Georgia’s tourism sector continues to grow impressively – in 10M13 the number of international arrivals was up 24% y/y to 4.6mn. Georgian tourism activity traditionally peaks in July and August, with those two months representing 1/4 of total annual arrivals on average and this year has been no exception. The y/y growth rate of international arrivals has been strong heading into the fall months, with foreign visits up 20% y/y in 3Q13 and 14% y/y in October. New direct flights from Poland, Ukraine, Russia and Iraq helped significantly boost arrival numbers from these countries. Arrivals from Russia alone were up 50% y/y to 662,291 visitors, representing 15% of total visitors in 10M13 vs. 11% in 2012. We forecast 8.9mn international arrivals or 2.1x of Georgia’s population in 2019. To compare – Croatia, Cyprus, Estonia and Montenegro hosted 2.3x, 2.1x, 2.0x and 1.9x of their respective populations in 2011.
Neighbours dominate, but air travel is rising
Neighbouring countries continue to account for the lion’s share of foreign arrivals. In 10M13, 87% of arrivals came from Turkey (30%), Armenia (23%), Azerbaijan (19%) and Russia (15%). Air travel is on the rise, however, with 0.5mn visitors arriving via international flights, up 38% y/y. The introduction of new direct flights from Poland, Ukraine, Russia and Iraq helped boost arrival numbers from these countries. Total arrivals via all modes of transport from these four countries alone were up 59% y/y, making up 18% of total 10M13 arrivals vs. 14% in 2012. Accommodation turnover is also rising alongside arrivals growth, which means the hospitality sector could face capacity constraints going forward, especially in the branded hotel segment.
Foreign arrivals on pace for 25% y/y growth
The 4.6mn in international arrivals in 10M13 is above our forecasted number and translates into an annualized figure of 5.5mn in FY13, some 6% above our previous estimate of 5.2mn and puts Georgia on pace for 25% y/y growth in 2013. We forecast annual 8.9mn foreign arrivals by 2019.
NBG growing reserves at unprecedented levels
The National Bank of Georgia’s gross international reserves have continued to expand, up to US$ 3.1bn in 9M13 from US$ 2.9bn as of YE12, partly as a result of increasing tourism receipts. NBG’s net FX buying reached US$ 555mn in 9M13, or 3.6x of that in 9M12. In 9M13, repayment of IMF and other liabilities totaled to US$ 353mn.
