia and experience mountain biking. National Geographic s Geotourism program should be encouraged as a way of encouraging the development of environmental resources for sustainable tourism. Geotourism is tourism that sustains or enhances the geographical character of a place its environment, culture, aesthetics, heritage, and the well-being of its residents. D. Infrastructure Launch a public awareness campaign about the environment as part of domestic marketing for tourism. Georgia s environmental assets are also tourism assets. Water and energy conservation programs for tourism businesses should be encouraged, especially since tourism is a major consumer of energy and water resources. Generate a detailed national needs or gap assessment, one in which local level needs and gaps in services are specifically identified for activities, shopping, events, attractions, guesthouse renovations, etc. and matched with locally driven action plans. An action plan template should be provided by the DOTR. It could be based on the current assessment DOTR questionnaires and the worksheets provided by the GTSP team, as well as on the needs assessments being undertaken for signage and toilets. The needs assessment could become a campaign in which travelers are invited to help improve the places they visit in Georgia by completing online surveys or surveys at the tourist information centers. Rather than attempt to cover the entire country, though, the surveys should be destination specific. Travelers could be recruited via sites such as Lonely Planet s Thorntree, TripAdvisor, IgoUgo, and the InfoHub Specialty Travel Guide. Those who complete the surveys could be entered into a drawing for a return trip to Georgia that includes a helicopter tour. In addition, they could be asked to submit Google Earth mash-ups and photos competing for the most creative 69

70 depictions of Georgia. The contest should be conducted via the new DOTR website and the winners could be announced and presented on the DOTR website. Schedules and fares need to be added to the Georgian Railways website. The site should be linked to as many other Georgian tourism websites as possible, including the DOTR website. To maximize the number of visitors able to benefit from signage, signs should be in English and/or follow UNWTO and ISO guidelines for international signage. Shops that sell things tourists might want or need should also be encouraged to have signage in English. E. Training and Education Taxi drivers in Tbilisi would benefit from a Taxi Host training program similar to what has been organized throughout the US and Canada. The program is designed to help taxicab drivers increase their income, create more customer satisfaction and become more familiar with tourist destinations. The program lasts about nine hours. An immediate outreach awareness effort needs to be undertaken with hotel managers and key staff in Tbilisi and Kobuleti regions so that they know what each College is offering and trying to develop Industry advisory boards should be created at each College, which involve local industry as much as possible in College curricula. Internship programs should be required as part of the curricula. These should be developed closely with industry according to their needs. Sister relationships with international tourism institutions such as the Swiss School should be sought in which these institutions provide visiting lecturers, perhaps via donor support or sponsorship. II. Longer term recommendations A. Investments Improve the economic performance of tourism industry businesses. There is a constant need for the industry to review the regulations, taxes and practices which impinge on its competitiveness and ability to attract investment capital. 70

71 This will require a concentrated effort by the industry and industry associations to research and document those practices and changes that are an imposition on business and to present professional and coherent cases for the governments' consideration. A key action includes preparation of a study by key industry groups to identify any government initiatives that would encourage the establishment and improve the operation of tourism businesses. Convince the Georgian banking and financial institutions that the tourism industry offers sound investment opportunities by improving their knowledge base Investigate alternative venture capital avenues. A proactive approach should be encouraged with tourism investment and development whereby measures to reduce energy and water consumption and better waste management are presented as cost-savings and thus ways to increase profits. Provision of an advisory service and guidelines for industry operators as needed by the financial community. A reliable and comprehensive statistical database of the tourism facility inventory to guide decision-makers at various levels of tourism development; Reliable tourism market data at both the national and destination level, including marketing strategies. Trained policy-makers and destination managers in a wide range of skills and knowledge about tourism development, investment, and business planning. A mechanism to work in concert with others in the national tourism industry to support tourism development strategies; A master plan that identifies a planning and implementation mechanism to ensure the development of appropriate attractions and tourism products; Information technology capacity which provides the necessary information as to promotion strategies and marketing reach The recognition that, within budget decisions, improving and conserving natural and cultural environments is essential to the development of sustainable tourism strategies; and A concerted attempt to work closely with all tourism stakeholders to lessen leakages that occur from tourism development. 71

72 B. Institutional and policy A national tourism strategy that will emphasize international tourism over domestic because the latter leads largely to a redistribution of national income while international tourism generates much needed foreign exchange earnings. Develop a tourism investment policy which ensures sound and direct investment in areas to meet national social and economic goals is of paramount importance in Georgia. Hence, every effort should be made to encourage investment in tourism businesses that support national social and economic development policies. Implement policies that will encourage the domestic tourism industry and attract foreign direct investment. Those policies should ensure that tourism is properly planned and managed so as to minimize its adverse economic, social, cultural and environmental impacts. Extend the applicability of the Law on Protective Sanitary Zones to all types of tourism, particularly tourism in or around protected areas and national parks. Ensure that the Law of Protected Areas factors in tourism as a source of financing, income and employment for local communities in and around protected areas. Priority should be attached to the integration of tourism policies with the policies of other government agencies so that tourism develops in harmony with overall economic, social and environmental goals. Define laws and regulations clearly, leaving less room for arbitrary interpretation and enforcement by bureaucrats and courts. Institutionalize the government s approach to incentives, and articulate a common message. Emphasize on building human capital and training, which often takes a back seat to infrastructure planning. Facilitate and encourage the continual growth of business associations representing key parts of the tourism industry. Pursue policies that maximize local level tourism-related expenditures and linkages in the local economy and minimize leakages. 72

73 Encourage strong backward and forward linkages through proactive policies, especially with attention to some or all of the following backward linkage industries: Food products Real estate Wholesale trade Performing arts, spectator sports and museums Advertising and related services Beverage products Monetary oversight and credit intermediation Rights to non-financial intangible assets C. Marketing, product development and promotion Tbilisi would benefit from offering additional international car rental agencies. While there are several local options, these are not known to foreign visitors. Incentives for attracting franchises for Sixt Rent a Car, Europcar and others should be considered. Cruise potential for Batumi Port should be further analyzed jointly by the Adjara and national tourism departments. The heads of development for several of the major cruise lines should be contacted, invited to the investment forums and invited to visit Georgia. The GTSP team can assist with this. The director of Yalta-based Select Black Sea Company should be invited to Batumi and Tbilisi to discuss adding Batumi to more Black Sea cruise itineraries. Encourage the development of bicycle rental businesses in Batumi and other destinations. Each tourism information center should be responsible for maintaining individual destination-specific web pages on the DOTR website according to a template set by DOTR. The largest tourism investment program in the world is currently occurring in Macau. As the result of issuing three exclusive licenses, to conduct gambling in this Chinese Special Administrative Region (SAR), an investment program of well over $US10 billion is currently underway. Whereas, Georgia does not have the availability of the casino hungry Chinese market, it is appropriate to 73

74 examine how the Georgia casino environment could be improved to attract this immense source of capital. D. Infrastructure When undertaking the development of major infrastructures, the Georgia government will have to ensure that it coordinates the needs of the tourism sector with the needs of other industries in the area, as well as to the local community as a whole. Consideration should be given to the various options available for financing and privatizing tourism infrastructure projects, such as government outlays, multilateral and regional financial institutions, involvement of the private sector through build-operate-transfer schemes and foreign direct investment. Government should remain cognizant that the provision of core infrastructure (suitable access, sanitation, and security) is indispensable to a successful tourism industry and needs to be included in the public works program. On a preliminary basis, we see that regional airport and airline network could be a key element in improving the tourism infrastructure within Georgia and that this could be an attractive privatization opportunity. Protect cultural heritage: o Improve neighborhoods around protected areas (e.g. zoning). Strive for increased emphasis on UNESCO World Heritage Site designations. o Related to neighborhood improvement is the establishment of protective zones around cultural heritage sites and monuments in which there would be no or minimal development. o During our inspection trip we were impressed by the potential of what could be offered to the international tourist, but there is room for substantial improvement in this part of the tourism industry. We recommend the following approach (in sequence) would markedly improve the contribution of the cultural heritage sites to the tourism industry: Preservation (P) Access (A) Interpretation (I) Remembrance (R) If this is not already happening, meet with the Roads Department on a regular basis as they develop and implement their roads master plan. Minister 74

75 Arveladze stated in August that priority is being given to those roads that serve key tourism destinations and attractions such as Vardzia and Mestia. Meet with the MCC Samtskhe-Javakheti Road Rehabilitation Project team on a monthly basis to stay informed about the possible tourism aspects of the project. It is in the interest of the DOTR to see how the project could boost tourism to destinations along the road. Coordinate with the Roads Department on a safe driving awareness campaign. The airports of Tbilisi and Batumi are both under-utilized, capable of increased service. Currently, charter flights are minimal, but as Batumi grows, there is increased potential for more regional connections, as well as domestic service. Conduct a Market Diagnostic Report, which analyzes information on traffic patterns, capacity, fares, and market demographics, thus helping to target tourism markets more precisely. It would be useful for such an analysis to assess traffic flows to determine how either charter or scheduled service might be viable. This could contribute to the development of incentive programs to stimulate increased interest of carriers. The UNWTO provides guidelines for tourist safety and security, an adaptation of these guidelines could be helpful for visitors to Georgia. This adaptation should be made available via the DOTR website. Roadside rest areas similar to what are found in Europe and North America should be considered. Extend the applicability of the Law on Protective Sanitary Zones to all types of tourism, particularly tourism in or around protected areas and national parks. Ensure that the Law of Protected Areas factors in tourism as a source of financing, income and employment for local communities in and around protected areas. Water and energy conservation programs for tourism businesses should be encouraged, especially since tourism is a major consumer of energy and water resources. A concessions policy which encourages sustainable tourism development in protected areas and parklands should be explored. A sustainable concessions policy would generate more resources for the parks and natural areas. 75

76 E. Training and Education Lack of trained staff: o Educational exchanges with foreign universities for improved training and education. o Promote awareness about the importance of the tourism industry to the country among Georgian youth. Emphasize temporary and longer term employment opportunities as guides, hotel staff and management, etc. If the many tourism programs at other Georgian universities and schools are not producing employable candidates, then the Ministry of Education at the urging of DOTR might consider redesigning the curricula and/or scrapping certain programs so that scarce resources are not wasted. Full implementation of the National Qualifications Framework should be encouraged by the DOTR in close cooperation with the Ministries of Education and Labor. The UNWTO s TedQual program could provide some guidance on implementation of the Framework. Practical lessons need more emphasis and need to be more closely integrated into the programs. We recommend that this be done in close coordination with DOTR and the industry. DOTR can be a facilitator in this process and thus demonstrate increased practical value for the industry. With every course that is offered, the College administration and faculty need to consider how these courses will contribute to the employability of the students. Would the courses strengthen the skills of students while working? Are the courses providing knowledge and experience that employers need? Are the employers being asked their opinions and input on the courses? The latter is essential to a successful and sustainable program. If a student can move directly from graduation into a job and not require much additional training, then the College s program has succeeded. A proactive approach should be encouraged with tourism investment and development whereby measures to reduce energy and water consumption and better waste management are presented as cost-savings and thus ways to increase profits. Encourage financial institutions to employ tourism graduates and/or experienced industry practitioners so they can develop an inherent knowledge of the industry within their organizations. 76

77 Task 2 Task 2.1: SWOT Analysis The following SWOT Analysis of tourism in Georgia is the result of numerous site visits and interviews by the Georgia Tourism Strategy Project Team I. Strengths A. Attractions and Product Offers We were impressed by those aspects of our visits that were distinctly Georgian for example, visits to roadside bakeries and churchkhela sellers, witnessing a wedding at the medieval fortress church of Gelati, experiencing the hospitality and sampling the homemade wine and yogurt of the border police chief of Mestia and his wife, etc. These are special experiences that foreign visitors crave and make a tour successful. Wine country and traditional Georgian cuisine. The country s historical legacy as the birthplace of wine is an important strength that is being leveraged in the campaign Europe Started Here which was launched in November Unique attractions such as the Stalin Museum in Gori and the archaeological finds at Dmanisi in southern Georgia. The latter is one of the world s most significant archaeological sites human bones dating to over 1 million years were discovered here. The natural scenery was equally impressive and definitely requires special attention to protecting and preserving this asset. National parks and protected areas are an under-utilized tourism strength. With increased managed tourism to these areas, tourism could contribute to further protecting the country s natural assets. Overall, Georgia has a wealth of natural and cultural heritage that are unique selling propositions, which can position the country well as an internationally competitive destination. The challenge will be to leverage these propositions and turn them into competitive advantages without compromising sustainability. Investors are realizing these strengths and investing in hotel developments around the country. The DOTR should be commended for recognizing the weaknesses listed below and beginning to take serious actions to address these weaknesses. 77

78 B. Infrastructure and Services The DOTR is addressing several of these issues directly themselves by increasing the number of garbage receptacles and clean public toilets. They launched programs in 2007 to tackle these issues. C. Human resource capacity Georgia is at a turning point in tourism education and training with the opening this year of tourism and hospitality schools in Tbilisi and Kobuleti. These schools are really just getting started and thus should receive as much support as possible from both the Government and tourism industry. They have the potential of becoming regional hubs for tourism education and training. The World Economic Forum s Tourism Competitiveness Index ranked Georgia 66 th out of 124 countries on tourism competitiveness. Georgia was ranked number one on low visa requirements and ranked in the top 10 on human resources and tourism perception. D. Investment Climate The International Finance Corporation (IFC) noted in a recent assessment that Georgia was the leading reformer in three specific areas. Reforms in these areas are positive developments for tourism: Dealing with licenses: The report looks specifically at construction licenses and permits, and this year Georgia created a one-stop shop for building permits. Shorter time limits for the issuance of permits were introduced, and several unnecessary procedures were eliminated. As a result, compliance with building regulations in Tbilisi is as now as easy as in Hong Kong. Enforcing contracts: Georgia established specialized commercial sections in the courts. Also, the Supreme Court can now decide which cases to review. Previously, it dealt with every case sent by the lower courts. In addition, Georgia has been striving to reduce corruption in the courts by increasing judges salaries and more aggressively investigating corruption and taking disciplinary measures against judges. Employing workers: The new labor code eases restrictions on the duration of term contracts and overtime work. The new law provides for one month s severance pay, replacing complex rules requiring varying notice periods and the involvement of labor unions and the Ministry of Labor. Georgia also reduced the social security contributions paid on wages by businesses from 31% to 20%. Together, these changes make 78

79 Georgia the sixth easiest place to employ workers globally (after the Marshall Islands, United States, Singapore, Tonga, and the Maldives). 7 II. Weaknesses The GTSP team found the following issues serious weaknesses that diminish the quality of a tourist s experience: A. Attractions and Product Offers Archaeological, natural and historic sites are poorly protected Our team visited the caves of Vardzia, but arrived too late for a guided tour because the road was full of pot holes and not well marked. Nevertheless, even though we arrived at 6.30 pm after the ticket taker had left, there was still someone at the entrance happy to put 10 GEL in his pocket for us to park and enter the grounds. It is also worth noting that the Advisory Committee found this issue to be a top priority. The World Heritage sites of the 12 th century Monastery and Academy of Gelati and Bagrati Cathedral have just been added to the endangered list of the World Monument Fund. A lack of resources to maintain the site has been cited as one reason. Lack of signage and information Signage in general and especially in English are lacking for everything cities, towns, historic sites, facilities, interpretation, and opening hours. For example, in driving from Kutaisi, our driver had to ask for directions five times in order to locate the nearby Monastery and Academy of Gelati. In Gori, there was no signage directing us to the Stalin Museum and at the museum itself, there were a few items labeled in English, but not enough for a self-guided tour. An English-speaking tour guide did provide a helpful tour of the exhibits. In Vardzia, there was no information posted about the cave city and monastery and no printed information available nothing to indicate, for example, that this was originally founded by Queen Tamar in the 12 th century as protection 7 Doing Business, In addition, Georgia made strides in increasing the ease of starting a business. Georgia reduced the minimum capital required to start a new business from 2,000 lari to 200 (US$85). As a result, business registrations rose by 55 percent from 2005 to 2006, reflecting both the creation of new businesses and the registration of companies formerly operating in the shadow economy. In the area of getting credit, Georgia also has made some legislative changes to facilitate the exchange of credit information, and a private credit bureau began to support the exchange of information among banks. 79

80 against invading Mongols. Guides were not available during the team s visit, although they arrived at 6.30 pm. Guesthouses are inadequate for foreign groups Most of the available accommodations outside Tbilisi, Telavi, Borjomi, Kutaisi, and Batumi are guesthouses. And most of these are inadequate for foreign visitors. Showertoilet combinations in guesthouses In one guesthouse visited in Mestia, this was the standard even after having been operating for over eight years. A minor upgrading would bring this up to an international standard. Lack of shopping opportunities Aside from a few roadside stands, there were minimal souvenirs available in cities and at the airport. Around the country we saw multiple missed opportunities for selling souvenirs to tourists a microenterprise mine waiting to be tapped. Abandoned buildings In nearly every city and town we visited across the country, dilapidated buildings were often the first sites we saw. As we entered Kutaisi, for example, our immediate reaction to the buildings on the outskirts was that the city had been bombed B. Infrastructure and Services Transportation and Accessibility Road quality and safety In driving around the country, we found the road quality and drivers on the roads to be dangerous. Driving across the country is a game of chicken in which the line down the middle of road is a third lane for passing in both directions! Roads were cited by hotel operators as the number one infrastructure concern. Driving along some roads, such as the road from Borjomi to Vardzia, is slow and grinding. Better more permanent roads were expected to be finished soon. Signage As mentioned above, a lack of signage (of any kind) is also a serious issue that the DOTR recognizes and is trying to address. Signage in English would be helpful. Lack of domestic air service -- Lack of domestic air service and capacity, other than helicopters and small charter planes, is a serious weakness, especially as tourism marketing and promotion exist. Insufficient transportation capacity Insufficient rail and international air capacity for peak travel periods is also a serious weakness. 80

81 Public Services Proliferation of garbage and absence of receptacles While we noted some progress in this area particularly in Tbilisi and Kutaisi, this issue needs to be urgently addressed. A pile of garbage in the foreground of a beautiful landscape or scattered near the entrance of Sighnaghi overrides the positive images and experiences of a visit. In our travelers survey, garbage was cited as a priority issue. Lack of clean modern toilets In six field visits around the country, the team found the lack of toilets to be a serious weakness in general and specifically for foreign visitors. The lack of toilets also poses a health hazard. C. Marketing and market research The DOTR does not have the necessary staff and resources to conduct research about which generating markets and market segments could be interested in Georgia. Consequently, there is no marketing plan to guide expenditures on marketing and promotion. And there is no means of monitoring and measuring the impact of current marketing efforts. This severely limits the ability of Georgia to maximize the effectiveness of their marketing efforts and compete internationally for tourists. In May 2007, BCG Research in Tbilisi conducted a survey in the duty free zone at the airport of visitors to Georgia. The results were useful, but these efforts are insufficient for developing an ongoing institutionalized capacity within the DOTR. The same could be said about the very useful USAIDsponsored study on domestic tourism, which was prepared in March D. Human resource capacity While tourism certainly depends on the availability of attractions, sights, and accommodations, the human element is paramount. As far as we could tell, there has not been a survey of the current state of education and training for tourism in Georgia. There is a lack of understanding about what the industry needs from the new Tourism School in Tbilisi and the Tourism Education College in Kobuleti. Audits have been conducted of both institutions by the Swiss School of Tourism and Hospitality, which show that these schools will be challenged in providing the necessary trained personnel for tourism businesses, especially hotels. Both audits cited shortages of faculty, equipment, and teaching materials. Relationships with hotels and tour operators also seem to be lacking. There is also a lack of understanding about what Western tourists expect as minimum standards in accommodations, service and sanitation. English language skills are minimal in the regions. 81

82 III. Opportunities A. Attractions and product offers See the preliminary project list below for the prime opportunities. Georgia has untapped product opportunities in cultural and nature-based tourism for businesses of all sizes. International and major domestic investors and developers such as the Center Point group have bought land all across Georgia and are planning to develop at least 60 hotels. B. Infrastructure and Services Expanded and improved passenger rail service High speed rail lines across the country from Tbilisi to Batumi and internationally connecting through Batumi into Turkey and from Tbilisi to Yerevan and Baku would be popular transportation options and opportunities. A wine train into the Kakheti region and a special renovated line into Tskaltubo if and when that is rejuvenated as a destination would also be popular. Privatization of infrastructure such as highways is being considered and could offer opportunities for investors. Privatization of the rail system was being invited as of November C. Marketing and market research Niche markets such as those that National Geographic considers Geotourism are fast-growing, high spending tourism market segments. These segments include wine tourism, visits to archaeological sites, religious tourism and nature based tourism (see below). In 2006, international arrivals to Turkey from several key markets decreased United Kingdom (-4.49%), Netherlands (-20.45%), Germany (-11.27%), Israel (-8%), and Greece (-29.41%). These are all generating markets for Georgia, thus opening up possible opportunities. However, it should be emphasized that one of the reasons for the decrease was a perceived terrorist threat in the region, which prompted tour operator cancellations. The amount of this lost market that could become Georgia s gain would have to be researched based on the composition of the cancellations. D. Human resources With the increased presence of international brand quality standards, such as Kempinski and Park Hyatt, there will be pressure on the local tourism industry to improve standards and for the tourism schools to cater to those increased standards. All of this will be a great opportunity for Georgia to become more of an international tourist destination. It will also be an opportunity for the 82

83 industry to learn from the top service level standards of the international brands. IV. Threats A. Attractions and product offers As mentioned below in the international competition section, Georgian tourism has serious competition in several segments. The segment attracting the largest number of visitors to the country sun and sand is faced with serious competition from Turkey, which attracted 50% more Georgians in 2006 compared with The winter tourism segment is also faced with competition to the west, especially in those destinations where heli-skiing is offered (Russia, Turkey, Italy and Switzerland). B. Infrastructure and Services The team considers waste management, particularly the lack of sewage treatment along the coast, and especially in Bakuriani, Gudauri and Telavi among other tourism destinations to be one of most serious infrastructure issues. o Given that over 60 hotels opened in 2006 alone, it is highly unlikely that waste management improvements can keep pace with additional hotel development. In fact, in Gudauri, the team saw the area s only sewage pond filled to capacity outside the Sporthotel when occupancy in the area was reportedly less than 10%. In Bakuriani, sewage flowed untreated directly into a river near hotels. See comments below. Misperceptions of Georgia as a dangerous destination could also be a threat, one that could be countered though by continual positive messaging and positioning. C. Marketing and market research As mentioned above, the lack of market research is a serious weakness. It is also a potential threat if not addressed immediately. Currently, the Department of Tourism pursues marketing without targeted research, so it is not known where the greatest impact can be obtained from their limited marketing budget. The competition invests heavily in market research definitely a potential threat as the novelty effect of Georgian tourism becomes less interesting for prospective visitors. 83

84 D. Human resources Tourism is heavily dependent on human resources. The tourism schools are relatively new and, according to the Swiss Hotel School audits, are not ready to provide the necessary human resources for international standard tourism services, especially those required by the likes of international brands such as Marriott, Kempinski and Intercontinental. The Marriott Hotels in Tbilisi recognize the need to develop local capacity and are supporting and encouraging the tourism school. Another potential threat is political instability or even the perception of political instability in Georgia and neighboring countries. With an increasingly vocal opposition in Georgia and continued issues of independence in South Ossetia and Abkhazia, this is a very real threat. Task 2.2: Product analysis Tasks & 2.2.2: Regional attractions and visitation patterns, deficiencies, ways to address deficiencies, building on strengths. The regional attractions described below were visited and evaluated whenever possible according to the following considerations: Infrastructure, Product offers and the Quality of Services. In every destination, except Tbilisi, infrastructure issues ranging from shortages of utilities and waste management systems to hotels and restaurants were deficient. These deficiencies are being addressed in varying degrees with Government and Donor support. Increased private sector involvement in the provision of infrastructure is inevitable in order to realize investments in areas with infrastructure shortages. It is unclear, though, the extent to which investors are being required as part of their investments to improve infrastructure. This is a key deficiency that if not addressed simultaneously with the core tourism investment, it will quickly degrade the intrinsic strengths of the natural and cultural attractions and thus degrade the value of their investments. I. Visitation patterns Most of the destinations listed below are on the itineraries of the major Tbilisibased tour operators. They are being actively promoted by these operators and/or are attracting independent travelers. The following destinations are exceptions: Batumi and the Black Sea Coast This region attracts mainly summer holiday visitors from Georgia, Armenia and Azerbaijan who stay in guesthouses and 84

85 spend an average of 27 GEL a day, according to the Adjara Tourism Department. Arrivals from Kazakhstan are also rising. Tskaltubo The spa center at Tskaltubo attracts Georgians and visitors from neighboring countries, but the infrastructure is not sufficient to provide services to a broader international market. Lower Chala This is undeveloped as a destination, but great potential to build off its interesting past (see below). Kolkheti National Park The Park would benefit from increased tourism. Table 5: Key Destinations Site/Attraction Comments 1) Kazbegi Kazbegi Village is accessible by public transport and private a. Trailhead car, three hours from Tbilisi. The main northbound highway brings you straight into Kazbegi s main square where there is a statue of the namesake of the village, Alexander Kazbegi. The highway is under construction and much improved, although there are several stretches still needing repair and difficult or closed for periods of time in the winter. Basic infrastructure within the village was not evaluated, though expectations are that it is on par with Gudauri (see below). Product Most visitors to Kazbegi can t help but make their way to the 14 th Century Holy Trinity (Tsminda Sameba) Church, perched as it is on a prominent point overlooking the village (2170m). The church has become something of a symbol of Georgia a large and beautiful building high in the mountains. It is well worth including on itineraries. The trail to Mt. Kazbegi (5047m) is well traveled, especially late in the season which runs approximately May Oct. The ascent of the extinct volcano is technically straightforward, with some crevasses. There were reported to have been as many as 2,000 climbers during the 2007 season, which maybe a record number. Without exception, all climbers interviewed said it was a fantastic experience, even those who did not succeed reaching the summit. There is one lodge (previously a Soviet-era meteorological station) at 3680m. Otherwise, most climbers camp. 85

86 Site/Attraction Comments Quality of services Kazbegi is well developed for home stays, with a wide range of offerings throughout the village. The Intourist Hotel is no longer operational and appears to sit dormant. The relatively newly constructed Stepan Tsminda Hotel is satisfactory for groups, located right on the square with western amenities and a dining / deck area. There is a recent effort to offer tourists more recreational options, including horseback riding (see photo). To date, most visitors are in Kazbegi for the day to visit the church, or passing through for a night enroute up Mt. Kazbegi. It is said that there are local guides that can be hired to assist with the climb up Mt. Kazbegi. We were unable to find one upon reaching the village. More time could have yielded success. There is a WWF Eco-Station located outside of the village center and difficult to find. There is not yet a visitor information center (VIC) at Kazbegi. Given the dominance of the backpacker set going to Kazbegi, a VIC could be very helpful assisting with lodging and potentially promoting local guides and other recreational outlets. SME Development Guide Services: A core recommendation for Kazbegi Region Tourism Development is to provide high quality guide training and establish a formal association of guides to provide mountaineering services. If indeed there were 2,000 climbers going up the mountain this year, the large increase maybe indicative that more will come. Indeed, given the beauty of the mountain, and relative ease of access (not a highly technical climb), an annual increase in visitor numbers maybe safely assumed. The village at the moment benefits only tangentially from the tourist traffic making its way through the village enroute either to the church or heading up the mountain. Safety: there is no easier way to ruin a destination than to have a high profile accident resulting in injury or death. Although technically not difficult perhaps, the ascent of Mt. Kazbegi includes natural perils from falling rocks to simple slips and head injury. Part of the mountaineering training should be a formal program of emergency response in the event of an accident. 86

87 Site/Attraction Comments Handicrafts: Given the magnificence of the mountain and stunning beauty of the church setting, travelers may respond well to handicrafts that capture the essence of this uniquely Georgian experience. Training and marketing support will be necessary inputs. 2) Gudauri a. Ski sites Infrastructure The access to Gudauri is as good as it gets in Georgia: over half of the road from Tbilisi is newly paved and expanded, reducing the drive time to approximately 2 hours with good weather. The actual ski lift facilities are undergoing a complete overhaul with most chairs and main cables being replaced in Fall This should bode well for the winter ski season. There is a large amount of ski terrain currently inaccessible or under-utilized, especially at higher elevations. A new lift is planned, and possibly even contracted, which will greatly expand the elevation of current terrain by several hundred meters. The lift is to be installed for operation during the ski season. New Construction: New hotel, lodge, villa and condominium construction is everywhere in Gudauri. It is difficult to confirm without reliable statistics, but our estimate of new room construction, based on observation of construction underway as well as interviews with construction crew managers and residents in Gudauri, is that there is upwards of 125% increase in new rooms coming online this winter. Most resort destinations are thrilled with 5 10% increase in room availability; Gudauri is looking at 125% increase. Issues for Concern Sewage: All of the new hotels, villas, lodges and condominium complexes currently under construction have tied into the existing sewage pipes leading to the only sewage treatment facility in Gudauri: the sewage treatment plant stopped functioning several years ago. A visit to the treatment site documented raw sewage flowing over the walls of antiquated and cracked containment facilities; ¼ to 1/3 of the raw sewage leaking out of cracks in the main pipe before actually reaching the site; etc. And these issues were documented in late August, when the resort was less than 5% occupied. 87

88 Site/Attraction Comments Solid Waste: the Gudauri dump is a piece of land just off the main road below the village. There has been some effort to dig a pit for garbage to be dumped, but the current pit is small and clearly not being used. Garbage is strewn about over a 400 square meter area, including plastics, cardboard, glass, household goods, construction materials and raw organic waste being consumed by cows wandering around. The impact of 125% + growth in room availability can only be expected to compound an already uncontrolled solid waste dump site. There is real potential for human health concern from the consumption of raw organic food waste by cows whose milk will re-enter the food chain. Product offers The quality of the skiing is reputed to be very good to excellent by experienced skiers. The Heli-skiing operation is booked approximately one year in advance at 3,000 (Euro) per week. Terrain in the lower portion of the mountain is ideal for beginner to intermediate skiers. Quality of services In the context of Gudauri, it is difficult to gauge visitor satisfaction with the ski product as there are many large and defining influences impacting the resort. First, approximately 50% of the skiers in recent years have been Russians coming across the border and down the Old Military Highway. With the recent closing of the border, the Russians are no longer skiing in such large numbers, except those who come via air through Tbilisi or by some other means. Second, the impact of the new room construction is impossible to gauge as those rooms may or may not be completed in time for this coming ski season, and may not be entirely booked. That said, the lift capacity of the resort at present is 2,000/hr. There was reported to be 30 minute + waits in ski lift lines in the recent past. With the increase in new rooms it is only rational to expect those waits will increase. Finally, the prospect of upgraded lifts, and a new lift on the horizon, offers the possibility to diffuse the demand. Only time will tell. 88

89 Site/Attraction Comments The original Sport Hotel (formerly the Marco Polo) is a good facility, with traditional 1980s resort design: large pool, tennis courts, big lobby with side bar and buffet style restaurant. The rooms are satisfactory to good for a western clientele. It has been by far the most dominant property in Gudauri. Under construction within ¼ mile are no less than 3 new hotels a/o condominium complexes that are equal in size, or larger, than the Sport Hotel. It is unclear how individual properties will compare until they are fully operational. Recommendations: 1) It is critical for a high mountain, resort destination like Gudauri to have proper infrastructure in place for the existing hotels and lodges, let alone the new rooms under construction. 2) A master plan of the Gudauri Resort is critical to ensure the state will achieve maximum return from bidders; to ensure that bidders are given maximum opportunity to leverage their investment into successful occupancy; and to ensure that guests have a rewarding ski vacation experience. Privatization should proceed, and quickly but with a master plan for resort expansion establishing the parameters. Issues relating to land titling must be resolved as part of the master planning process and well ahead of the release of a tender. Gudauri offers perhaps the greatest prospect for an expansion of winter tourism in Georgia. The importance of master planning the resort, addressing infrastructure needs, resolving all cadastral claims and moving forward with privatization are all critical to attract significant direct investment to the destination. 3) Omalo 4) Shatili 5) Telavi a. Teliani b. Tsinandali c. Vinoterra winery d. Residence Access to both Omalo and Shatili is limited to adventure travelers because of rough road conditions, but from our visits and interviews with travelers and tour operators, the limited access helps ensure a sense of special travel experiences. Local information for travelers, especially trail related information would be helpful. Telavi is a strategic hub for visits to Kakheti, increased wine tourism and potential for special events, including cultural events, MICE, and family events (weddings, for example). Infrastructure The wineries of Teliani ( 89

90 Site/Attraction Comments of King Irakly II Badagoni ( Shumi and Vinoterra are prime examples of fully functioning and evolving winery experiences. Teliani s small guesthouse and tasting room are attractions for visitors that could be leveraged further with more souvenir offers and a restaurant. Badagoni was preparing to open its doors to visitors when team members visited in late September The venue offered substantial space for events. Tourist infrastructure hotels, especially mid-range similar to the Hotel Rcheuli Marani are needed. Such hotels facilitate group travel in the countryside of Georgia. Upon completion, the Rcheuli Marani almost immediately experienced high occupancy with groups ranging from Israel to France to the Ukraine. The TSG team experienced similar rates of high occupancy for new properties around the country, adding fuel to the idea that if you build it, they will come. The Tourist Information Center in Telavi, one of the few in Georgia, is centrally located in the main square of the city and has an internationally recognized I sign prominently placed in front of the building. Product Tsinandali is now owned and slated for a major transformation into a resort development by the Silk Road Group. We regard this development as having strong strategic potential for positively impacting tourism in the region, especially a wine tourism product linked to other possible spoke destinations and activities in the region. The residence of King Irakly II is a high priority attraction for Telavi, but further improvements are needed in and around the site: basic site infrastructure such as tourist information and interpretation and visitor safety, i.e. covering a manhole that is in the middle of a pathway on the grounds. 90

91 Site/Attraction Comments Product/market opportunity With infrastructure improvements, both Tsinandali and the residence could be excellent sites for special events, particularly wine tasting, incentives and small conferences, scenic venue especially on the terrace. Other possibilities include: Further development of restaurants, cafes and crafts sales around the square would enhance Telavi considerably. Art galleries and the sale of crafts such as glassware, linens, casual clothing, jewelry, Wine tasting in shops around the square. Enhancement of the cultural center on the square would make this more of an attraction for visitors. Website for Telavi and wine country similar to what the Sonoma Valley Visitors Bureau offers would be very helpful: Sonoma Valley is a hub/cluster for wine tourism in California. Leveraging the Center Point conversion of the hotel facing the palace will also improve this area. The 300 refugees who had inhabited the building left on August 15 th, Quality of services The Rcheuli Marani Hotel is a good example of the type of tourist class property that could cater to a steady stream of tour groups, especially European tour groups. More restaurants and cafes are needed in Telavi. In fact, on a Saturday night in September, team members could not find a restaurant or café in town for a meal. We did find one restaurant outside the town on the road towards Tsinandali. 6) Lagodekhi a. National park Infrastructure The infrastructure of Lagodekhi National Park has been significantly improved through the parks participation with the GEF-funded Protected Areas Project. As of this summer there is a new Visitor Center, improved trails, newly constructed bed and breakfast type facility with bathrooms 91

92 Site/Attraction Comments inside the administrative offices, a new cafeteria type facility and improved signage and promotional material. Everything has been done to a very high standard. There has also been an investment in the improvement of home stays in the village, which is said to have significantly increased the availability of rooms for overnight visitors. Finally, a new stable has been constructed at a different entrance to the park that is designed to facilitate groups interested in horse trekking through the park. Product offers The park offers the adventurous and nature-seeking traveler an excellent opportunity to experience a wide range of climatic zones, reflective of the diversity of Eastern Georgia. It is possible to move from forest (600 1,900 m); sub-alpine (1,900-2,500m); alpine (2,500-3,000m); to sub-nival (3,000-3,500m) within the course of a 3 day trek within park boundaries. The opportunity to do so on horseback, as part of the newly organized horse trekking program, is a particularly attractive addition to overall experience possible at Lagodekhi. A major investment group has expressed an interest in building a hotel near the national park. Quality of services Home stays are the only available lodging in Lagodekhi at present. The former Intourist Hotel is either dysfunctional, in the case of the one located in town across from Town Hall, or used by school groups in the case of one closer to the park. There is a new small hotel / lodge style property under construction close to the entrance to the park that may expand the range of lodging available to guests and small tour groups. SME Development: Guide Services: The quality of local guides was un-tested, but given the very recent investment in tourism infrastructure in and around the park, and historically low visitation, it is reasonable to expect that whoever will provide interpretation or guide services will come through park administration, with little foreign language training and virtually no experience working with tourists. Now might well be an excellent time to invest in a training program to enhance the quality and abilities of guide services. 92

93 Site/Attraction Comments Handicrafts: Consistent with virtually every destination in Georgia, there was no local handicraft available that reflected anything related to having visited Lagodekhi. There were no t- shirts, hats, posters or embroidered goods with the name Lagodekhi, let alone something traditional of the region. 7) Sighnaghi a. Town restoration Sighnaghi is fast becoming a model for tourism development and restoration, a model that is potentially replicable throughout the region. And, as with Telavi, it could be a significant hub for visits around wine country. Sighnaghi on the hill and Telavi in the valley. Infrastructure The town is undergoing a massive improvement in infrastructure, including road improvements. Both of the main roads leading into town were being repaved in August- September and a collapsed bridge was being repaired. Interpretation of the town historical events and key buildings, including the old city wall, is totally lacking. Public toilets were lacking when the team visited between July and September 2007, but much of the town was also under renovation during this period. Product The Sighnaghi product offers are being developed. Hotels and restaurants were slated to be developed in and around the town. The views from town into the valley and beyond to the Caucasus are spectacular. There is definite potential here for a destination or signature restaurant, maybe in combination with a culinary institute (see list of possible projects). Historical reenactments connected to annual festivals should be considered, especially using the well-preserved the old city wall. In 1762, King Irakly II of Georgia arranged to build the town and a fortress to defend the area from Dagestan tribesmen. Sighnaghi s has a growing community of artists, which includes artisan wood-carvers, painters, musicians, carpetand kilim-weavers, and winemakers. Old Town Studios is a great example of what Sighnaghi is supposed to become: 93

94 Site/Attraction 8) Alaverdi Monastery Comments Quality of services When team members visited between July and October 2007, services were almost non-existent. In the town center, the building facades were beautiful, but no tourist services shops, restaurants, cafes, public toilets were visible. All of this is supposed to change over the next year. Infrastructure and access For independent travelers, particularly those on self-drive tours, road signage directing visitors to Alaverdi is limited, practically non-existent. Although the Monastery is only 20 km from Telavi, it can initially be difficult to find. Product offer The Alaverdi Monastery is a favorite destination of Kakheti tours. Onsite descriptions and information about the Monastery are very limited, very much in need of improvement. There is also a winery operated by the Monks. Quality of Services Quality of the product offer would be enhanced by the creation of a Sound and Light show in and around the Monastery complex, which tells the history of the complex. The complex dates back to the 6 th century AD. 9) Tbilisi a. Old town b. Mtatsminda mountain plateau Infrastructure Tbilisi is in the throes of hyper-rapid development, especially in infrastructure overall infrastructure and hotel-specific infrastructure. Since early 2004, every infrastructure deficiency seems to be getting attention, including in the tourism sector. Product offer Several major internationally branded hotels were being constructed during the team s visits Radisson, Inter- Continental, Park Hyatt and Sheraton. The hotel market, as well as the restaurant market, was changing so quickly that weekly monitoring is recommended to track the developments. With the opening of Mtatsminda Park on the plateau overlooking Tbilisi, the city will have a theme park especially appropriate for a local market. The Park may also appeal to a Gulf Arab market that is expected to purchase villas and stay in hotels that are expected to be a part of the Rakeen Group Tbilisi Heights project. 94

95 Site/Attraction 10) Lower Chala a. Prince s house estate Comments Quality of Services With major international brands entering the market, world class quality of services is expected to begin appearing in Tbilisi over the next five years that will compete with Marriott. Located 50 km west of Tbilisi, Lower Chala is home to a 16 th century era Prince s estate, which includes a chapel, stone tower and wall and several dilapidated buildings. While there are many sites like this around Georgia, the team was introduced to this site by Ia Tabagari, Chair of the Inbound Tour Operators Association and General Manager of Caucasus Travel. Infrastructure Even in a dilapidated state, the site makes for an interesting visit, but there is no signage or explanation of what is being viewed. The property was expropriated during the Soviet era and served as a local telephone exchange and administrative offices. Product offer This property could be a spoke product with Gori as a hub. Combined with the Upper Chala castle on the hill, this destination could offer a truly authentic experience. It needs major investment to rehabilitate the buildings and improve the grounds, but with the proper injection, this could be a boutique-style hotel property with space for special events and an interesting story about the family reclaiming property that has been part of their personal history for over 400 years. 11) Gori a. Stalin Museum Gori is 96 km west of Tbilisi and should be a hub site along the spine of key tourism destinations. Infrastructure Basic, grandiose and slightly dated museum of artifacts and relics documenting the life and times of Stalin. The museum is said to up for privatization, and a possibility confirmed by an Advisory Board Member. Product offers The Museum is the highlight of Gori; it is a uniquely Georgian experience, deeply rooted in the historical legacy of this small town having been the birthplace of a major 20 th century leader. Considered a must by most travel agents interviewed, this is a requisite stop for tour groups from west and east alike. 95

96 Site/Attraction Comments Although unverified, there is reported to be up to 22,000 visitors, of whom only half are school groups. This suggests a fairly sizable opportunity for entrance receipts and other revenue from merchandising, etc. The site would benefit from a café, more signage in English, more materials for purchase, and a retail or craft shop. The only items for sale were very old post cards and a mug of Stalin s head. Though interesting, they are probably not satisfying the average visitor s interest in memorabilia. An introductory movie about the life and times of Josef Stalin would enhance the visitor s experience. A Josef Stalin wax figure sitting behind his desk along with Lenin and the other main Communist figures would be interesting features to the museum. And hearing his Stalin s voice booming through a sound system in his recreated office would also add to the experience. Perhaps a Yalta summit wax figure re-creation of Churchill, Roosevelt and Stalin? The Cave City of Uplistsikhe and 10 th century Prince s Church, 7 km from Gori, are historic attractions that are a great complement to a Gori Stalin Museum visit. With 150 caves, there is an opportunity to develop a boutique hotel destination similar to what has been developed at Anatolian Houses ( Product opportunities There is a strong need for mid-range accommodations appropriate for tour groups. These are completely lacking in Gori. 96

97 Site/Attraction Comments Quality of services Very good guides available with multiple language skills, including excellent English. Stalin s artifacts, especially his train car and birthplace, should be better protected from visitors to ensure that they are around for awhile. 13) Borjomi a. National Park b. Green Monastery Infrastructure Borjomi National Park has been a beneficiary of technical assistance and some funding through WWF International and recently became a participant with the PAN Parks Program in Europe. The quality of the visitor information is very high and the enthusiasm of educational staff exceptional. The management of core natural areas and surrounding visitor facilities has been greatly improved over the past several years, coinciding with and subsequent to the park being officially opened by the past President in Product offers Borjomi National Park The Borjomi Gorge, covering 143 sq. km has 450 varieties of plants and most of the fauna endemic to the Caucasus can be found here, including a resurgent number of bear. Within the national park, an area is set aside for a well-managed captive breeding program, which enhances the attraction of the park for visitors. The opportunity for visitors to learn about the challenges of captive breeding and the re-introduction of native species is a genuine highlight for travelers to the region. Although it s possible to see the facility, even encouraged, it is rarely visited and is an example of an under-utilized, uniquely Georgian Geotourism experience. Hiking, overnight trekking, single and multiple day horse treks, visits with traditional shepherds and rural villages. National Park Visitor center exists, but is located at the administration building, an old grey structure, both unappealing and slightly imposing to enter. The staff is aware of the need for improvement of the facility; however a better idea might be to develop a high quality NP visitor Center to serve as a point of entry and orientation to the park. A model would be the new visitor center at Kolkheti NP. 97

98 Site/Attraction Comments Borjomi Visitor Center, built by DOTR, is beautifully constructed and well located in a high profile, high traffic spot along the river. The staff was exceptionally pleasant and spoke English fluently. Typical of the difficulties that visitor center s face everywhere: there was little information available for the traveler to take-away. The woman working there did not even have paper to print out info about home stays available in Borjomi; she had to resort to copying and writing it out for a young Israeli traveler. Visit to the Borjomi Mineral Water bottling plant is a unique travel experience, something that isn t usually on a travel itinerary. Good opportunity to combine a domestic and international tourist experience in the Park. There were billboard size posters about new hotel and resort construction to be found all over the hillsides around Borjomi. To the extent that even a portion of those new properties are actually constructed, the destination will soon take on a new profile. Quality of services Borjomi attracts a lot of people in the summer especially with local and domestic tourists, school groups. Trail signage and interpretation basic level exists. Some signage directing visitors from the main road. 14) Bakuriani Site visit Infrastructure There is no sewage treatment in Bakuriani. A meeting with the municipal engineer and a guided tour to the old Russian treatment plant showed that it has been inoperable for the past decade at least. The engineer showed us one of three main pipes depositing raw sewage directly into the stream running through town. (see photos) A similar inspection of the existing dumpsite showed there were some remediation efforts underway, in conjunction with a Borjomi-based NGO, but the overall distribution of garbage covered 1 mile stretch of dirt road, alongside a waterway, all uncovered and with cows eating. As with the dumpsite in Gudauri, the presence of cows feeding on organic waste is a 98

99 Site/Attraction Comments health concern for their milk will re-enter the food chain and be consumed by humans. This is a particular concern if local cuisine is being promoted at tourist hotels and restaurants. An extensive master plan has been proposed in which land is zoned for both preservation and further development. An extensive vacation housing complex is planned. Product offers Skiing, snowboarding, hiking, trekking, a small botanic gardens, restaurants, village ambiance and cool climate in the summer. Caucasus Travel chooses to bus its guests an extra half hour from Borjomi to Bakuriani because there is no acceptable lodging in Borjomi. Several large-scale resorts offer tennis, swimming and traditional recreational outlets for primarily the domestic and some regional market. Quality of services The hotels and resorts in town and that ring the Bakuriani Valley are a mixed class of service, primarily catering to winter ski and snowboarding, but with a reported increase in summer occupancy. The hotel market in Bakuriani is changing rapidly. 15) Vardzia a. Cave city b. Khertvissi Fort Vardzia a. Cave city Infrastructure Vardzia is located in a remote Southwestern part of Georgia. In August 2007, the scenic road leading to Vardzia was being repaired. At the time, there was no signage. Basic infrastructure was lacking at the site -- no bathrooms, no concession stands, no site interpretation, etc. The dilapidated Soviet-era hotel across from Vardzia stands abandoned. Access to the caves would be improved with a tramway or other unobtrusive transport to the caves. Product offers Vardzia is a 12 th century monastery complex cut into the high cliffs of Vardzia above a river valley. The complex contains approximately 250 caves, including a royal complex founded during the reign of King Tamar. It is still an active monastery 99

100 Site/Attraction Comments and thus would benefit from signage for visitors informing of appropriate dress and behavior (similar to the signage at Alaverdi Monastery in Kakheti). A small campsite seemed to be available near the caves. Quality No services were available at the time of GTSP team s visit, but the Al Rakeen Group had bought the hotel across from the caves and is planning a high end Sheraton resort, which will also serve a convenient departure point for daytrips into the area. b. Khertvisi Fortress Above the narrow canyon where the Mtkvari and Paravani rivers meet, the well-preserved Khertvisi fortress dates to the 2 nd century BC making it one of the oldest in Georgia. Although the team was not able to visit the fortress, it appeared to be an attractive add-on to a Vardzia visit. Infrastructure No basic infrastructure in and around the Khertvisi fortress. The road leading to the fortress is undergoing repair. Product offers Khertvisi and Vardzia should be part of the same product because of their proximity and historical significance. 16) Batumi Infrastructure There is a major GTZ (German Development Assistance) funded infrastructure project underway in Batumi and neighboring regions designed to address infrastructure needs, including water and sewage. Most sewage treatment along the coast is point source into the sea. The project is slated to connect a significant percentage of existing, and planned, tourist facilities to sewage lines, although an exact number or percentage was unavailable. Batumi Airport was a sparkling new structure when we visited in August There are relatively few airlines and flights into the airport, but as multiple hotel projects are completed and Adjara tourism marketing increases, the airport will be able to receive substantially more capacity. 100

101 Site/Attraction Comments Product offers Old Batumi was a pleasant surprise more traditional architectural character in the center of town than we expected. There were a number of buildings that seemed to be slated for renovation, which when completed could transform the center of Batumi into an attractive destination. Currently, the potential is greater than the appeal. The Intourist Palace Casino is the main casino in the region. But when we visited after 10 pm on Saturday in early August 2007, it was not full of visitors. During the summer, the chief attractions of Batumi are the beaches, although nobody the team met could recommend swimming due to high pollution levels. There is no wastewater treatment in coastal communities yet. If people wanted to swim, they headed south to a beach near the Turkish border, although sewage was also flowing into those waters as well. The Gonio-Apsaros Fortress, 12 km south of Batumi, dates to at least the 1 st century AD. The Apostle Matthias is thought to be buried here, thus making this a potential religious pilgrimage site. Its strategic location made this an important fortress for the Roman and Byzantine Empires. There is also interest in the mountains of Adjara as a ski destination (see below). 17) Poti a. Kolkheti National Park Quality of services Batumi is a mid to lower range destination for summer vacationing families from Georgia and neighboring countries. The team does not see the potential for Batumi to be internationally competitive in the sun and sand segment beyond a regional market, particularly compared with wellestablished, cost competitive destinations such as Bulgaria and Turkey. Infrastructure Kolkheti National Park is easily accessible, just past the Port at Poti. The newly constructed visitor center is up to international standards and offers passive interpretive materials and displays. They have excellent maps, brochures and info about the park. There is a new float boat available for group tours, which is well built with new engines and seats. 101

102 Site/Attraction Comments Product offers The Interpretation Center has four guest rooms with television and private baths, located inside the national park compound, behind the main office and above the interpretation center. They might prove popular with individual travelers or small groups perhaps. They are only just completed and there are no occupancy records. They also just had a few kayaks delivered and will be offering kayak rental in addition to the boat tours. The bird diversity with Kolkheti National Park is quite attractive for the casual birder or as part of a larger natural history of Georgia for instance. Visitation to the park has historically been quite sparse and these offerings are all breaking new ground. The park staff seems eager to engage with the travel and tourism industry and is marketing their new product offerings directly to tour operators and hoteliers. Quality of services The float boat ride offers quite a unique experience on the water relative to activities around Georgia. The boat captains work for the park service and there is not yet any developed narrative to be provided guests, i.e. information to be communicated during the course of the tour. There are four new interpretive signs at stopping points along the waterway. The furthest reaches of the park were not visited. 19) Mestia Infrastructure Access is limited from Zugdidi; transport is by old Soviet jeep or a Niva according to the Svaneti Trekking website. From Mestia, transport is available to Ushguli and other villages in the region. Product offers Stunning landscape with great opportunities for a backpacker independent traveler and adventure travel operator market. Horseback tours are available. Quality of services Not of international standards in accommodations, most of which are guesthouse-style lodging. 102

103 Site/Attraction Comments Local guides are experienced mountaineers. Authentic quality experience of Svaneti mountain life. 20) Kutaisi Kutaisi Kutaisi is a logical overnight stop for tourists traveling between the coast and Tbilisi and north into the Svaneti region, but investment is needed in infrastructure, product offers and the quality of services. The first impressions of the town were shaped by the presence of crumbling multi-story buildings and abandoned factories that appeared to have been either bombed or practically burnt to the ground. If the airport were renovated and reactivated, Kutaisi and surrounding destinations would get a boost. 21) Tskaltubo Tskaltubo Tskaltubo is situated in a river valley, 9 km north-west of the town of Kutaisi, 235 km from Tbilisi and 70 km from the Black Sea, thus easily accessible for coastal tourists, including cruise passengers. Infrastructure Tskaltubo has great promise as a revived spa resort destination, but it is in need of major investment in infrastructure. Today, 21 of the 22 buildings which surround a lush forest park and central sanatorium complex are now inhabited by thousands of refugees; several of the buildings appear to be beyond repair or renovation. All 22 buildings functioned as popular hotels in Soviet times with thousands of visitors coming from all across the Soviet Union. Product offers Tskaltubo is renowned for its radon mineral springs, which attracted thousands of visitors from across the country during Soviet times. The springs help people suffering from nervous system, heart and gynecological disorders. It was a favorite retreat for Stalin, who had a personal pool in the sanatorium, which today is offered as part of a Stalin Treatment package. A small, but non-functioning train station exists, which prior to independence, received direct trains from Moscow. There is also a karst (similar to limestone) cave in Tskaltubo called Tetri Mghvime (the White Cave), the microclimate of which has reportedly been helpful for people with hypertension and bronchial asthma. 103

104 Site/Attraction Comments The existing hotel has great potential as a possible casino and resort development with the possibility of a grand ballroom and small theater. 22) Bagrati Cathedral and Gelati Monastery Quality of services The hotel and sanatorium complex are basic and would not appeal to a foreign market that is used to top end or mid-level services and facilities. The Gelati Monastery near Kutaisi was founded by King David the Builder of Georgia in UNESCO designated the Monastery as a World Heritage Site. Infrastructure Signage directing visitors to the site is practically non-existent. In driving through Kutaisi trying to locate the road to Gelati, our driver had to stop and ask five times for directions. Interpretation on the site is non-existent. The Monastery and Cathedral need further support to preserve the structures and frescoes. Product offers The Monastery and Cathedral are included on itineraries and could be highlights, as well as a boost to tourism-related micro-enterprises in the area around the complex. The first impression, though, is shaped by the persistent beggars at the entrance to the Monastery. Quality of services No services available for tourists. 23) Ikalto Academy and Monastery Product offers Founded by King David the Builder in the 11 th -12 th centuries, this was an important religious and education center. A few walls remain of the original structure. A church dating to the 6 th century is also on the grounds. Archaeological excavations have uncovered ancient clay vats that were used for winemaking and educational purposes. This is one of the world s earliest examples of advanced viticulture and wine-making education in the world. Infrastructure Information and facilities for tourists are limited. 104

105 II. Existing markets for further development We reviewed several market segments, all of which offer opportunities for further development: A. Cultural tourism, including food and wine. B. Nature-based tourism, including mountain travel, adventure travel and skiing. C. Sun and sand tourism, almost entirely concentrated along the Black Sea coast in July and August. D. Business/Commercial travel E. Visits with Friends and Relatives (VFR) These market segments are all attracting substantial foreign and domestic investment. Examples include: 1) The Rakeen Group is developing a new Sheraton Hotel at the cave city of Vardzia and renovating the Metechi Palace Sheraton in Tbilisi. 2) Development Solutions, the development company of the Silk Road Group, is developing Prince Chachavadze s residence at Tsinandali in the wine country of Kakheti into a resort complex. 3) Local investors are developing accommodations and ski lifts at the ski destination of Gudauri. 4) The Silk Road Group has over 20 properties slated for development between Kobuleti and the Turkish border, as well as properties in other areas of the country. 5) The Center Point Group has opened boutique-style hotels in Telavi and Batumi and is planning at least five or six in While these segments are being actively developed, there is still plenty of room for further development in each segment, especially with mid-range accommodations that cater to tour groups. A higher end exclusive type of property also has strong market potential, particularly when coupled with wine tourism and good food. A. Cultural tourism The GTSP team believes that some of the highest value could come from further development of the wine country product offers and smaller upscale lodging such as what is often represented by a Geotourism/ecolodge development. If developed with high quality accommodations and cuisine, this product will attract a higher spending demographic. Examples include the wine country destinations of Napa Valley, Tuscany, Provence and the Stellenbosch Cape region of South Africa all of which offer some of the highest quality tourism experiences in the world. 105

106 Wine Tourism can target local Georgian market, expatriate community in Georgia, and foreign visitors. Wine and culinary tours are attractive for wine aficionados, especially from Western countries, as well as Russia, Ukraine and others who are familiar with Georgia and its cuisine and wines. The country s wine history, 500 varieties of grapes and combination of modern and traditional wine-making technology and methods can be experienced in Kakheti and other regions of Georgia these are excellent selling points for Georgia. Annex B includes a wine tourism strategy. In Kakheti, wine tourism would benefit from further development. There are very few tours available of wineries Teliani Valley Winery and, as of October, the newly opened Badagoni Winery. The GTSP team visited the Teliani Winery, toured the plant and participated in a wine tasting. An eight room guesthouse managed by the M Group is situated over the wine processing plant. A wine tasting room decorated in traditional Georgian country farm style is an ideal venue for groups. A restaurant and café would be welcomed here. A smaller winery operated by the winemaker of Teliani was open to visitors up the hill from Teliani and due to open a small boutique-style hotel in In fact, restaurants, cafes, tourist shops and art galleries are practically nonexistent in wine country. On a Saturday night in Telavi, the team searched for a restaurant and finally found one outside the town. In the main square next to the tourism information office, there is one small plain café with plastic seats and nothing distinctly Georgian. A café decorated with traditional Georgian art and playing traditional or contemporary Georgian music such as from the Georgian group SHIN, which be an attraction in and of itself ( and why not include such a café as part of the tourism information center? Wine tourism could easily be coupled with quality ecotourism activities such as horseback riding through wine country and day trips into national park and protected areas such as Lagodekhi. The newly renovated town of Sighnaghi offers great potential as a hub for this type of tourism, especially as more accommodations, restaurants, cafes, shops and galleries become available in Team members were guided through Sighnaghi three times, but unfortunately none of these visits included wine tasting or a visit to a local gallery. 106

107 The cave cities of Vardzia and Uplistsikhe near Gori might host restaurants and hotels similar to what has been developed in the Cappadocia region of Turkey with the Anatolian Houses development, which has built in and around the caves (see B. Nature-based tourism Throughout the Kakheti region, as well as other rural regions with agro tourism, mountain tourism and recreational outlets, would be well served with smaller, more intimate facilities such as eco-lodges. The GTSP team made a presentation on the subject of eco-lodges at the annual conference of the America Georgian Business Council in September The enthusiasm by the investment community for the topic further convinced team members of the viability of ecolodge style construction as a strategy to accommodate small group travel in Georgia, as well as a method for distinguishing Georgian tourism as the more remote corners of the country experience a growth in tourist arrivals. See below for further discussion of ecotourism. The ski tourism segment, especially for slopes in the Gudauri region, could be internationally competitive. In the high season, the Gudauri ski lifts were sending 2000 persons an hour up the slopes. The Gudauri slopes on high season winter weekends reportedly get as crazy as Georgian highways. In addition, heli-skiing is very popular with European visitors and is booked several months, sometimes even a year in advance. There is also great potential for mid-week ski packages when the slopes are less visited. From discussions with skiers and tour operators, the GTSP team found the ski offer in Bakuriani to be, at best, intermediate level. There was no question that skiing at Gudauri was much better. The GTSP team is concerned, however, that the current fast-paced development in Gudauri and Bakuriani is overtaking the infrastructure capacity, particularly the sewage system and water supply. Gudauri was already at capacity when accommodations were at minimal occupancy in late August. Solid waste management is minimal. Substantial planning and infrastructure investment are required to cope with current accommodations capacity. 107

108 The GTSP team believes that the privatization of the Gudauri ski area should be tendered again with a comprehensive master plan prepared ahead of time. This would help provide potential investors with the requisite security that their investments will not be jeopardized by haphazard developments or a lack of infrastructure. A master plan would help maximize the opportunity of winter tourism sport arrivals, especially for Gudauri. Ski school and resort developments are being considered for the mountains east of Batumi. The areas around the village of Gomarduli and the Khulo region are considered as interesting prospects for winter sport development. Adjaran tourism hopes to see the first ski school open in An ideal scenario, in terms of developing a quality ski product offer, is to create a completely new, well planned ski resort in a new area near Gudauri and/or perhaps the area that is being considered in Adjara. A detailed Gudauri master plan is needed, which specifies development zones and helps rationalize investment for maximum benefit. C. Business/Commercial travel According to statistics from the Georgian Department of Tourism & Resorts that were prepared for the UNWTO, the country received 57,000 business and professional visitors in 2006 versus only 12,000 leisure and holiday visitors. In the same report, the Department reported that the country received 983,000 total visitors; so data on the purpose of visit for the vast majority of visitors is not being reported. Nevertheless, the team believes that the potential for business and commercial travel to Georgia is strong and sees that it is growing. The Department reported that this segment has more than doubled since As more major international brand hotels open in Tbilisi and Batumi starting in 2008 Radisson, Sheraton (Vardzia and a renovated property in Tbilisi), Holiday Inn, Inter- Continental, Kempinski and Park Hyatt capacity and interest in Tbilisi as a destination for meetings and conferences is forecast to grow. Related to this trend is also strong potential for pre- and post business travel excursions, as well as events in destinations such as Telavi using facilities such as Prince Chachavadze s Tsinandali residence and gardens and King Irakly II's palace in the center of town. In Batumi, there is also longer term potential in the business and commercial segment, particularly as the Radisson, Hilton and other hotels open in the region. This segment could also help extend the limited season of the Black Sea coast. For now, the meeting capacity is less than 200, thus really only for seminars and small conferences. 108

109 D. Visits with Friends and Relatives This segment is estimated at 20% of total arrivals, particularly from overseas Georgians. There are about one million Georgians who currently live abroad, the majority of which are Russia followed by Ukraine, Europe, and the USA. Many Georgian expatriates return to Georgia for visits. There are also Georgians in Turkey who, for historic reasons, still speak Georgian and sometimes travel to Georgia, but the total is not clear. It would be worthwhile surveying overseas Georgians through the variety of Georgia-related organizations overseas. III. Untapped and/or under-developed market segments A. Special events cultural events, sporting competitions, etc. B. Ecotourism Eco-lodges, birding C. Spa tourism tapping mineral water resources D. Special interest tourism casinos and gaming, golf, and themed attractions A. Special Events & Festivals in Georgia The world of special events is a relatively under-developed market for Georgia. Events can range from single day fairs to major sporting and cultural festivals through to special interest group activities. The duration of these events can range from a single day to several weeks. Planning might be done with a few weeks notice, or many years of careful preparation in the case of major sporting events. To tap this segment, the GTSP team recommends the following: 1) Advance planning, ideally more than a year in advance. 2) A consistent, year-to-year calendar of events; no organized calendar of events is desperately needed. 3) Maximum media involvement should be encouraged and developed. 4) Events should reflect the national tourism strategy 5) Overseas Georgian cultural events, such as the Zedashe Ensemble from Sighnaghi and the Sukhishvili National Ballet, should be considered extensions of the country s marketing and promotion. 6) A national festival, perhaps an international competition for folk music and dance, should be organized on an annual basis. Something comparable to the Edinburgh Festival, the National Eisteddfod of Wales ( or the International Llangollen International Musical Eisteddfod ( 109

110 eisteddfod.co.uk/index.asp). The latter is a world-renowned festival of music, song and dance with competitors from more than fifty countries. 7) The cave cities of Vardzia and Uplistsikhe near Gori could be venues for special events (see above). Events are a growing international segment Over the past decade, there has been a significant increase in the number and type of special events available to the traveling public. This growth has been attributed to both an increased emphasis on regional economic development, as well as destination marketing by many governments and tourism marketing organizations. Special events are seen to have the ability to produce a wide range of significant economic and social benefits for communities and regions, which helps to explain the reason that they have been so eagerly embraced. In addition to providing opportunities to increase direct expenditure at a destination, special events contribute to a destination s range of tourist attractions, facilitate media coverage and promote awareness of the destination for future visitation. Special events can substantially increase the opportunities for new expenditure within Georgia by simply attracting more visitors. The events can become the reason for visiting the destination. They also act to retain the expenditures of locals who, in the absence of local special events, would travel elsewhere in pursuit of leisure activities. Special events can contribute substantially to a destination s range of tourist attractions, facilitate media coverage and promote awareness of the destination for future visitation. Events and festivals that cater to the learning interests of the traveler are experiencing particular growth internationally. They represent a direct connection with the international trend toward special interest, or experiential travel. According to the UN World Tourism Organization (UNWTO), There is a shift from active holidays to holidays as an experience. The point is to achieve a complete participative experience which provides new knowledge and authentic experiences. Destinations that have consciously and deliberately forged linkages between special events and special interest tourism benefit economically and socially. Events also help diversify the destination s tourism product offers. 110

111 The annual Jazz Music Festival in Batumi is a successful example of tapping the special events segment. This event has gained prestige with every successful year of operation and is a significant contributor to the summer calendar for domestic and regional visitors alike. The ongoing success of this event has encouraged local hotels in Tbilisi There is at present no consistent, reliable funding source for special event organizers to access in Georgia. There is no venture capital available to support entrepreneurial endeavors for and now Batumi, to actively market it to their regional and international clientele. So successful has this event been that it begs the question: Why are there not more? The answer is simple: organizing a special event is risky. Special event organizers have to worry about every aspect of event planning, from sponsorships to safety and everything in-between. Event planners have to define the goals and objectives of the event. They have to craft a vision for the event, and then determine the number of days and time of year. They have to select a location and book it in advance. They have to assess all associated risks, including the risk of success as well as failure. They have to determine the target audience and provide sufficient activities for everyone to feel satisfied. And all of this has to happen long before the event planners have to grapple with funding any of it. Special Event Funding There is at present no consistent, reliable funding source for special event organizers to access in Georgia. There is no venture capital to support entrepreneurial endeavors related to events. And yet, if successful, the rewards to both the community and the destination can be significant. Destinations around the globe have recognized the value in establishing an event funding application process, often through a public-private destination marketing entity, such as a Tourism Board. One benefit of a rational application process is that it enables higher quality, advanced marketing of special events, which in turn improves attendance, which further helps to ensure success. Specific Event-related Recommendations As the tourism economy in Georgia grows, there is a need to: 1) Expand the number and type of special events organized for domestic, regional and international travelers alike; and 2) Establish a structured application process for special event funding. While there has been an increase in home grown special events recently, such as the Jazz Festival, Miss Georgia Contest and regional wine festivals among others, these are all relatively young ventures in terms of their tourist appeal. In order to succeed over the long-term, such festivals and events deserve the financial support necessary to enable them to thrive. If they succeed, special 111

112 events offer the prospect of community development, recreation and diversification of the destination profile. Special events often produce returns on investment that cover costs and add to local economies, but these need to be well planned. The better the planning the greater the potential for a higher return on investment. B. Eco-lodges and Ecotourism Eco-lodges are a key product element of ecotourism and especially distinguished by the fact that most lodges are unique. At the top tier, there are discernible traits that are worthy of emulation throughout Georgia: a light footprint, adherence to local cultural style and character, close connection to nature, local community and private spaces. The Department of Tourism and Resorts (DOTR) should promote these traits in all communications with potential investors interested in ecolodge developments in Georgia. More specifically, when required to build on pristine sites or sites with heavy vegetation, the utility corridors, pathways, access points, and the structure itself are minimized in size and impacts on the existing ecosystem. The photographs below show a variety of ways that this can be accomplished -- from the raised walkways of Namale Resort, Coconut Beach, Almonds and Corals, and Daintree to the moveable and fragmented footprint of the tent lodges at Corcovado. It is no accident that raised walkways and buildings dominate the majority of award-winning ecolodge products, for as well as raising guests above the ground plane, it also allows for plant and hydrology to co-exist with minimal impact, and maintains the natural paths and movements of existing fauna on the site through below-lodge ability to pass unnoticed. The raised footprint also allows for more efficient management of lodge infrastructure. Water lines, sewer pipes, phone, cable, electric lines can pass invisibly beneath walkways and lodge structure while not requiring trenching and destruction of both soil strata and the existing floor cover. 112

113 Figure 6: Ecolodge examples C. Spa Tourism The spa tourism segment was at its peak during the Soviet era when reportedly hundreds of thousands of Soviets flocked to spa centers such as Tskaltubo near Kutaisi in west central Georgia, Likani near Borjomi and Sairme. The curative waters of Georgian spa centers have been analyzed and demonstrated to have substantial medicinal and therapeutic value. Tbilisi is also known for its curative waters with the Turkish Baths being a favorite visitor destination. Aside from Georgians and visitors from Azerbaijan and Armenia, though, the spa centers outside Tbilisi are not attracting many visitors. Only 1% visited Georgia for this purpose according to Statistics Georgia. And yet there are at least 2000 mineral springs and numerous locations of medicinal mud baths in Georgia. To be internationally competitive, this segment would need to be strategically repositioned away from the strictly curative to a more leisure oriented market. To accomplish would require substantial investment, development, promotion and marketing. This segment should be focused more on self-improvement 113

114 treatments such as beauty, weight loss, stress reduction and wellness treatments than the traditional curative approach from Soviet times. It should also be closely linked to other products, integrated into overall resort development programs, which could be focused on coastal, mountain and/or golf tourism. D. Special Interest Tourism Whereas there are a number of special interest markets, some of the most important tourism generators are those that focus on activities that are reasonably popular with high yield customers. Some of the more appropriate and potentially promising for further development include golf, casino gambling, skiing, and themed attractions. Each of these is discussed below: Casinos/Gambling Casinos are relatively widespread throughout Europe as well as North America and Asia. For many travelers they are an expected activity opportunity and for some travelers, they are the primary reason to travel. Certain destinations (Monte Carlo, Las Vegas, and now Macau) are predominant in their regions, but there is no focal point for casino activity in the Caucuses, Eastern Europe or the Middle East. Georgia currently has a few casinos of modest standard the Adjara in Tbilisi and the Intourist in Batumi being the principal operations. Neither of these facilities generates the kind of casino action or excitement that most international casino customers are looking for. In examining the potential for an expanded casino industry, it is perhaps instructive to look at the example of Macau. In 2002, Macau went through an RFP process to attract international gaming operators to bid on one of three gaming licenses that were to be awarded by the government. Two Las Vegas operators were among the winning bids (Wynn Resorts and Las Vegas Sands/ Venetian). Since that time these new entrants have invested over $3 billion in modernizing and expanding the Macau gaming product. To date the results have been so remarkable that Macau gaming revenue now exceeds that of Las Vegas. Well, what are the lessons? First, by limiting the number of gaming licenses, Macau found that the bidding gaming companies were able to commit substantially more investment than if any and all gaming operators were allowed to come into the market. This protection for their investment was very important, and we know first hand that most international companies would not have participated without this protection. Secondly, bringing in the experience and marketing reach of two of the best Las Vegas companies known the world over for quality gaming, shopping, entertainment, and convention products was a tremendous improvement over the dull and seedy operations of the previous monopoly provider, the Sociedade de Turismo e Diversoes de Macau (STDM). 114

115 For Georgia, there is an opportunity to expand its casino based tourism products certainly in Tbilisi and Batumi and perhaps elsewhere Borjomi, Tskaltubo, etc. However, we believe that it will be important for developers to partner with international gaming operators if this potential is to be realized. Why? Because international operators will bring with them credibility, general market reach and operations expertise. They will also bring with them their existing customer base that will feel comfortable that they will be well taken care off when they visit one of the operator s facilities in Georgia. In a competitive sense, Georgia will not be alone in trying to expand its casino business. Some neighboring countries also have modest casino operations and some governments in the area are actively providing incentives to attract casino resort investment. Considering the size of the potential casino market in the region, Georgia needs to develop a specific strategy to address whether it wishes to pursue this market and, if so, how to best facilitate partnerships with recognized international operators. Golf Golf is an expected activity at most tourism resort destinations. There are very few golf courses in the region and - none in Georgia and one recently developed in Kazakhstan. In our discussions with various developers and investors in Georgia, a number of them are certainly considering golf as an activity and real estate sales generator for projects near Tbilisi, Batumi, and selected interior sites. This is appropriate. However, from a national tourism perspective, there needs to be some coordination of these developments and encouragement that the courses meet international standards. Having one course does not bring in international golf tourists but having a Georgia (or even Caucasus) Golf Trail that provide quality golf experiences in a variety of attractive environments (e.g., Tbilisi, wine country, Borjomi region, one or more lake sites, and a seaside experience) would be a marketable package that should be attractive to tourists and stimulate potential seasonal home investment.. Themed Attractions Large scale themed attractions are an important tourism element in many locations, but most often they are anchored by a large nearby resident population. Georgia would not be a supportable location for this type of destination theme park development. However, it is certainly appropriate to include tourism related elements within existing and proposed regional attractions. For example, we visited the soft opening of the Mtatsminda Park outside Tbilisi and had a brief view of the theme park under construction in Adjara. Since many tourists (+/-25%) will visit a local theme park during their trip to a destination, these Georgia theme parks should be encouraged to include attractions that have authentic Georgian themes and stories and then make these known to tourist visitors. For Mtatsminda, this seems particularly appropriate since the Rakeen Group s Tbilisi Heights development is nearby and 115

116 when fully developed will host 30,000 residents, many of whom will be seasonal residents or visitors to their hotels and condos. A separate but related themed attraction opportunity and one of the very strong trends in Europe and North America is to provide all-weather indoor themed experiences. Examples include the Centerparc resorts in the UK and continental Europe and hotel/ indoor water park combinations such as the Great Wolf resorts in North America. We understand that the Europa water park has recently opened in Tbilisi and that there will be another water park in Batumi. We understand that these are day use seasonal facilities. The project team suggests that looking at all weather facilities that combine hotel and water recreation activities could be appropriate in order to provide recreation opportunities during inclement weather (a particular problem in Batumi) and thereby lessen tourism seasonality. Other commercial attractions that relate to Georgia and would be interesting to tourists should also be considered. For example, in Washington, DC there is a very popular spy museum. One could also be appropriate in Tbilisi or Gori. Similarly, commercial museums such as Madam Tussaud s and Ripley s Believe It or Not are often found in high volume tourism destinations. IV. Key project and amenity concepts Amenity concepts are those aspects of the experience that provide for the comfort, recreation, relaxation and business efficiency. Internationally, the trend is towards more destination features for self-improvement. Aside from the Tbilisi Marriott, Courtyard Marriott and, to a lesser extent, the Sheraton, we found nothing of a comparable standard in Georgia in which the following factors were of an international caliber. With the construction over the next few years of several major international hotels, this will rapidly change and propel Georgia into the highly competitive world of top end hotels: A. Design characteristics The Tbilisi Marriott is one of the most successful hotels in the Marriott system with a high occupancy rate (not disclosed by the manager) and also one of the best local examples of architectural restoration. Local traditional architectural design characteristics were successfully restored in a building that was almost completely destroyed after the civil war in the early years of independence. 116

117 A few smaller hotels have followed suit with similar restorations and more are expected in Tbilisi with the eventual openings of hotels that will be managed by Kempinski, Park Hyatt and Inter-Continental Hotel groups, as well as in Batumi. And the town of Sighnaghi in the Kakheti region of Georgia has been undergoing extensive restorations of seemingly every building in the town. In Telavi, the 50 room Hotel Rcheuli Marani was opened in the summer of 2007 and the 11 room Rcheuli Villa in Batumi both maintaining some traditional architectural design features. At the time of writing, the majority of new hotel projects were either under construction or being planned. Most of the properties seemed oriented to higher end markets with international brands and sizing of less than 250 rooms. By the end of 2009, Tbilisi is expected to have almost 800 top end rooms added to the 385 rooms at the two Marriotts and Sheraton, thus possibly placing some downward pressure on pricing. However, given that this room total will still not be sufficient for even a conference or event of a thousand attendees, the average daily rack rate for a room might be sustained at the current ADR of over $300. This category of hotel is mostly geared to business or commercial travel. No full service integrated master plan resort developments currently exist in Georgia, although the Silk Road Group and its development arm, Development Solutions, contracted Barcelona-based THR to create resort master plans for their hotel property acquisitions along the Black Sea coast. A full development would include sports and spa facilities and activities (golf, skiing), restaurants, seasonal homes, shopping opportunities and venues for cultural presentations. Master plans that integrate the above elements need to be implemented for Gudauri, Bakuriani, Borjomi, Shaori Lake and other destinations within the country. B. Marketing channels Aside from the Marriott and Sheraton international marketing networks and their access to global distribution systems, there are only nine hotels in Tbilisi that can be booked online through the likes of Expedia and Kayak.com. Some hotels have their own websites, but none of these has real time booking capabilities, an expensive proposition for hotels. Real time booking is lacking and is something that a portal or hotel association might facilitate, perhaps through services such as World Hotel Link or Web Reservations International. Most marketing of international tourism to Georgia is conducted through the seven main inbound tour operators that comprise the Inbound Tour Operators Association. Levon Travel is also an established tour operator, but they are not yet a member of the Association; Levon has an office in the US. These tour operators exhibit at international travel trade fairs such as the World Travel 117

118 Market in London and ITB in Berlin. However, international leisure travel (beyond visitors from neighboring countries) is still outpaced by business travel to Georgia In 2007, the DOTR began an advertising campaign to improve the image of Georgia. No fulfillment program whereby prospective visitors could obtain more information was included no telephone or website address. A new website was launched in the summer of 2007, which helps promote and market the country s tourism offers. Other channels for marketing are more informal and include travel guidebooks, traveler blogs such as Lonely Planet s, Trip Advisor and Virtual Tourist. A marketing campaign led by the Government and based on targeted market research is needed to leverage the country s limited marketing resources. A carefully planned campaign would enable the Government to focus their marketing efforts and maximize benefits. C. Areas of Concern and Potential Success With demand for accommodations exceeding supply, especially in Tbilisi and Batumi, two key areas of concern are quality and pricing. Once outside Tbilisi, very few hotels and restaurants meet international quality standards. Most of the current demand is mainly being met by guesthouses, which provide interesting and authentic Geotourism style cultural experiences for individual travelers and small groups. But there are no required minimum standards for accommodations, so virtually anything goes. Consequently, it is essentially a seller s market for accommodations whereby prices are not in line with the value of offers. In a traveler s survey conducted by the GTSP team in October 2007, several visitors complained that accommodations were overpriced, that better values could be found in other countries. Pricing is also a concern with air fares because routings are still relatively limited. A round trip fare from London to Tbilisi in November very much the off-season was about $900. A roundtrip flight from London to Istanbul was $337, $300 to Sofia, or less than 100 from Frankfurt to Istanbul. Another area of concern is that with the launch of international television advertising and promotion campaign, prospective visitors will begin looking online for ways to book travel to Georgia, but as mentioned above, no fulfillment or booking options are provided. An area of potential success that was just beginning to be tapped in 2007 was the opening of mid-level, three star type properties. The Hotel Rcheuli Marani with a rate of $50 a night represented a good start in this direction. This market gap is of special concern to inbound tour operators. The Visits with Friends and Relatives (VFR) segment would also be a priority market for mid-market 118

119 properties. In Tbilisi, though, land costs are prohibitive for building this category of hotel, although this category is greatly needed. The GTSP team recommends that the Government consider earmarking or designating land in Tbilisi for three star hotels. The meetings and events markets are others area of both actual and potential success actual because the demand for event management is flourishing. D. International style amenities Every year, Travel & Leisure magazine conducts a reader s survey of the 500 best hotels in the world. In the 2007 survey, Four Seasons Hotels, Park Hyatt Hotels, Kempinski and Ritz Carlton were consistently ranked as some of the best hotels in the world. These hotels represent the top end of international amenities for hotels. Some of the top end amenities include: Marble bathrooms Thick terry bathrobes Down duvets and pillows High ceiling rooms Lamps in black marble and ebony Crystal chandeliers Fitness rooms with the latest exercise equipment Landscaped grounds With Park Hyatt and Kempinski Hotels opening in Tbilisi, the city will be home to a top caliber of international amenities, thus raising the bar of tourism industry amenities, services and overall product in the country. As with other destinations where these hotels have been established, Tbilisi can be expected to experience something of a positive domino effect from the presence of some of the best tourism brands in the world. New restaurants, shops and services can be expected to open to cater to this market. In the GTSP survey described below, the following was reported in regards to existing hotel amenities: Hotels were also asked about basic amenities, such as a business center, meeting rooms, internet access, restaurant, room service, laundry service, fitness center and parking. As our survey showed, most Tbilisi hotels provided full room and laundry service, but lacked amenities such as restaurants, business centers, fitness/exercise centers and sport facilities (tennis and sports courts, swimming pools, etc). 119

120 Tbilisi Hote l Am enitie s 4% 100% Sport Centers: 56% 80% 76% Room Service Restaurant: Parking Meeting rooms 36% 96% 100% Laundry service: Internet access: Fitness center: Business center: 44% 0% 20% 40% 60% 80% 100% 120% Figure 7: Tbilisi Hotel Amenities In the regions, the key service and amenity differences compared with city hotels are fewer offering business centers and internet access and more offering increased parking. None of this is surprising given the lower levels of internet access outside the cities and the greater availability of land for parking. Land for parking in Tbilisi is more expensive. Regional Hotel Amenities 11% 20% 57% 55% 66% 84% 86% 91% Sport Centers: Room Service Restaurant: Parking Meeting rooms Laundry service: Internet access: Fitness center: Business center: 16% Figure 8: Regional Hotel Amenities E. Issues of development structure and planning location Issues of development structure and planning location, views, parking, role of adjacent hotel and/or other amenities, and other factors related to market acceptance. A detailed master planning process based on international standards would cover all of these elements. Currently, the team found that such a planning process was either completely lacking or insufficient in the destinations visited. THR had conducted detailed master plans for the coast and plans were 120

121 developed for the Borjomi region. However, in planning the Shaori development, the team that was contracted to conduct the work had created superb maps of the possible developments, but they had not had the opportunity yet to conduct site visits of model resort developments in other countries. They would also benefit from contact and cooperation with internationally experienced planners and architects. Master planning should be conducted at all tourist destinations, especially those in which the PAIR principle is critical -- Preservation, Access, Interpretation, and Remembrance. For example, a master planning process would help ensure the historic character of the destination and thus its chief attraction. Government capacity, particularly at the local and regional levels would benefit from capacity building in international planning and land use standards and practices. The Urban Land Institute, which is often a USAID contractor, has a wealth of publications, knowledge and experience that would benefit planners and architects in Georgia. Seasonality is also an issue with most of the developments that are either existing or planned. Many are focused on a single season with the exception of Bakuriani which is attracting both a winter and summer market. For Batumi and Gudauri, seasonality is a problem with Batumi s season is concentrated in July and August. And Gudauri is focused on the winter season, although there is strong potential for summer activities, including business retreats, small meetings and conferences. Task 2.3: International competition analysis Task 2.3.1: International competition in terms of product offering, target markets, levels of success, and lessons learned. I. Overall Target markets Georgian tourism currently attracts visitors from nearly every country. The following are the top nationalities visiting Georgia in terms of total arrivals the first eight months of 2007 and their 2005 average expenditures per trip (internationally): 121

122 Table 6: Overall Target Markets Country of origin Arrivals to Georgia Jan- August 2007 % of total Average 2005 tourism expenditures per trip (Euros) Azerbaijan 174,225 26% 72 Armenia 154,666 23% 350 Turkey 150, % 280 Russia 61, % 504 Ukraine 18, % 128 (2004) Israel 10, % 631 USA 9, % 775 Germany 9, % 709 Greece 8, % Not available Bulgaria 5,954.9% 245 United Kingdom 5,796.87% 720 Iran 4,911.7% Not available France 4,207.6% 1,126 Japan 961 1,117 Australia 563 1,081 South Korea 408 1,685 Source: Arrivals from DOTR, Expenditures from UNWTO, Tourism Market Trends Europe and Asia, 2006 Based on this, the team believes that there should be a tourism development and marketing approach based on the principle of priority market circumstances. In plain words, it is to go after those market segments that are easiest to reach and convince to come to Georgia. The market for tourism development in Georgia is quite large and also quite diverse. A development and marketing strategy for Georgia should be focused in terms of serving high priority markets first and then branching out to wider markets. The GTSP team also believes that it is important to reduce the leakage in the outbound market from Georgia to Turkey. The following table shows 2006 international arrivals to Turkey by nationality and the percentage increase from 2005 to Arrivals from Georgia grew faster than almost all other markets (except for Iceland, Tajikistan and Afghanistan). It is important to understand the reasons for this leakage and institute a program to encourage these Georgia outbound travelers to vacation in Turkey. 122

123 Table 7: Arrivals to Turkey Arrivals to Turkey from: Number of arrivals % increase from 2005 to 2006 United Kingdom 1,678, % Georgia 549, USA 532, Italy 402,573.18% Israel 362, % Japan 125, Korea, Republic of 108, Australia 99, The following table expands on this analysis by comparing arrivals to Turkey and Georgia. Comparison of International Tourists to Turkey and Georgia Turkey Total 13,248,176 13,956,405 17,548,384 21,124,886 19,819,833 AFRICA 133, , , , ,192 AMERICAS 326, , , , ,080 EAST ASIA AND THE PACIFIC 283, , , , ,208 EUROPE 11,733,579 12,355,266 15,522,343 18,239,299 16,823,108 MIDDLE EAST 306, , , , ,398 SOUTH ASIA 453, , ,878 1,008, ,560 OTHER 10,619 14,126 19,289 22,483 19,287 Georgia TOTAL 298, , , , ,114 AFRICA AMERICAS 8,156 8,731 11,209 14,842 19,417 EAST ASIA AND THE PACIFIC 6,865 6,756 4,952 3,244 13,732 EUROPE 275, , , , ,747 MIDDLE EAST 1,250 1,835 1, ,105 SOUTH ASIA 5,822 6,683 6,635 6,641 9,977 OTHER ,359 Georgia as % of Turkey TOTAL 2.3% 2.2% 2.1% 2.7% 5.0% AFRICA 0.4% 0.2% 0.6% 0.3% 0.5% AMERICAS 2.5% 2.9% 2.8% 2.4% 2.6% EAST ASIA AND THE PACIFIC 2.4% 2.6% 1.6% 0.7% 2.8% EUROPE 2.3% 2.3% 2.2% 2.9% 5.6% MIDDLE EAST 0.4% 0.5% 0.3% 0.2% 0.3% SOUTH ASIA 1.3% 1.2% 1.0% 0.7% 1.1% OTHER 4.3% 3.4% 2.9% 3.4% 7.0% Table 8: Comparison of Regional Tourists Whereas Georgia has recently been increasing market share (particularly from the Europe market), there is still great potential to further penetrate the market of visitors to Turkey. For example, a program that targets 5% of the tourists to Turkey to include a trip to Georgia in their itinerary would double the number of tourists to Georgia. Importantly, Georgia needs a market research program that 123

124 helps understand the tourism patterns and activities of these nearby tourists and how they can be captured by Georgia. II. International competition A. Bulgaria Product Offerings: Resorts situated in towns, villages, and surroundings along the Black Sea coast Rusalka, Kavarna, Albena, and Kraveno, among others. Mountains cover 28% of the country s territory, with offers that include skiing and hiking. The best known mountain resorts include Borovec, Rila, Pamporovo, the Rhodopes, Bansko, Pirin, and others. Significant level of new investment in ski resorts has yielded excellent returns, with visitor arrival figures rising and length of stay during the winter increasing. Balneotourism and spa resorts consist of over 800 mineral springs, which include Bankya in the foothills of Lyulin Mountain, Devin in Rhodopes, Hissarya in Sredna Gora Mountain, and Kyustendil in Ossogovo Mountains. Cultural and rural tourism, with an emphasis on promoting authentic towns with ecotourism. There are three National Parks with a total area of 193,049 hectares, making it one of the largest protected areas in Europe. Activities include trekking, mountain biking, rock climbing, mountaineering, caving and horseback riding. Wine and culinary tours are also becoming popular. Target Markets: The EU with a focus on Germany, UK, and Scandinavian countries, as well as the CIS, specifically Russia. Table 9: Levels of Success for Bulgaria Total Int l Tourist Arrivals Tourist Receipts Tourist Receipts per visitor Tourist Receipts per capita Annual Percentage Growth 7,282,000 1 billion % international tourist arrivals/ +9.3%international tourism receipts T&T Industry Expected GDP Contribution % Lessons Learned Diversifying beyond the sun and sand segment to ecotourism is a challenge. Rapid coastal construction has damaged the seaside and pushed away tourists 124

125 Bulgaria has still been able to maintain its competitiveness based on the quality to price ratio relative to Spain, Greece, and Turkey, but that cannot be assumed as sustainable. B. Croatia Product Offerings: Sun and sand with more than 1,000 islands, a number of which have been classified as national parks. Dubrovnik is known as the Pearl of the Adriatic and is considered the main tourist attraction. The most developed region is Istria in the north of the country. Other product offerings increasingly include cultural tourism, nautical sports, camping, active sports, wine and gastronomic tours, spa and wellness resorts and cruising. Croatia is actively promoting wine and culinary tourism. Target Markets: The EU, specifically Belgium, Czech Republic, Germany, Spain, France, Italy, Hungary, Netherlands, Ireland, UK and Austria. Other European non-eu countries, especially Switzerland, as well the CIS, especially Russia. Japan is also being targeted. Table 10: Levels of Success for Croatia Total Int l Tourist Arrivals (2005) Tourist Receipts 7,282,000 5,999 million Tourist Receipts per visitor Tourist Receipts per capita Annual Percentage Growth 692 1, %international tourist arrivals/+9.0%international tourism receipts T&T Industry Expected GDP Contribution % Lessons Learned: Coastal tourism has become a huge success thanks in part to a concerted tourism promotion campaign. A booming cruise tourism sector, however, threatens to overrun Dubrovnik. Promotion of wine and cultural tourism is beginning pay off with diversification beyond the coast. Croatia has avoided many of the mistakes made by their competitors by conducting detailed planning to avoid excessive construction and exploitation of natural resources. 125

126 Advertising seems to have benefited the industry: visitor arrivals reached 10 million in 2005, accounted for 6.3% of all Southern Mediterranean arrivals that year. This has helped attract more foreign arrivals, which now comprise almost 85% of all arrivals. Although arrivals have increased, the average number of room nights spent has decreased, most likely due to the arrival of budget airlines, which makes the destination more affordable and accessible for weekend visits. Low cost airlines are playing a key role in the development of the tourism industry. This may make Croatia more of a year-round destination. A lack of quality hotels is the main obstacle to attracting a higher spending visitor. According to Euromonitor International, more luxury and small boutique hotels are needed to attract this segment. C. Cyprus (South) Product Offering: Cyprus offers cultural tourism, particularly visits to Byzantine era churches and monasteries, medieval castles and palaces and city walls dating from the presence of Venetians. The country also attracts a sun and sand segment, but is aiming to diversify into other segments -- religious tourism, sports tourism and medical tourism. Recent publications of the Tourist Board include an Agro-tourism Guide and an expanded trails network as part of their participation with the Pan-Parks project of the EU. Target Markets: The EU, especially the UK and Germany, and the CIS, especially Russia. Table 11: Levels of Success for Cyprus Total Int l Tourist Arrivals (2006) Tourist Receipts (2006) 2,629,000 1,879 million Tourist Receipts per visitor (2006) Tourist Receipts per capita Annual Percentage Growth 714 2, % international tourist arrivals/+3.5% international tourism receipts T&T Industry Expected GDP Contribution % Lessons Learned The Cypriot government is striving to diversify its tourism offering, hoping to move away from its historic sun and sea product towards a more sophisticated culture-based tourism development in order to attract higher spending tourists. Plans to revitalize the industry are being implemented in an effort to move away from the island s traditional image as a sun and sand destination. Repositioning is not easy and the extent to which efforts have succeeded remains unclear. The current campaign is challenged by decades 126

127 of sun and sand emphasis, with the sex appeal of island destinations such as Ianapa often dominating the country s overseas image, particularly in the UK source market. The repositioning effort is the outgrowth of the Cyprus Tourism Organization s new 7-year strategic plan, which includes an emphasis on better tourist services and less seasonality. The CNN-based campaign Love Cyprus has been a significant investment, though returns for the 2007 season appear marginal at best. D. Montenegro Product Offerings: Montenegro s main attraction is its coastline with resorts, hotels and guesthouses catering mainly to a sun and sand mass market. While there is some local and regional demand for attractions and activities in northern Montenegro, international demand and interest beyond the coast are still very limited. Only 2% of international tourists visited Montenegro beyond the coast in 2005, most of whom visited the Žabljak region, which is the core of the Durmitor National Park area. 8 A main reason for this is the lack of infrastructure, facilities and operators offering services and accommodations. But this is something of a vicious circle because public and private sector investment are lacking to improve the situation. It is questionable, given regional competition, whether a continued concentration of tourism along the coast is sustainable. Each of the countries listed below in Table 1 grew steadily from 2000 to 2005 in terms of international receipts and arrivals based mainly on coastal tourism. In fact, the head of Bulgarian tourism reported the end of July that the country s seaside resorts may have been overdeveloped forcing prices down to 8 EUR a night. 9 They are aiming to get visitors inland to experience the country s authentic tourism and wild beauty, which highlights their diverse flora and fauna, and dramatic geography. The country is striving to develop nature based tourism as an alternative to the beach, both for the summer and winter seasons. Development of mountain tourism in the north is a priority, including skiing and adventure sports. The Government is also working to create events, make Montenegro a prime conference destination, as well as a cultural tourism, agrotourism and gastronomic destination, including especially wine tours. Other offerings such as spas and wellness centers, as well as maritime and yacht activities are also being developed. 8 Opportunities and barriers for the private sector in the development of sustainable tourism in Northern Montenegro, UNDP, February 2006, p. 8 9 seeurope.net, July 27 th,

128 Target Markets: Montenegro is targeting the EU market with currently 50% of total arrivals from EU countries. The rest consist of 13% of European non-eu countries, 19% former Yugoslavia, and 18% Russia and CIS countries. Montenegro is continuing to heavily target Russia, as there is a large amount of Russian investment that flowing into the country. Montenegro is emphasizing tourists with high buying power, as the billion dollar plus high-end marina and resort develop at Tivat aims to become the next Monte Carlo. Table 12: Levels of Success for Montenegro Total Int l Tourist Arrivals (2006) Tourist Receipts (2006) 378, million Tourist Receipts per visitor FDI per capita Annual Percentage Growth 709 1, % international tourist arrivals/+59% international tourism receipts T&T Industry Expected GDP Contribution % Lessons Learned: It is challenging to diversify tourism beyond the coast to other destinations, particularly national parks and protected areas, when most of the investment and tourism are concentrated along the coast. Infrastructure, especially roads, water supply and sewage systems, cannot sustain any additional capacity. Public-private partnerships are needed to finance future infrastructure growth. E. Turkey Product Offering: Turkey continues to promote the sun and sand segment, but is also developing several other segments as part of its 2023 Strategy. These additional offerings include health and thermal tourism, winter sports, mountain climbing, adventure trips, plateau tourism, ecotourism, expo and conference tourism, cruises, yachting, and shopping. Target Markets: With diversification, Turkey is aiming to target high income generating traveler groups. They are increasing marketing in the Middle East, Central Asia Turkic speaking Republics, the EU, as well as the U.S. and Japan. Table 13: Levels of Success for Turkey Total Int l Tourist Arrivals Tourist Receipts 21,125,000 14,590 million Tourist Receipts per visitor FDI per capita Annual Percentage Growth % international tourist arrivals/ +14.2% international tourism receipts T&T Industry Expected GDP Contribution % 128

129 Lessons Learned: The Government has recognized that it needs to diversify its tourism sector beyond the sun and sand segment and thus has begun actively themebased tourism in which nine thematic zones and several tourist corridors associated with product offerings have been created: the Phrygia (west central Anatolia) Cultural and Thermal Zone, Troy Cultural and Thematic Zone, Terra Mere Ecotourism Zone, etc. The Corridors are routes with names such as the Olive Corridor, Winter Corridor, Faith Tourism Corridor, Silk Road Corridor, etc. The following table shows comparative levels of success based on total international arrivals and receipts and the key figures of receipts per visitor, thus the yield per visitor. A full table can be found in Annex D. Table 14: Comparative Levels of Success Comparative Levels of Success 2005 Bulgaria Croatia Cyprus Montenegro (South) Total Int l Tourist Arrivals 7,282,000 8,659,000 2,657, ,000 Tourist Receipts (millions Euros) Tourist Receipts per visitor (millions Euros) Tourist Receipts per capita (Euro) Int'l Tourist Arrivals Growth Int'l Tourist Receipts Growth Expect % GDP Contribution ,952 5,999 1, ,334 2,388 1, % 1.8% 7.2% 31.0% 9.3% 9.0% 3.5% 59.0% 4.1% 8.5% 9.5% 10.2% Table 15: International Arrivals in Competing Destinations International arrivals in competing destinations from selected target markets 2005/06 (in thousands) Target Market/Destination Bulgaria Croatia Cyprus Montenegro* Turkey Germany 729 1, ,166 United Kingdom , ,638 USA Israel Italy 64 1, Japan

130 One of the main lessons learned from comparing international competitors is the need to diversify beyond the sun and sand segment. However, as Montenegro is discovering, this is not easy; investment is not flowing to the interior. And Croatia is still heavily a coastal destination, although as EU Corridor highway projects are completed through the Balkans, interior product offers are expected to increase in popularity. Turkey does seem to be succeeding with its thematic corridor approach. As mentioned above, each of the competitors has product strengths similar to Georgia. Beyond these country destinations, Georgia faces strong competition in the following segments: 1) Winter tourism Helicopter skiing is popular in Georgia, but access is limited. And the website helicopterskiing.org lists multiple destinations around the world, but not Georgia. For other types of skiing, Georgia is competing with highly developed winter resorts around the world. 2) Sun and sand tourism As mentioned previously, Georgia is faced with serious competition throughout the region and beyond into especially the Mediterranean. The sun and sand segment is especially driven by price and value. In fact, as noted below, Adjaran hoteliers are complaining about high prices and how this has been driving more people away from Adjara and into Turkey. In general, the sun and sand tourist is mainly looking for a relaxing place in the sun on the beach. The cultural and natural attributes beyond the beach are far less important to these visitors. According to Beka Jakeli at the DOTR, at least 90% of Georgian outbound tour operators offer packages to Turkey and Egypt. 3) Cultural tourism Georgia can distinguish itself well on cultural tourism. Georgian heritage, wine, arts, dance and music are distinctive and of interest to niche market tourists. These tourists are often described by National Geographic as Geotourists tourism that sustains or enhances the geographical character of the place being visited, including its environment, culture, aesthetics, heritage and the well-being of its residents. As mentioned above, all of these competitors are pursuing similar angles, but cultural tourists want to have different experiences and will be attracted to a destination for that reason alone. The Georgia advertising campaign based on the slogan Europe Started Here fits with increased positioning of the country as a niche market special interest destination. 4) Ecotourism As with cultural tourism, positioning on ecotourism or naturebased tourism is also extremely competitive. Pairing ecotourism products with cultural experiences creates a competitive combination something which Georgia can offer throughout the country. 130

131 Task 2.4: Analysis of existing customers Task 2.4.1: Results of the GTSP Hotel Survey A hotel survey was conducted of 70 hotels totaling 1650 rooms throughout Georgia, which included most of the hotels used by the main tour operators in the country. The sample covered 25 city hotels and 45 hotels in the regions of Adjara, Kakheti, Imereti and Samtsxe-Javaxeti. While the survey covered only 20% of the total number of operating hotels in country, this 20% represented 90% of the main hotel capacity on the market. The hotels were surveyed about sizing, amenities, pricing, occupancy levels, market orientation and development. They were also asked to provide their opinions about the overall Georgian tourism industry, thus helping to identify some key needs. In the process of conducting this survey, the lack of overall statistics and especially market research quickly became apparent. Most of the hotels also said that this was the first time they were surveyed. Georgia Statistics does not collect hotel data such as occupancy rates, revenue per available room, and average daily rates. Nor do the majority of individual hotels collect this data. We highly recommend that technical assistance be provided to assist hotels with collecting this data and enabling them to better evaluate their performance and future trends. Another interesting issue that needs to be addressed is the classification of accommodations, which would establish minimum quality and operational standards. Without specific standards, any type of accommodation can call itself a hotel, which confuses visitors. Consequently, statistical data covering hotels includes all types of accommodations from larger multi-room structures that would commonly be considered hotels to small family-owned guesthouses with a few rooms available for guests. USAID has been sponsoring an inventory which should enable a more precise accounting of property types. The Georgian hotel industry is surging forward with double digit growth in the number of hotels. Despite this increase, the price to value ratio, considering the services and amenities offered, is relatively high compared to other countries. The lack of service level and high quality staff has been identified as critical issues for tourism/hospitality industry. 131

132 I. Characteristics of Hotels in Georgia As of October 2007, according to the Statistics Georgia, there were 374 hotels with rooms in the country. Figure 9: Number of Hotels by Region Number of Hotels by Region Kartli Samtskhe-Javakheti Samegrelo-Zemo Svaneti Racha-Lechkhumi & Kvemo Svaneti Mtskheta-Mtianeti Kakheti Imereti Guria Adjara AR Tbilisi In 2006, as the chart above shows, the number of hotels throughout Georgia doubled compared with 2005 with a 25% increase in Tbilisi and more than a 50% increase in the Samtskhe-Javakheti region. Most hotels, especially in Tbilisi, classify themselves as 3-5 stars, although there seems to be a tendency for operators to over-rate themselves. According to Statistics Georgia, most hotels in Georgia are privately owned; 8.9% of hotels are government owned. Of the rooms in the country, over 5900 (59%) are double bedded rooms. Among the hotels surveyed, the average size was about rooms. In our interviews with hotel operators, many said that they were thinking about converting single rooms to doubles and triples, especially in the regions, in order to meet the increasing demand for rooms. 132

133 Distribution of Room s 19% 8% 14% Deluxe Single Room Double Room 59% Rooms w ith three or more bed Figure 10: Distribution of Rooms Source: Statistics Georgia In Tbilisi, 59% of total rooms in the hotels surveyed were double rooms and 27% were singles. In the regions, among the hotels surveyed, 49% of the rooms were doubles and 33% were multi-bedded suites and/or triples. Figure 11: % of Room Distribution in Tbilisi % of Room Distribution Tbilisi 14% 27% % of Single % of Double % of Suits 59% Type of Room s Regions 33% 18% % of Single % of Double 49% % of Suits, ThreeBeds Figure 12: Type of Rooms in Regions 133

134 As the above charts show, the key difference between Tbilisi and the regions is that more single rooms are available, which is not surprising given the dominance of business travelers to the city. However, as tourism, particularly leisure travel increases, more demand could be expected for double and triple rooms. In the regions, although most hotels are small guesthouse style accommodations, the average hotel size of the hotels surveyed is 25 rooms, with three or more beds per room. This was especially the case in Gudauri, Bakuriani and the Adjara regions, where the tourist flow is higher than other regions and thus more beds are needed. Multi-bedded rooms tend to cater mainly to domestic visitors. Based on our analysis, the greater the number of multi-bedded (especially triples) rooms at a hotel or guesthouse, the greater the likelihood that the guest would be a Georgian leisure visitor. The survey also indicated that 45% of all hotels interviewed expected to increase the number of rooms available. Consequently, we expect the average number of hotel rooms to increase to a minimum of 45 rooms over the next few years. In addition to increasing the number of rooms, the majority of hotels in Tbilisi also plan to renovate their buildings. This is not surprising given that many of the operating hotels are in ageing buildings that lack the facilities and amenities expected by an international market. We found that many hotels need to renovate and upgrade just to meet basic quality standards. Many hotels also indicated that they plan to change their landscaping, especially adding greenery, parking, restaurants and bars. Hotels were also asked about basic amenities, such as a business center, meeting rooms, internet access, restaurant, room service, laundry service, fitness center and parking. As our survey showed, most Tbilisi hotels provided full room and laundry service, but lacked amenities such as restaurants, business centers, fitness/exercise centers and sport facilities (tennis and sports courts, swimming pools, etc). 134

135 Figure 13: Tbilisi Hotel Amenities Tbilisi Hote l Am enitie s 4% 100% Sport Centers: 56% 80% 76% Room Service Restaurant: Parking Meeting rooms 36% 96% 100% Laundry service: Internet access: Fitness center: Business center: 44% 0% 20% 40% 60% 80% 100% 120% In the regions, the key service and amenity differences compared with city hotels are fewer offering business centers and internet access and more offering increased parking. None of this is surprising given the lower levels of internet access outside the cities and the greater availability of land for parking. Land for parking in Tbilisi is more expensive. Figure 14:Regional Hotel Amenities Regional Hotel Amenities 11% 20% 57% 55% 66% 84% 86% 91% Sport Centers: Room Service Restaurant: Parking Meeting rooms Laundry service: Internet access: Fitness center: Business center: 16% Hotel operators were also asked whether they offered any value added services such as cultural tours, visits to historic sites, village visits and other activities, to enhance the customer experience. Only 40% responded positively. As described above, with the entry into the Tbilisi market of major international brands such as Kempinski and Park Hyatt, there will be upward pressure on hotels across the country to improve and upgrade their buildings, facilities and services. 135

136 II. Pricing As the above charts show, Georgian hotels offer limited amenities and services, although prices are high, especially compared with comparable properties in other countries. Foreigners are reportedly paying an average of US$100 a night in Tbilisi and US$55 in the regions; for the latter domestic visitors are paying on average lower rates. Average Room Rate (US$) in Tbilisi Hotels # of Rooms Average Price < And as Table 1 shows, average pricing in Tbilisi hotels also increases according to the amenities and services offered, which tend to increase with the number of rooms in the property. Table 16: Average Room Rate Most of the hotel owners surveyed explained that high prices were due to demand exceeding the supply of rooms and thus a relatively low level of competition. Consequently, many hotels also tend to over-rate themselves. Another interesting trend, especially among small hotels and guesthouses in Tbilisi and the regions, is the emphasis on increasing prices over improving quality and services. Table 17: Average daily hotel rates (US$) in the regions. Regions Average Price Regions Average Price Sighnaghi 22 Telavi 36 Bakuriani 75 Borjomi /Abastumani Gudauri 50 Kazbegi Batumi 90 Kobuleti 34 Xelvachauri 34 Poti

137 III. Occupancy Rates According to Statistics Georgia (SG), the estimated overall annual occupancy rate in 2006 for Georgian accommodations (including bed and breakfast establishments, guesthouses and hotels) was 70%, a 20% increase over It should be emphasized, though, that most individual hotels do not collect this data themselves. The SG estimates are, therefore, approximate based on calculations from the limited data available. The following tables summarize estimated occupancy rates throughout Georgia, but it should be emphasized that most hotel operators do not track this data, so their responses are approximate, perceived occupancy rates. Tbilisi Yearly Occupancy Rate # of Rooms Occupancy Rate <12 60% % % Table 18: Tbilisi Yearly Occupancy Rates Among Tbilisi hotels, occupancy rates for all types of hotels are similarly high. In addition, as the survey showed, those hotels with conference facilities, restaurants and business centers had higher occupancy rates than others without these amenities. 137

138 Yearly Occupancy Rates by Regions Regions Occupancy Rate Regions Occupancy Rate Sighnaghi 48% Telavi 38% Bakuriani 48% Borjomi /Abastumani 52% Gudauri 25% Kazbegi 40% Batumi 57% Kobuleti 58% Xelvachauri 50% Poti 30% Table 19: Yearly Occupancy Rates by Regions Occupancy rates for the regions are highest for Adjara and Samtsxe- Javaxeti (Borjomi, Bakuriani, and Abastumani). These regions are relatively developed in terms of infrastructure and are the most visited by both domestic and international visitors. Adjara has a high occupancy rate in the summer (July- August) and Samtsxe-Javaxeti (end of December-January) in the winter. Business travelers visit these regions all year. IV. Composition of Visitors According to the survey and Statistics Georgia, business visitors comprise the largest segment of visitors to Georgia. Figure 15: Georgia Visitor Segments Source: Statistics Georgia In Tbilisi, business visitors account for approximately 60% of all hotel customers in Tbilisi. 138

139 Figure 16: Survey Result: Purpose of Visit among Tbilisi Hotels 12% Gov 3% o t h 26% Leisure Business 59% : Purpose of Visit in Regions among hotels surveyed Regions Business Leisure Regions Business Leisure Sighnaghi 15% 85% Telavi 67% 33% Bakuriani 38% 63% Borjomi /Abastumani 40% 60% Gudauri 3% 98% Kazbegi 30% 70% Batumi 59% 41% Kobuleti 20% 80% Xelvachauri 25% 75% Poti 90% 10% Table 20: Purpose of Visit in Regions Source: GTSP Survey, October 2007 The survey also asked about the composition of customers in terms of groups, individuals and couples/families. Hotel operators noted that most groups were foreign leisure travelers and business groups. 139

140 R eg io nal D ist r ib ut io n o f T r aveler s 18% 34% Gr oup Tr aveler s Individual Couple/ Family 48% Figure 17: Regional Distribution of Travelers V. Length of Stay The survey also asked about the average length of stay, which for Tbilisi hotels ranged from three to four days, while in the regions it was seven days. The latter are mostly domestic visitors. One night stays accounted only for 10% of total stays, while the remainder was evenly split between weekdays and weekends. Average Length of Stay, Tbilisi # of Rooms Length of Stay < ( 3-4 Days) ( 3-4 Days) Table 21: Average Length of Stay, Tbilisi 140

141 Average Length of Stay in Regions during high seasons Sighnaghi 2.5 Days Telavi 2.5 Days Bakuriani 8 Days Borjomi /Abastumani 7 Days Gudauri 5 Days Kazbegi 2.5 Days Batumi 5 Days Kobuleti 9 Days Xelvachauri 8.5 Days Poti 2.5 Day Table 22: Average Length of Stay in Regions during high season VI. Origins of Visitors Hotels were asked to rank visitors by nationality, but most hotels named only regions and not individual countries, i.e. European Union and the CIS, which not surprisingly ranked as the top generating markets. Some hotels were able to indicate that Great Britain, Germany, France and Netherlands have been prime generating markets for them. International Tourist Arrivals in Tbilisi Hotels 1 Europe (Great Britain, Germany, France, Netherlands) 2 CIS ( Ukraine, Russia, Azerbaijan, Armenia) 3 Turkey 4 Israel 5 USA Table 23: International Tourist Arrivals in Tbilisi Hotels International travelers account for an estimated 36% of the total market in regions with most visitors coming from the CIS, Israel and the Baltic Countries. As mentioned above, 30% are coming via tour operators, which means 6% are travelling independently. Arrivals from Germany, Great Britain and the US are some of the main nationalities visiting the regions. 141

142 International Arrivals in Regions by Country of Origin Sighnaghi Israel, Germany, other EU Telavi Germany, Israel, England Bakuriani Israel, CIS and Baltic Countries Borjomi /Abastumani Azerbaijan, Israel, Other CIS Gudauri Ukraine, Russia, Latvia Kazbegi Israel, USA, Italy Batumi Turkey, Armenia, other CIS and Israel Kobuleti Armenia, Ukraine, Russia Xelvachauri Armenia, Ukraine, Azerbaijan Poti Azerbaijan, Armenia, Netherlands Table 24: International Arrivals in Regions VII. Hotels and Tour Operators Hotel customers from tour operators represented only 20% for Tbilisi hotels and 30% for the regional hotels. Most of the regional customers are repeat customers (55%), many of whom find the hotel by word-of-mouth or randomly upon arrival (usually at bus and minibus stops). Most regional hotels do not have websites, and even fewer buy advertising. Both Tbilisi and regional hotels receive some free online advertising on Georgian tourist websites. Repeat customers for Tbilisi hotels represent about 50% of total customers. Most of these hotels have websites and some buy advertising in local publications. The top three tour operators that work with hotels are: Table 25: Top Three Tour Operators in Georgia 1 Caucasus Travel 2 Visit Georgia 3 GeorgiCa Travel and Explore Georgia 142

143 VIII. Hoteliers views about Georgian tourism Hotel operators were asked: If you had the power, what would you improve in Georgian hotel industry? Staff and overall service levels were cited as the most important improvement followed by infrastructure and then international marketing of Georgia. Staff and overall service level development Staff education and overall service levels were cited by the operators as very low. Most tourism and hospitality training is conducted in house by hotel managers who also need training themselves. Quality is therefore lacking in accommodations and in tourism overall. Hotel operators want more special training for hospitality either in educational institutions or universities. They are also keen to see more internships, short term management training programs, and distance learning courses (especially for the regions). Infrastructure More than 70% of the hotels surveyed cited roads as the most important infrastructure improvement needed. Lighting and street cleaning service were also cited by Tbilisi hotel operators as priorities. Other critical issues are the lack of public restrooms and signage of any kind. One regional hotel manager noted that due to a lack of public toilets on the roads, when people arrive at my hotel, they rush like crazy to get to the restrooms. This should not be the case because this creates a negative image of Georgia. Marketing Georgia and its destinations Most hotel operators said that awareness of Georgia as an international destination is very low and that the country needed to be more active in international travel shows, exhibitions, and conferences. They also wanted to see more coordination between the government and private sector, including joint marketing and promotional campaigns. More local level community awareness about the importance of tourism is also needed. Hotel operators in Adjara were especially critical about what they regarded as excessively high prices, especially in restaurants and accommodations, and inadequate service levels. They saw that increasing numbers of Georgians prefer to visit Turkey because they get more value for their money. Arrivals from Georgia to Turkey have increased by more than 50% in 2006 compared with 2005 to 550,000. Turkey has fast become a favorite holiday destination for Georgians. 143

144 IX. New Hotel Supply In 2006, 124 new hotels opened, thus almost a 50% increase. Several of the major international brands such as Park Hyatt, Intercontinental, Radisson, Kempinski, and Hilton are expected to be opening over the next year and beyond. Table 26:Large scale Top Segment Announcements on Georgian Market Hotel Date of Category Number of Rooms Completion Radisson May 1, * 248 Intercontinental 2 nd Quarter of * 155 Kempinski Year * 200 Hilton n/a n/a n/a Hyatt Year * 187 Total # of Rooms 790 Developers such as Rakeen Developments, Development Solutions, the Silk Road Group and Center Point are all pursuing hotel developments, which either include or are expected to help various options for resort amenities and other services and facilities -- tours, winter sport facilities, hotel and catering supplies, convention business opportunities and many others. Task 2.4.2: Interviews with tourism industry line managers to understand customer activity patterns, preferences, and disappointments. (Also Tasks and 3.2.4) The GTSP team obtained data and opinions on customer activity patterns, preferences and disappointments in several ways and integrated this into each section of Task 2. We also conducted a traveler s survey, the results of which are similar to feedback we received from stakeholders. Nearly every manager interviewed and traveler surveyed mentioned some aspect of infrastructure as a key negative issue poor road quality, lack of public toilets, lack of signage, lack of information and a lack of service mentality. On the positive side, most managers mentioned Georgian hospitality, the beauty of the Georgian landscape, opportunities for special events and opportunities for adventure travel and cultural experiences all across the country. Some of the managers we met with included: 144

145 Table 27: Interviews Name of person and position Tour operators Ia Tabagari, General Manager Name of company Caucasus Travel Comments Directory of People in Tourism would be helpful. Inbound Tour Operators expected to play an important role with the industry and government. Hotels sticking with their contracts is a problem. Archil Dateshidze, Fresh Travel Tourism Manager Hamed Alavi, President AGE International Iranian tour operator for inbound Iranian visitors, which are growing in numbers. Manana Bostoganashvili, Marketing Manager George Kalandadze, General Director Nick Erkomaishvili, General Director and Owner Georgian Holidays GeorgiCa Travel Explore Georgia Turkish market extensions could be interesting for prospective visitors to Georgia. Most of his market is experienced travelers. He sees increased Iranian interest. He also sees much more room for growth combining adventure and culture. Adventure travel demand is increasing rapidly, 20% in 2006 over 2005 for his company. Safety and emergency services is a big issue that needs to be addressed, especially in the mountains. Hoteliers The team interviewed 70 hotel managers in Georgia. The results are summarized in the above hotel survey. Steve Johnson, Owner Betsy s Hotel Trained staff is a big 145

146 Name of person and position Toni Toshev, General Manager Igael Porecki, General Manager Betsy Haskell, AMCHAM Tourism Committee and former owner of Betsy s Hotel Mamuka Bakhtadze, Chief Information Officer Others Tamar Tabidze, Director Mikheil Tsereteli, Head of Education Department and Teona Jakeli Name of company Sheraton Hotel Tbilisi Marriott Center Point Group (hotels) Tourism Multiprofile College Georgian National Museum Comments challenge for the entire industry. Real estate speculation is driving up prices throughout the city. Human resources was a huge issue. He hired and fired hundreds of staff. Culinary Institute is needed. More international cuisine is needed. Minimum standards are essential. Seasonality is an issue. Health clinics needed. Need better understanding of tourism in Georgia. Establishing the necessary management systems at their hotels is a short to medium issue that they are addressing. Close collaboration between the College and the private sector is important to ensuring that international quality standards demanded by customers are met. Shortage of professional staff for the College is a critical issue. Educational market segment can be expanded internationally. They have relationships with overseas museums that could be leveraged better in a tourism context. They also want 146

147 Name of person and position David Natadze, Cofounder and Operations Director Irakli Baidashvili, Board Member Tea Barnovi and Lali Tevadze Temur Diasamidze Name of company M Group GMT Group Department of Environmental Protection Department of Tourism, Adjara Comments to link museums in other parts of country to tourism investments. They have established their own training programs, which they use with other businesses. But staff is a big problem in the industry as a whole because there are not enough trained people. For their Batumi restaurants, they must send staff from Tbilisi to ensure smooth operations during the busy summer season. Owners of the Marriotts, but they do not get involved in operations. They do see increased demand for boutique style properties outside Tbilisi. Number of visitors to protected areas should be increased within the limits established by the World Bank GEF program. Seasonality is a big issue. Most of their tourism is concentrated in July and August. I. Customer Activity Patterns The majority of visitors to Georgia come from neighboring countries mainly in July and August for the Black Sea coast. As mentioned above, according to Adjara Tourism, their average daily spending is only 27 GEL per person. International visitors come to Georgia from multiple countries (see above) for leisure and/or business purposes. For visitors from outside the region, the main 147

148 attractions are Tbilisi, winter sports in Gudauri, cultural tours of the Kakheti region. There is a strong domestic market, but that is increasingly being drawn to other countries, especially Turkey where the tourism offer is greater for the price than especially along the coast. In fact, as shown above, Georgian tourism to Turkey increased almost 50% in 2006 compared with II. Customer Preferences and Disappointments International leisure visitors are seeking Geotourism-style experiences, thus tourism experiences that tourism that sustains or enhances the geographical character of the place being visited, including its environment, culture, aesthetics, heritage and the well-being of its resident Task 2.4.3: Prior Market Research Market research is a definite area for improvement. There is currently no market research conducted of foreign visitors by the DOTR. Nor is there any organization conducting market research on a routine, regular basis, which makes it nearly impossible to target markets, both domestic and foreign, geographically and according to segments. Below are the main examples of market research conducted this year all of it useful information, which taken together comprise a foundation for solidifying a market research function within the DOTR. USAID contractor CHF International in Georgia produced a report in May 2007, which concluded that there are no exact statistics available that would help to identify the actual quantity of tourist arrival and their profile. Therefore, the market can be only assessed through informal surveys and research. To address this deficit, CHF conducted a survey of Georgian tour operators of visitor demand, especially in regards to tour profiles, countries of origin, age, and most frequently visited destinations. Their analysis indicated that international tourist arrivals to Georgia grew by over 44% from 2005 to The analysis also indicated that a third of visitors sought cultural tours, almost 16% a learning experience, 27% mountain travel, 18.5% hiking, and 15% adventure travel such as extreme (such as rafting ). CHF produced the following chart from a survey of the top 10 tour operators in Georgia, which show where the operators visitors are coming from. For the operators, key generating markets were Germany, Switzerland, Great Britain and Estonia, although as the arrivals to Georgia above show, Estonia does not appear as a key market. 148

149 Figure 18: Top 10 Tour Operators in Georgia Also in May 2007, BCG Research in Tbilisi and the DOTR conducted an airport exit survey in the duty free zone at Tbilisi International Airport. They surveyed approximately 500 visitors about travel experiences in Georgia. Nearly a third of the respondents were Americans and Germans. Two thirds were business travelers half of whom stayed in one of the Marriotts or the Sheraton and a quarter had come for holidays. Of those who came for holidays, most came for the country s cultural tourism offers (see slide below). To what type of tourism did your travel belong? This question was answered by the tourists traveling in Georgia only for leisure % Cultural tourism 86,5% Adventurous tourism Ecotourism No one Wine tourism Ski tourism Agrotourism Health tourism Specialized tourism (archeological find, hunting, fishing etc.) Figure 19: Type of Travel 25,4% 14,3% 7,9% 5,6% 4,8% 2,4% 1,6% 0,8%

150 The survey was skewed to business travelers and visitors to Tbilisi, but the results for leisure travelers are in parallel with what the GTSP team found in its traveler survey and from interviews with tourism industry stakeholders. Airport exit surveys should be conducted on a routine basis by the DOTR based perhaps on a broader more representative survey sample. Also this year, the USAID SME program commissioned a Consumer Survey on National Tourism Potential through the Institute for Polling and Marketing for the DOTR. The survey was conducted of 800 in-person interviews in the cities of Tbilisi, Gori, Telavi, Rustavi, Poti, Zugdidi, Batumi and Kutaisi. The main purpose of the survey was to determine national interest in Kakheti and Sighnaghi, particularly wine tourism. The survey identified Kobuleti and Batumi as the most popular destinations followed by Borjomi and Bakuriani. However, Sighnaghi was identified as a historical destination that is attracting visitors and could attract even more. Nearly 70% of the respondents considered Sighnaghi as the heart of Kakheti. Overall, Sighnaghi is considered the core of wine country and traditional Georgian culture in Kakheti. The survey also concluded that Sighnaghi s tourism potential is mainly based on wine and cultural/ heritage tourism, an offer that is most attractive to foreign visitors. Georgian tourists are mainly focused on holidays in Batumi and Kobuleti, which are considered more prestigious destinations than Sighnaghi. Task 2.4.4: Results of the GTSP Online Survey of Past Visitors to Georgia To supplement the statistical data and lack of broad based records on guest histories, the project team conducted an online survey with past visitors to Georgia. The visitors surveyed were a different sample from the May 2007 airport survey conducted by the DOTR. We found the user base through travel blogs such as Lonely Planet s Thorntree, TripAdvisor, VirtualTourist and WAYN. The objectives of this survey were to: Understand the appeal and problems associated with a trip to Georgia Understand the characteristics and motivations of current Georgia visitors. Understand the depth of the market and their tourism product needs Identify Existing deficiencies and priority improvement projects. Incorporate findings into the product development and marketing program of the Georgia Tourism Strategy Project. 150

151 The interim results of this survey are presented below: A. Origin of Georgia Visitors The survey respondents included a cross section of visitors from principal long haul markets Figure 20: % of Respondents by Region North America 45% Western Europe 31% Asia Pacific/ Middle East 24% 0% 10% 20% 30% 40% 50% 60% % of Respondents B. Lengths of Stay in Georgia The majority of respondents were on a relatively extended trip to Georgia and, therefore, able to experience a cross-section of activities and destinations within the country. Less than 7 days 17% Between 7 to 14 days 30% More than 14 days 53% Figure 21: Lengths of Stay 0% 10% 20% 30% 40% 50% 60% % of Respondents C. Ages of Visitors The respondents tended to be of a somewhat younger age profile than those seen in the airport survey. 151

152 Less than 25 23% 26 to 35 47% 36 to 45 17% 46 to 55 7% over 55 3% Figure 22: Ages of Visitors 0% 10% 20% 30% 40% 50% 60% 70% % of Respondents D. Gender of Georgia Tourism Visitors The majority of respondents were male, although there is reasonable representation of the female viewpoint. Figure 23: Gender of visitors Male 66% Female 34% 0% 10% 20% 30% 40% 50% 60% 70% % of Respondents E. Education Levels of Georgia Tourism Visitors The respondent group is well educated and provided substantial open ended comments and recommendations. Figure 24: Education levels of visitors Post Graduate 62% College Vocational/ Trade School 14% 17% High School Grade School 3% 3% 0% 10% 20% 30% 40% 50% 60% 70% % of Respondents 152

153 F. Sources of Information about Visiting Georgia The majority of visitors came to Georgia based on the recommendations of others. The Internet was also an important source of information. Word of mouth, friends, family Internet Newspaper Magazine Radio/Television Tour Operator Travel Brochure 0% 0% 13% 10% 10% 27% 73% Figure 25: Sources of Information 0% 20% 40% 60% 80% 100% % of Respondents G. Participation in Selected Activities while in Georgia The highest incidence of activity participation in Georgia revolves around culture and heritage sightseeing activities, followed reasonably closely by hiking. Wine tourism, visiting national parks, and attending performances also have a reasonable high incidence of participation. Visiting Cultural heritage sights Visiting historical places Visiting small towns or villages Hiking/trekking Wine tasting Visiting national parks Attending art or music performances Climbing Wildlife viewing Kayaking Mountain biking 10% 10% 33% 37% 37% 63% 60% 73% 83% Figure 26: Activities while in Georgia 0% 20% 40% 60% 80% 100% % of Respondents Participating H. Rating of Reasons for Visiting Georgia Respondents were asked to rate their reasons for visiting Georgia on a rating scale of 1 to 4, where 4 is very important. Again, culture and heritage are driving 153

154 forces. In addition, other important reasons (score 3.0 or above) include the natural beauty of the countryside, visiting traditional communities, and good value. Learn about Georgian culture & heritage 3.59 Quality of natural scenery Visit a traditional Georgian community Good prices for quality received 3.21 Visits to parks and natural areas Opportunities for adventure Opportunity to see wildlife 2.04 Interest in business investment Figure 27: Reasons for Visiting I. Rating of Georgia Tourism Attributes Respondents were asked to rate the attributes of Georgia tourism on a rating scale of 1 to 4, where 4 is excellent. In this case, the quality of Georgian food and wine received very high marks and the tourism strategy should build on this strength. The other highly rated attribute was wildlife and plant viewing, but fewer respondents (60%) rated this attribute. Attributes that are in need of substantial improvement (score of less than 2.5) include foreign language skills of service personnel, health and hygiene conditions, and at the bottom of the list visitor centers and shopping opportunities. Whereas a program to develop better visitor centers is partially underway (a good example is in Borjomi), and there are expanded shopping opportunities being developed in Tbilisi, there is an important need to correct these existing deficiencies elsewhere. In particular, our field observations found that visitor information and shopping opportunities (for remembrance) are nearly entirely lacking at many cultural and heritage sites. Since shopping opportunities are a key part of the being a competitive international tourism product, this deserves special attention. 154

155 Georgian food and drink (100%) 3.60 Access to wildlife/plant life viewing (60%) Accessibility to cultural heritage sites (93%) Products, Services & Hospitality (90%) Convenience of the customs (83%) Services at the airport (73%) Preservation of cultural and natural sites (93%) Personal safety (97%) 2.69 Interpretation of cultural heritage sites (87%) 2.69 Foreign language skills of service personnel (97%) Health and hygiene conditions (90%) Shopping opportunities (80%) 1.92 Visitor Centers (73%) Figure 28: Scoring of Activities J. Visitor Expenditures Respondents were also asked to estimate their trip expenditures. As shown below, the average budget expenditure was about $1,600 of which about 40% was for air travel. In country expenditures are approximately $100 per day, and shopping expenditures are well below average reflecting the low quality of shopping opportunities as discussed above. 155

156 Total $1,598 Airfare $646 Lodging $439 Restaurants $251 Other $190 Shopping $40 Activities $33 Figure 29: Expenditures in US$ $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 Airfare 40% Lodging 27% Restaurants 16% Other 12% Shopping 2% Activities 2% 0% 10% 20% 30% 40% 50% 60% 70% Figure 30: Expenditures as % of total K. Recommended Improvements Respondents were also given the opportunity to offer recommendations as to how various aspects of the Georgian tourism product could be improved. They took full advantage of this opportunity and some of their comments in their own words are shown below. These comments are organized by the following categories: Tours, Sights, Accommodations, and Infrastructure. Following the 156

157 comments, we have included a keyword count that helps weight the various comments Tours Visitor comments on tours included: Very bad guides, who got them lost in the mountains, did not show up although the deal was agreed ahead. (Need) tour guides that speak English, have a standard body of knowledge, and are more accessible. Number one problem for Georgia is insanely high prices on airtickets. Tickets to Georgia should be cheaper. The airfare is incredibly expensive compared with other East Europe destinations. Guides should be familiar with local customs, and introduce visitors to local crafts people like carpet weavers, folk singers, wine makers, sock knitters, local bakers. The big tourist attractions like Ilia Chachavadze s House are nice, but even better is the local poet who can tell stories about the Communist era, or the great Persian invasions of Kakheti. Nice places to visit. (Many) local guides when visiting sights like the Stalin Museum, Mtskheta or Uplisitkhe do not speak English. This is a big problem for tourists. Not just visiting churches! More than 5 in 2 weeks is overkill Better signage would be useful in the future for self driving tours. In general more printed info to add to the experience for tourists - not just depending on the verbal info given by each and every guide. Our guide was super by the way. Sights Visitor comments on sights included: Some beautiful and fascinating sites, not spoilt by tourism but difficult to locate if traveling independently Good, some could be better maintained. Start of dual pricing structure for foreigners is making many very angry and less likely to go to a museum, etc Vardzia important place, needs help. Improvement of access to some sights is good, but others are poor (David Gareja for example). Minibuses to David Gareja and Vardzia from Tbilisi and Akhalkalaki would be a good idea. Very nice sights but need to have better signs and signs in other languages so that an independent tourist can grasp the history of the sight. Better information about access - bus time tables, marshrutka numbers etc Standard tourist sightseeing attractions (museums) and other cultural attractions need English language descriptions for tourists to understand what they are looking at. 157

158 Include signs in English. ; More English Signs Male guides who don't touch female visitors, printed brochures in either Russian or German, including access ways to sight Excellent. Sometimes renovation is a bit over the top. Explanatory booklets/public toilets Please print postcards and make them accessible to tourists! Put up discreet placards which indicate the interesting historical information of a place. Have at least one international language such as English, French, or German. As well as historical information, include information about correct behavior, such as what times are possible to enter a functioning monastery, when the services are, and what the appropriate clothing is (headscarves for women, no shorts for men, etc.) Explanation of significance of buildings/monuments, etc. in foreign languages; more tourist information offices Less dust and construction The sites of Georgia are lovely, perhaps just greater exposure of these to your local people as they are perhaps your greatest ambassadors. Accommodations Visitor comments regarding improvements in accommodations included: Home stays were excellent & should be promoted as a great way of seeing the country & experiencing the culture. Nobody collects information about home stays. For example, suppose I want to stay in Batumi in August. I know most locals will rent an apartment, but it is impossible for me to organise this from the UK. So I have to arrive and negotiate with old ladies in the market. I travel with my wife + 4 kids, and my wife gets nervous when I cannot plan my accommodation ahead. More centralized information/ tourist info centers with information about guest houses and hotels: prices/ standards. Also help booking places. Make them clean of dust! Throw away the old mattresses, pillow and remove all the carpets!!! Better having a fake wooden floor than the carpets that were everywhere with stains, cleans with 30 years old vacuum cleaners! Don't clean the bathrooms with the cheapest cleaning material there is, which stinks! Stars for guest houses would help Totally overpriced in Tbilisi, Internet not yet sufficient, often no answer to s There needs to be more budget accommodation made available if Georgia is to attract younger travellers. This accommodation should be centrally located and signposted to make it easy to find in the major cities and towns. Budget hotels were very bad 158

159 Budget accommodation is very poor in Tbilisi...and prices have doubled on hotels since last year...which makes it very expensive for the budget traveller, which is most travellers nowadays. Need to have youth hostels, etc. ; More youth hostels More options for budget travellers. The facilities for backpackers and long-term travellers are quite poor in Georgia. I travel as cheap as possible (ie 15$ per day), countries like Iran, China or Southeast Asia offer much better value accommodation for just a fraction of the prices in Georgia. Of course Georgia is still cheaper than Western Europe, but in my opinion accommodation in Georgia doesn't have good value for money. There are very few middle price range hotels/hostels in the city. There are a few very nice hotels and then some very cheap and not very nice hotels. I'd like to see more in the middle price range. ; More mid-range options. They are surely overpriced. For the same price one can get superior quality even in Poland or Estonia Guest-houses must absolutely have electric hot-water heaters because gas is unpredictable. Functioning toilets of course. Sidewalks, steps, lights in apartment foyers all very bad and hazardous to health In cities like Tbilisi you have very nice hotels but the service is generally terrible although staff is very nice. More cheap decent accommodation Infrastructure Visitor comments on recommended infrastructure improvements included: Needs a lot of work!! Much better than on previous visits! Especially the road from Kutaisi to Batumi. However, the road from Batumi to Akhaltsikhe needs repairs. The road from Sukhumi to Ritsis Tba is also in terrible condition, although I know you can't fix this yet Roads are awful; a trip lasting 2.5 hours feels like 10 hours. The drivers are driving like crazy, wouldn't want to rent a car there for a million dollars! Put signs in English, that are telling where and how long to go to major sites. Marshrutkas should have signs in English on them. Taxis should have fixed prices between major destinations. No public toilets anywhere Your roads are terrible! Needs improvement fast ; Traffic! Roads - bad. Sanitation - very bad. Water - Okay. Street signs are basically non existent in Tbilisi and most cab drivers don't know where anything is and also rip off foreigners The roads seem to have improved a lot since my previous visits. I do feel that Georgian drivers are terrorific. I have been to countries all over Latin America and the Middle East and have never seen such suicidal drivers. 159

160 Bus/marshrutka system was a mystery to me and would have been incredibly difficult to figure out if I were travelling independently. Better roads, less garbage. Clean up litter, roads should be safer to walk on and traffic improved The state should pay more attention to public hygiene Too much garbage in rural areas and too much traffic and dust in Tbilisi. More public toilets that are of reasonable quality No one cares if there are some holes in the road, but everyone cares if they cannot go to the lavatory because there are no clean toilets. There should be a public restroom every 30 kilometers on all major roads. Even if there is a charge for this service, tourists will be happy to pay as long as there are clean, flush toilets (no holes in the ground). Infrastructure is not very good in Georgia, but not very bad either. I guess it will improve as the Georgian economy grows. But indeed some parts of Georgia need improvement (most notably the road from Zugdidi to Mestia, also the Akhaltsikhe-Batumi road is very poor). Taxis are lethal. Even worse than Moscow or India Better roads, streetlights or crosswalks in Tbilisi A definite improvement in roads - and education of drivers in Georgia. Recommended Areas for Improvements to Georgia Tourism (Key Word Count). The most frequent recommendations for improvement focused on infrastructure needs primarily road and sanitation conditions as well as access. These basic building blocks upon which to build the future of Georgia tourism are critical factors that are recognized by the government and industry. Nevertheless, we must continue to stress their importance. A second category of recommendations focused around information, interpretation, signage, and English language capability. All of these factors relate to better communication so that the visitor can get to and understand what they go to see and then communicate with their guides and interpreters. There are also a number of recommendations to improve the range of accommodations opportunities and in our discussions with several local developers; there are plans to address this deficiency. The government needs to encourage these development opportunities and facilitate appropriate sites. 160

161 Road and traffic conditions 50% Toilet/ bathroom/ sanitation/hygiene conditions 33% Better Information and Interpretation 33% Improved signage 30% More budget and mid range accommodations/hostels 27% More English language capability 23% Better access to visitor sites 20% BetterPreservation of historical sites 10% 0% 10% 20% 30% 40% 50% 60% 70% % of Respondents Figure 31: Improvements Recommendation to Visit Georgia In spite of the many recommendations for improvements, our respondents had a very positive response to their Georgia visit and nearly all (97%) would recommend a trip to Georgia. This is a very powerful result indicating the underlying strength of Georgian tourism once the existing deficiencies in infrastructure and services are addressed. Yes 97% No 3% Figure 32: Recommendations 0% 20% 40% 60% 80% 100% % of Respondents Respondents were also asked an open-ended question as to why they would recommend a trip to Georgia. Again, they took full advantage of this opportunity and some of their recommendations in their own words are shown below. 161

162 Following the comments, we have included a keyword count that helps weight the various comments. Their reasons for recommending a trip for recommending a trip to Georgia included: "Recommend for friendly people, beautiful nature, good food and wine. However, tourist infrastructure is poor and it s difficult to get information in advance." Beautiful nature, still cheap, nice people. Tourism is not developed. It's a beautiful country with friendly people. And it's also very exotic and not very touristy. I know Georgia since 1984 and I felt in love with the people Some tourists might find the infrastructure too inadequate. Eco-tourists might like it Incredible nature, very friendly people, inexpensive. Beautiful country, fascinating culture, warm welcome, great food and wine It's a wonderful place, good food, good wine, good people. Beautiful nature, Historical places, Cultural activities I love Georgia. It is a country very close to my heart but I couldn't recommend a trip there because the transportation is too difficult. Marshrutka drivers have a tendency to lie about when Marshrutkas leave to go to other cities/towns. It is unclear what Marshrutkas go where; the signs are all in Georgian (if there are even signs). It is extremely difficult to get train tickets in many villages (in Ozurgeti for example you can only get a ticket to Tbilisi via train the day before you want to travel and the ticket office is only open for an hour. The food is delicious, city is beautiful, and people are wonderful! It's original Beautiful country/landscape Kind people Beautiful and charming country Nice people beautiful mountains The worst thing about travelling in Georgia is a lack of public bathrooms on the highways or in any village. This is a common courtesy that most civilized countries provide. Functioning clean toilets, that's all I ask. Everything else about Georgia is fantastic, including the roads. "Beautiful mountains. Nice monasteries. Tbilisi is perhaps one of the nicest old cities in Eastern Europe I have visited." I loved my trip to Georgia but I was staying with my Georgian friend and his family and without them would not have seen or experienced as much as I did. I think Georgia is not an easy place in which to travel independently. It is a beautiful, friendly, affordable country that we don't need a visa and it is near by. I liked to be there Recommend: Great food, low prices, hospitable people, beautiful scenery, lots to do Not recommend: Security concerns, especially in 162

163 northern portions of the country, difficulty in communicating with locals, tough transportation I travelled in 38 different countries and Georgia is definitely in my top-5 list of favorite destinations. I enjoyed Georgia a lot and stayed over a month because of my excitement. Very hospitable people & exotic destination "Friendly locals, cheap food interesting history & culture, unspoiled countryside & mountains" "Interesting combination of Asian and European cultures. Ancient traditions. Food, music, nature, people." "friendly people, great food, great wine, beautiful scenery, rich history, nice coast" "Beautiful scenery and interesting culture. Infrastructure is rather difficult (buses, trains, border connections)" Rich national culture; excellent food; proud, dignified, brave, and hospitable people; beautiful landscapes "Would recommend Georgia to well travelled people looking for a different experience. Hard to say as our time in Georgia was rushed and we did consume much of your fabulous home made wines..." Reasons for Recommending a Visit to Georgia (Key Word Count) On an overall basis, recommendations encompass the beauty of the country, its people, wine and food plus history and culture. All in all a great combination. Beautiful Nature and Scenery 83% Friendly People 67% Wine and Food 53% History and Culture 37% Unspoiled and Exotic 23% Inexpensive 13% 0% 20% 40% 60% 80% 100% % of Respondents Figure 33: Reasons for Recommending a Visit to Georgia Task 2.5: Preliminary List of Promising Projects The team recommends that the following projects be considered because we regard these as potential strategic catalysts for development and investment in Georgian tourism. These projects form the foundation of our development concept: A spine of tourism developments east-west across the country with key geographic clusters of tourism attractions, services and facilities that serve as 163

164 hubs or main destinations for Georgian tourism. The hubs would be Kakheti (Sighnaghi and Telavi), Tbilisi, Gori, Kutaisi/Tskaltubo, Borjomi/Bakuriani, and the Black Sea Coast (Batumi to Poti). Additional destinations would be attached to the hub as spokes Gudauri, Tusheti, Davit Gareja, Vardzia, Shaori, Mestia/Ushguli and the mountains of Adjara. The following preliminary list of projects would support this concept: A. Regional chain(s) of branded boutique and mid-range hotels with rooms each, located in each of seven hubs and developed to reflect local culture and architecture. B. Regional airline that serves both the domestic market and other countries in the region, especially Turkey, Armenia, Azerbaijan, and Kazakhstan C. Expand the rail system to include linkages with European rail systems -- the EURAIL and Inter-Rail systems -- which would expand the marketing and accessibility to Georgia from Europe. D. Culinary institute in Tbilisi and/or Sighnaghi that combines the best of Georgian cuisine with international food and wine specialties. E. Examine the potential for new resort developments around appropriate natural assets, i.e. a new ski resort in an area to be identified. F. Products, such as boutique hotels closely associated to local cultural and historic attractions and which are complementary to experiences in high volume nearby markets such as Turkey, G. An approach to a major casino operator with the idea of developing three or more casino, golf and spa resorts in key hub destinations such as Batumi and Tbilisi and key spokes such as Tskaltubo and Borjomi. H. A wine center developed in Kakheti followed by similar developments in other wine growing regions either at hub or spoke destinations. I. A comprehensive and consistent interpretation program for principal signature cultural and natural heritage sites such as at Vardzia, Caves outside Gori. J. New master plan resort developments, such as Shaori, that incorporate multiple activities such as golf. 164

165 K. Medical tourism based on Georgia s rich therapeutic mineral waters, with a focus on Tskaltubo. L. Establishment of themed circuits a single circuit across the country and a wine country circuit with information, interpretation and signage of international standards. 165

166 Part II: Tasks 3-6 Strategies and Actions (Task 3: Prepare Tourism Plan) Key Recommendation: The Georgian Way Create a core Georgian Way based on hub and spoke destinations and linked to neighboring countries for regional offers. Strategically and logistically, we believe that it makes sense to focus on tourism development in Georgia as a central Route of developments and development potential stretching east-west across the country. The Way Way is comprised of six key destination hubs: Sighnaghi/Telavi, Tbilisi/Mtskheta, Gori, Kutaisi, Borjomi/Bakuriani, and Batumi/ Kobuleti. From each hub, there are destination spokes such as Gudauri and Kazbegi (Tbilisi), Davit Gareja (Tbilisi),Lagodekhi (Sighnaghi), Tusheti (Telavi), Vardzia (Borjomi), Abastumani (Borjomi), Mestia/Svaneti (Kutaisi), and Tskaltubo (Kutaisi), each of these could form part of main itineraries. This Way Way should be developed and marketed individually and as part of a regional two, three or four country package The Silk Road from Istanbul to Baku, the Grand Caucasus Tour (Armenia, Georgia and Azerbaijan), Route to the Roots of Europe, etc. In particular, Georgia should focus on improving its penetration of long haul travel to the region, especially long-haul traffic to Turkey. Over 20 million international tourists visited Turkey in 2006, including 16 million Western Europeans, 600,000 from the Middle East, over 500,000 Georgians, 600,000 Americans, 100,000 Japanese and 100,000 Koreans. Convincing just a few percent of these high yield long haul travelers to include a Georgia extension in their itinerary will provide immediate and substantial benefit. It could yield a substantial increase in overall visitor expenditures, because these long-haul markets also have among the highest expenditure patterns. 166

167 Figure 34: Map of Georgia Destination Hubs and Spokes (Full page map is available in Annex F) By organizing key tourism development hubs across the country, tourism benefits can be distributed throughout the country. Each hub should have a critical mass of attractions and tourism support facilities, including a mix of accommodations, restaurants, retail opportunities, and cultural and recreational attractions. Designated tourism loops could more easily be developed, marketed and promoted by linking the hub and spoke destinations. And this will be particularly appealing to first time visitors and short duration group travelers. Specific strategies are organized according to investing, institutional development and policy, infrastructure, education and training and marketing and promotion. The latter can be presented as a separate stand-alone plan. It is recommended that each strategy be accompanied by a market assessment, thus follow-on analysis, to determine more specifically possible market targets for that segment. 167

168 1. Attractions and Experiences Georgia s Offers (Task 3.1: Longer range opportunities) Revitalize, protect and improve existing attractions and identify new attractions to meet market demand. 1.1 Immediate and short term strategies and actions Strategy: Protect and preserve cultural heritage Georgia s cultural heritage is a key tourism asset, and a key attraction for Georgian and foreign visitors. DOTR is working to protect assets such as the icons at the 12 th century Gelati Church and Monastery near Kutaisi, which require urgent attention Actions a. Conduct a needs assessment to determine the extent to which historic sites are under threat and then determine the financial and human resources needed to preserve and protect these sites. Build on the assessment conducted with DOTR and the American Chamber of Commerce. b. DOTR coordination with the National Museum of Georgia is critical to develop and implement the needs assessment. The DOTR and Museum should each have at least one individual assigned to keep both organizations informed of plans and development that might impact the sites. 1.2 Longer term strategies and actions Strategy: Extend Seasonality Most of Georgia s tourism is concentrated in July and August along the Black Sea coast and in January-February in Bakuriani and Gudauri. Both regions, as well as most of the destinations along the Georgia Route mentioned above, have the potential to receive visitors during all four seasons Actions a. Conduct site visits encouraging the development of four season attractions and experiences. In Adjara, these could include winter tourism casino and four season resort development and the meetings segment. In Bakuriani and Borjomi, there is great potential for summertime nature-based activities, such as increased use of Borjomi National Park and the creation of a hiking trail system in and around Bakuriani. Niche activities, such as riding stables, birding (seasonal migrants) and agro-tourism are also possible. b. Promote four season products in selected target markets that are not seasonally dependent. These segments include tourists who travel for special 168

169 interests and can be accommodated in Georgia, such as bird and wildlife viewing, wine tourism, pilgrimages, casino gaming, health and medical treatment, meetings and conventions, etc. These market segments are reasonably well organized, with specialty media and distribution channels that can be directly targeted. c. Provide all weather recreation opportunities that will ensure a quality tourism experience year round. For example, Tblisi and Batumi, as well as other hub sites, could probably support a combination hotel/indoor water park project. These developments are very popular in Europe and North America and tend to dramatically improve hotel occupancy levels. To facilitate this action, the Government could identify appropriate development sites that could support the use. If it is Government-owned land, then incentives might be considered for potential investors and developers (see below) Strategy: Focus attraction development on high yield specialty markets Georgia is attracting high yield markets, both in terms of nationalities (see below) and activities Actions a. Determine priority resort destinations in the country based on what is being planned and developed. Priorities are determined according to whether they could be either hubs or spokes on the Georgian Way and should include selected destination developments in the regions of Kakheti, Tbilisi, Bakuriani, Kutaisi, Batumi and Kobuleti Strategy: Expand the international profile of Georgian art and culture With the success of Georgian cultural performances overseas and a cultural renaissance in Tbilisi, Georgian art and culture are helping to establish the country and the capital as a cultural center of the Caucasus. Old Tbilisi is being renovated with the restoration of buildings and cultural facilities throughout the city; Tbilisi is fast becoming a regional capital of culture Actions a. Actively promote a Tbilisi cultural events calendar online and with hotels and restaurants in Tbilisi. b. Develop Georgian visual arts, fashion, and design centers in areas accessible to tourists. The GMT Group, for example, is developing a cultural quarter in the center of Tbilisi. c. Incorporate Georgian art and cultural products as part of the international marketing efforts, including trade shows, media presentations, investment 169

170 forums, wine tastings, and cultural performances such as the Georgian National Ballet Sukhishvili Strategy: Establish Tbilisi and Batumi as leaders in national, regional and international conventions and conferences. As both Tbilisi and Batumi add more four and five star properties, both cities will become more marketable as destinations for meetings and conferences for the Caucasus, Black Sea and Central Asia. At the time of writing in early 2008, capacity was still limited in both cities. In Tbilisi, for example, an international conference with 500 participants in mid-september, filled most of the available rooms of a tourist class and above. However, the Expo Georgia Exhibition Center was offering a full schedule of international exhibitions including the Caucasus Tourism Fair, Winexpo (international wine and spirits trade fair) and Transcom Caucasus (International Transport and Logistics Exhibition) Actions a. A key action for solidifying Tbilisi s status as a conference and exhibition center destination is to encourage increased use of the Expo-Georgia Exhibition Center and build a headquarters hotel adjacent to the Center. The Government could assist by identifying and/or providing land for the hotel, as well as promoting exhibitions overseas Strategy: Develop and leverage events as a core product offer Over the past decade, there has been a significant increase in the number and type of special events available to the traveling public. This growth has been attributed to both an increased emphasis on regional economic development, as well as destination marketing by many governments and tourism marketing organizations. Special events are seen to have the ability to produce a wide range of significant economic and social benefits for communities and regions, which helps to explain the reason that they have been so eagerly embraced. Special events can substantially increase the opportunities for new expenditure within Georgia by simply attracting more visitors. The events can become the reason for visiting the destination. They also act to retain the expenditures of locals who, in the absence of local special events, would travel elsewhere in pursuit of leisure activities. Special events can contribute substantially to a destination s range of tourist attractions, facilitate media coverage and promote awareness of the destination for future visitation. 170

171 Events and festivals that cater to the learning interests of the traveler are experiencing particular growth internationally. They represent a direct connection with the international trend toward special interest, or experiential travel. Include events that tie to Georgia s cultural and natural strengths for example international singing and dance festivals (for example, the International Eisteddfodd in Wales and River Dance in Ireland), wine harvest festivals, etc. Destinations that have consciously and deliberately forged linkages between special events and special interest tourism benefit economically and socially. Events also help diversify the destination s tourism product offers Actions a. Create and distribute event calendars in print and via websites. The DOTR tourism website, should have a regularly updated events section, which be updated by the Tourism Information Centers that are being established. b. Match existing and proposed events with sponsors. c. Develop a structured application process for special event funding and budget appropriately. Such a process would also encourage the development and expansion of the number and type of special events organized for domestic, regional and international travelers alike Strategy: Focus on Sports Competition and Events Markets Proactively pursue Georgian hosting, primarily by invitation, of regional and international sport and activity competitions and events. These could include just about any event that attracts an international audience road rally, bicycle race, wrestling championship, chess competition, etc. To the extent possible, events that attract higher yielding markets should be encouraged and incentivized. In addition to providing opportunities to increase direct expenditure at a destination, special events contribute to a destination s range of tourist attractions, facilitate media coverage and promote awareness of the destination for future visitation Actions a. DOTR will solicit event suggestions from sports organizations, tour operators and visitors both on and offline. 171

172 b. DOTR will target selected events based on high yield target markets, both in terms of the possible activities and nationalities (see below for average spending per trip). c. DOTR targeting efforts will also include outreach to specialized associations, organizations, publications and journalists related to the targeted sports events. Association examples could include the Adventure Travel Trade Association, European Fishing Tackle Trade Association, International Mountain Bicycling Association, Snowsports Associations, Hot Air Balloon Associations (see and the Sporting Goods Manufacturers Association. d. Develop marketing strategies for each targeted sport and/or event, including the development of close relationships with potential major corporate sponsors. e. Consider developing a marketing strategy focused on the mountain biking segment. Begin by contacting the International Mountain Bicycling Association Strategy: Wine Tourism Development Develop and promote Georgia as a unique wine destination of the world. Georgia can offer experience based on 7000 years of winemaking culture. Wines made from over 500 grape varieties using ancient Georgian technology or modern European technology can be tasted. No other place in the world offers wines that were consumed by Sumerians, Babylonians, ancient Greeks and Romans, in exactly the same way they were made in ancient times. Development of the wine sector is a boost to other economic and tourism sectors through a cluster effect of backward and forward linkages. For a mini-wine tourism cluster example, see Annex B Actions a. Development of a separate strategy is recommended in which further product development related to maximizing offers in wine tourism are developed. b. Organize and promote wine, food and music festivals and other events to start branding emerging wine regions in collaboration with winemakers and producers. These events should be organized in Signaghi, Kvareli and Telavi in Kakheti, Mukhrani and Gori in Kartli, Kutaisi and Vani in Imereti, and Tvish, Khvanchkara, Orbeli, and Ambrolauri in Racha-Lechkhumi. It is recommended that each wine tourism hub organizes individual wine festivals during the year so that people could experience the regional differences. 172

173 c. Develop infrastructure, especially roads, in already emerging wine tourism hubs in Kakheti, with Signaghi as a main example. Proximity to Tbilisi makes Kakheti the primary target for infrastructure development. d. In collaboration with the winemakers association and other tourism industry associations, develop a framework of wine tourism clusters in the Kakheti region and other parts of Georgia with a combined modern winery and hotel or guest house. Involve tour operators, and other supporting industries and institutions as part of the cluster: local retail, health care, local transportation, restaurants, food suppliers, public relations, market research services, educational institutions, and industry groups. e. Encourage the development and promotion of visits to old wine cellars and wineries, sites of medieval wine-education institutions, and monasteries as core aspects of the wine tourism experience. f. Create incentive packages in wine tourism areas that facilitate investments in product offers such as restaurants, hotels and local tours related to wine tourism. These packages could include electricity and water supply delivery, property purchases, waste management services, and improved road access. g. Expand Georgian wine tourism to include other aspects of the Georgian country lifestyle, including local food, traditional glassware and serving implements, clothing, furniture, and tableware. Make these items available for sale to visitors as part of a broader retail and merchandising strategy Strategy: Increase cruise visits to Batumi and Poti Cruise tourism is increasing in popularity around the world, including the Black Sea. Cruise ships help fill a higher end accommodations shortage along the Georgian Black Sea coast Actions a. Conduct further analysis of cruise potential for Batumi Port jointly by the Adjara and the DOTR. b. Invite the development directors for several of the major cruise lines to the investment forums and to visit Georgia. The GTSP team can assist with this. c. Invite the director of the Yalta-based Select Black Sea Company to Batumi and Tbilisi to discuss adding Batumi to more Black Sea cruise itineraries in cooperation with Yalta. 173

174 1.2.9 Strategy: Batumi as hub of Black Sea tourism The Batumi region is rapidly preparing for increased arrivals. The region is attracting substantial Turkish, Kazakh and Georgian investment in tourism, particularly resort developments along the coast. Below are a few of the resort development billboards greeting people on the way in and out of the new airport (May 2007) Actions a. Create a travel fair presence for Adjara and Batumi with separate tables at the key travel fairs listed below. b. Create a Batumi web portal in English, Russian, Georgian, Turkish, Armenian and Azeri that includes a diverse selection of photos Strategy: Batumi established as the World Capital of Mind Sports Chess, Go, Draughts/Checkers, Scrabble, Bridge and Monopoly Mind sports offer a strategic, four season opportunity for Batumi. The International Mind Sports Association was formed in 2005 by the international federations of bridge, chess, draughts (checkers) and go. Its members include World Bridge Federation, World Chess Federation, World Draughts Federation, and International Go Federation. There are 400 national federations with 500 million players. To the best of our knowledge, no other city has claimed to be the World Mind Sports Capital. Since several chess championships have been held in Batumi, the city could leverage their international chess reputation into attracting other mind sports competitions. a. Establish a World Chess Federation training academy at the Batumi Chess Club. 174

175 b. Promote Batumi in the off-season as an international mind sports destination Strategy: Gaming industry selectively targeted for investment. Tbilisi, Tskaltubo and Batumi developed as a linked group of resorts with gaming would be attractive for prospective investors. It is worth looking at Macau, which has focused on the development of a gaming-related tourism industry. The largest tourism investment program in the world is currently occurring in Macau. As the result of issuing three exclusive licenses to conduct gambling in this Chinese Special Administrative Region (SAR), an investment program of well over $US10 billion is currently underway. Whereas, Georgia does not have the availability of the casino hungry Chinese market, it is appropriate to examine how the Georgia casino environment could be improved to attract this immense source of capital. To encourage casino development, the government needs to identify specific areas for casinos that are consistent with tourism and redevelopment goals. There should be no more than four such areas Tbilisi, Batumi area, the Borjomi/Tskaltubo region and one other area to be determined. Within these areas, there should be minimum investment requirements and the participation of international casino operators should be encouraged Actions a. Promote a multi-destination package for casino investment and product development. Currently, Invest in Georgia emphasizes Tskaltubo for gaming industry investment with an incentive of no taxes or gambling fees on gaming operations. This offering could be enhanced by packaging a Tskaltubo license with one or two other desirable sites, including prime locations in Tbilisi and the Black Sea coast. This package would have sufficient scale and appeal to attract international operators. There should be a limited number of licenses in order to support a higher level of warranted investment Strategy: Retirement and Seasonal Home Market Segments Most successful master planned resort developments include a combination of hospitality and real estate products, in addition to the recreation amenities. These real estate products can include a wide range of options including full ownership of condominiums and villas, shared/ fractional ownership, timeshare development, and membership clubs. Each of these provides opportunities to increase overall resort occupancy and financial return Actions a. Conduct a market assessment of the potential of this segment. 175

176 b. Support the development of full scale master planned resorts that include real estate products suitable for international visitors/ investors as well as local Georgians Strategy: National Parks as integral part of Georgian Way Demand for nature-based and environmentally responsible experiences has grown enormously in international markets. With 13 climatic zones and 25% of the country reserved for national parks and protected areas, Georgia is well positioned to be internationally competitive in this segment Actions a. Provide better access improved roads to the parks. b. Provide appropriate accommodations either within the parks or near the entrances. c. Closer links between the tour operators, accommodation providers and Government should be developed and promoted. d. Better coordination with tour operators. e. Better and easier access to information and interpretive materials. f. Develop a marketing, promotion and merchandising program that ideally profiles one or more representative wildlife species and re-enforces efforts to reintroduce and protect wildlife and habitats. The Chamois of Borjomi a possible icon of Georgia s natural and protected areas. 176