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The Russian flight embargo has already incurred an estimated $60-million loss to the Georgian tourism industry, and this figure is predicted to climb much further, with no easing of political tensions between the two countries in sight.

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REPORT FROM GEORGIA—On 16 August, dozens of hoteliers blocked a central highway in Kobuleti, a small Georgian resort town in Adjara province on the Black Sea coast, in a bid to attract attention and government help to offset the negative impacts of Russian sanctions on their businesses.

In mid-July, Russian President Vladimir Putin imposed a temporary ban on passenger flights to Georgia in reaction to what the Russian government saw as anti-Russian demonstrations on the streets of the Georgia capital, Tbilisi.

The protestors in Kobuleti estimated that Russian citizens accounted for as much as 70% in their town. They said that their actions were just a warning that if nothing is done to support hotel industry the same kind of rallies would be taking place across Georgia at a much larger scale.

The Georgian government’s response to the crisis being felt in the Georgian hotel industry has been swift.

A bailout package is only applicable to hotels of between four and 20 rooms and limited to €80,000 ($88,562) or €100,000 ($110,702) and then only in the form of a reimbursement of interest rates on loans. State aid also has been approved to help developers or new builds or renovations, but many hoteliers say aid remains lacking across the board.

Georgia hoteliers are putting a brave face on the situation.

Shalva Alaverdashvili, director of the Georgian Hoteliers & Restaurateurs Association and GM of five properties in construction under the Rcheuli flag, said he believed the impact from the Russian flight embargo “is not going to be devastating, since Georgian hotels are not fully dependent on the Russian tourists.”

“(The reduced) tourist flow from Russia … would be only a temporary problem. First off, the Russian visitors soon enough would be replaced with tourists from other countries, plus those Russian citizens who were fond of Georgian low-price leisure will keep coming nonetheless,” Alaverdashvili said.

Official statistics seem to contradict that stance, with estimated losses in the month following the sanctions estimated to amount to approximately $60 million.

Nino Nadibaidze, marketing manager at the 121-room hotel Ambassadori Tbilisi, said the embargo initially was a huge shock to Georgian hoteliers as they were in a very comfortable position with the number of Russian tourists increasing almost every day.

“This sector was somehow increasingly dependent on Russia. (The embargo) caused lots of booking cancelations, especially for small- and medium-sized hotels and for those working on MICE tourism,” Nadibaidze said.

According to data from the Georgian National Tourism Administration, Georgia attracted almost 8.7 million inbound visitors in 2018, up approximately 11% from 2017. Roughly one quarter of those new visitors hailed from Russia.

Some hurt, some hurt more
Tbilisi accounts for the major part of the Georgian hotel industry, said Marina Smirnova, partner, head of hospitality and tourism, at business consultancy Cushman and Wakefield.

“There are 8,000 rooms in more than 300 hotels. Up to 50% of all rooms belong to the economy segment, and only 7% to the high-price segment represented by the hotels operated under international brands,” Smirnova added.

Before the recent sanctions, approximately 4,700 new rooms were slated to open by 2020.

“It is yet to be seen how the expansion plans would be affected,” Smirnova said.

The Ambassadori Tbilisi’s Nadibaidze said her hotel’s luxury standing has meant that the embargo is yet to effect business.

“The tourism industry has the ability to change strategy swiftly, so because of this embargo, lots of actors of this sphere have more or less changed plans and started to attract more and more tourists from other countries,” Nadibaidze added.

According to data from STR, the parent company of Hotel News Now, occupancy fell 10.7% year over year to 53% for June 2019, the month before Russian sanctions were announced, while in Tbilisi there was a 7.7% decrease to 59%.

Average daily rate for the same period increased 2.8% for all of Georgia to 289.71 Georgian lari ($97.21) and in Tbilisi by 4% to GEL324.72 ($109). Revenue per available room dipped 8.2% to GEL153.61 ($51.55) for all Georgia and 4.1% to GEL191.54 ($64.27) in Tbilisi.

“Although Russian tourists are not setting the tone on the local market completely, their absence would be quite sensitive for local hoteliers,” Smirnova said, adding that the impact would be similar to the one experienced by Turkey from the Russian sanctions imposed there in early 2016 following the shooting down of a Russian military aircraft on the Turkish-Syrian border by a Turkish fighter plane.

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Headline: Georgian hoteliers rue losses from Russian flight ban

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