International arrival numbers have remained stable in 2015 despite the regional economic turbulence. While foreign remittances and exports took significant hits in 5M15, monthly foreign arrivals have been resilient, growing a slight 0.4% y/y in April and a sharp 14.7% y/y in May, driving 5M15 growth rate to 2.0%. Notably, whereas the total number of visitors in 2014 increased by 2.3%, the number of tourists spending more than 24 hours in Georgia increased 7.4% y/y. On the spending side, travel revenues to Georgia increased 3.9% y/y to US$ 1.8bn in 2014, amounting to 10.8% of GDP.
International arrivals to Georgia have held up well in comparison to other sources of currency inflows. 4Q14 arrivals increased just 1.0% y/y, driving FY14 growth to 2.3% and 5.5mn total visitors. The weak growth rate relative to recent boom years was driven by a drop from Turkey (-9.7% y/y in FY14) and modest growth from Armenia (+2.6% y/y). In 1Q15, international arrivals declined 2.2% y/y, which compares very favorably to the decreases in exports (-27.8% y/y) and remittances (-22.9% y/y). In addition, monthly arrival figures offer optimism: visitor arrivals rose 0.4% y/y in April and further spiked 14.7% y/y in May, bringing the 5M15 annual growth rate to 2.0%. The high growth in May was largely a result of significant growth from Armenia (+33.1% y/y) and Russia (+42.5% y/y), mostly due to low comparison bases.
Travel inflows amounted to 10.8% of GDP in 2014. Total travel revenues to Georgia increased 3.9% y/y in 2014 to US$ 1.8bn, or per-visitor spending of US$ 324. That figure is relatively low, compared to peer countries, and partially driven by a low share of tourists – visitors who stay over 24 hours (38% and 40% in 2013 and 2014, respectively). On the upside, while total arrivals increased by just 2.3% y/y in 2014, the number of tourists staying more than 24 hours increased 7.4% y/y. Although January saw a 9.0% y/y decline in the number of tourists who stay over 24 hours, the rate of decline slowed to 2.7% y/y in April before posting 5.3% y/y growth in May.
Major one-off tourism events to provide some support in 2015. Major events scheduled for this year will bring an estimated additional 40-50,000 visitors. The EBRD’s Annual Meeting, which took place in Tbilisi in May, attracted 2,000 delegates from over 60 countries. Additionally, Georgia’s National Tourism Administration’s marketing campaigns in Eastern and Western Europe and China should drive growth from those regions, attracting more high-spending visitors.
We now expect around 2.4% y/y growth in arrivals and reiterate our latest forecast of 5.6mn in 2015, based on recent developments. Despite the depreciation of regional currencies, Georgia remains a cheap and attractive destination in comparison to its peers. As a result, we expect further growth in visitors from neighboring countries (excl. Turkey). On the spending side, we expect tourism to remain a significant contributor to Georgia’s external financing inflows in 2015 and the country’s tourism policy to attract high spending visitors should help increase tourism spending significantly in the future.
