The FINANCIAL — The leading hotels in Tbilisi are claiming a shortening in the number of business travellers. War propaganda managed by the Government, and supposed political instability in the country are leading to the cancellation of thousands of reservations made by travellers. There is little hope that new 5 star hotels will stabilize demand on the market.
“During and after August 2008 our guests were international observers, journalists, members of the OSCE, or guides of U.S. organizations. These are people usually accommodated at luxury hotels. They helped hotels management to fill up the hotel’s pre-written budget. But Sheraton Metechi Palace lost a huge amount of guests whose conferences and meetings got cancelled. What’s most obvious is that the world economical crisis made our hotel lose a lot of business oriented travellers,” Mrs. Tamuna Guledani, Director of Sales and Marketing Department of Sheraton Metechi Palace, told The FINANCIAL.
Sheraton Metechi Palace, one of the oldest high class hotels in Georgia, has not reported losses in 2008. It was fully booked even in August which is the worse period for hotel business.
Despite these difficulties though Sheraton Metechi Palace summed up January and February of 2009 with no losses.
“At the moment the most difficult thing for the hotel’s management is to foresee and plan a new schedule. We don’t have any special expectations for the coming months,” Mrs. Guledani notes. “Since the crisis Georgia, like the whole world, has become unpredictable for business.”
In 2007 Rakeen Development purchased the Hotel Metechi, the Georgian-Austrian Joint Venture Metechi Ltd, at USD 67.5 million. Besides investments in the hotel, the Arabian Emir Sakr al-Kasim invested several million in the construction of real estate in the picturesque Tabakhmela (near Tbilisi). “We’re going to spend USD 20 million in the reconstruction works of the Sheraton Metechi Palace which was built 15 years ago and clearly really needs refreshing. In a year’s period we’ll have a brand new type of hotel,” Mr. Zaza Mikadze, Rakeen Development and RAK Investment Authority Georgia General Director, told The FINANCIAL.
“In January and February 50-70% of our hotel rooms were booked,” Mr. David Pachulia, Sales and Marketing Manager of small hotel Dzveli Metekhi, declares.
“Perched on the edge of a rocky cliff high above the Mtkvari River, the Old Metekhi is a traditional establishment favouring individual attention over visitor numbers – despite its size, it only has 15 rooms. Rooms are comfortable rather than luxurious, but most have attractive parquetry floors and balconies with fabulous views,” such a description is given by Lonely Planet.
“Dzveli Metekhi got a small number of reservations for March and April and for the other months as well. Last January we already had a list of reservations up till October. Now the situation is different. That gives us a reason to think that the number of customers in 2009 will drop considerably. 35-40% of our customers are tourists and after the war Georgia is a less stable and less secure country for them,” Mr. Pachulia says.
Annual turnover of Hotel Dzveli Metekhi in 2008 was USD 350,000 compared with USD 160,000 in 2007.
“In 2007 income was USD 160,000 (40%), in 2008 till September income was USD 320,000 (80%), after September the number of tourists went down dramatically reaching 10-15%. In 2008 we have increased our rates,” Mr. Pachulia says.
Today a top floor single or double room costs: USD 80-100 per night. Suite: USD 160-180. Apartment: USD 200-220.
“Before the war we had 92% reservations. But then 35% of tourists cancelled reservations planned for the upcoming three months. After August the number of our business guests has remained stable. Usually in December we had reservations for summer, but now the number of reservations for the summer period has sharply reduced,” Mr. George Kondratiev, Front Office Manager of the hotel Vere Palace, says.
“Vere Palace Hotel is newly constructed and with a European standard of service excellence. It is located in the heart of the Tbilisi-Vere district,” describes the hotel Travelocity.
As Mr. Kondratiev notes, Vere Palace received reservations for May which is one of the most active periods for hotel business, but these reservations were cancelled according to the changes in Georgia’s political life.
“Now it is too difficult to forecast the future. The tourist companies collaborating with our hotel have only spontaneous orders. The most important thing is that officials should stop pointing towards destabilization. It badly influences our business.
For foreigners it will be more difficult to forget international reports spread by TV channels during and after August. For example Israel is one of the most popular destinations for tourists as no one stresses the war in this country which has been lasting for years. We must start talking positive and not negative,” Mr. Kondratiev says.
“The demand for hotels will grow according to the political and economical situation”, Mrs. Irma Tabatadze, Marketing Coordinator of Tbilisi Marriott Hotel and Courtyard by Marriott Tbilisi, says.
Tbilisi Marriott hotel, a five-star establishment, according to Lonely Planet, has the best location of Tbilisi’s existing top-range hotels and is a palace of excellent service and facilities. It’s aimed at the business and international-agency crowd, so it’s rather formal and quiet.
According to the representative of Tbilisi Marriot, prices of appartments have not specifically changed because of the world economical crisis. Officials of the hotel avoid giving concrete figures however. A Deluxe Room in Tbilisi Marriott is USD 295, Executive Room – USD 345, Club Room – USD 365, Superior Room – USD 315, Junior Suite – USD 385, Patio Suite – USD 425, Vice Presidential Suite – USD 895, and Presidential Suite – USD 1295.
The world economical crisis has forced companies to think about shortening their travel and accommodation expenses. As Mrs. Guledani, the Sheraton, notes, during the full swing of the world economical crisis their partner foreign companies started renegotiations with them, asking to reduce or at least not to increase prices.
“What our management is seeing not only in the Georgian market but worldwide is that all companies have started reducing their travel expenses because of the financial crisis. If before the war companies were sending five representatives, now they are sending only two. If before guests were staying two more days to visit different sights, now they are restricting themselves to business tours only.”
The main segment of Sheraton’s customers is: business, corporate and official delegations. Accordingly prices for rooms at the Sheraton Metechi Palace range from USD 275 to USD 850 per night. Despite the global crisis the Sheraton has not reduced its room rates. The number of tourist guests at hotel is up to 5%.
“Because of economical destabilization the price reduction will not cause dramatic increase of hotels’ demand,” Mrs. Guledani says.
The number of the Sheraton’s clients that can afford to pay for luxury rooms is from 5 to 10%. As the management of the company says, this segment may decrease slightly, but they will not ask for discounts,” Mrs. Guledani says.
Market demand on lower prices gives hope to 4 star hotels that customers will start choosing them. “A lot of international organizations have shortened travel expenses, so they will choose hotels offering lower prices. At our hotel the level of apartments and the prices are in harmony,” Mr. Kondratiev, Vere Palace, says.
Radisson, Intercontinental, Kempinski, Holiday Inn and Hyatt are planned to be opened soon in Tbilisi. The Radisson will be the first hotel out of these that will open its doors to guests. Representatives of the existing hotels think that the business of the new five star hotels will not be profitable.
“There is no bright future for five new hotels in such a political and economical environment as it is today,” Mr. Kondratiev, Vere Palace, says.
Mr. Pachulia, Dzveli Metekhi, says investors were ensured in their successful business before entry to the Georgian market.
“These hotels have regular guests who will never go to another hotel. All of these hotels carried out marketing researches, they met with representatives of the Government before deciding to come to the country, so they know where they are doing their business,” Mr. Pachulia says.
As for Mrs. Tabatadze, Tbilisi Marriott hotel, she thinks that already existing luxury hotels won’t be afraid of competition from five brand hotels as such luxury hotel chains have their own clients around the world.
“When Tbilisi Marriott Hotel entered the Georgian market there was only one international chain existing in Tbilisi. We are aware that all the above mentioned hotel brands plan to operate their hotels in the near future, but the competition will not influence our occupancy as we already have our loyal customers, who know the Marriott brand quite well and will choose it above others. When traveling around the world they expect and rely on Marriott hotels’ already-familiar accommodation and service level at all times,” Mrs. Tabatadze says.
“Our country is expecting big investments in the near future. The hotel business is a long term business which means a lot of foreign guests. I said guests, not tourists, because the majority of new hotels are oriented at business travellers and official people, excluding Holiday Inn that is,” Mr. Pachulia says.
In Mr. Pachulia’s words, Dzveli Metekhi has its own customers and prices are significantly lower compared with others.
“There was a time when the market supply of hotels in Georgia was not able to cover the demand. Totally in Georgia there are about 2,000 rooms which mean that our country won’t be able to host large scale events. After the opening of five new brand hotels we will not be afraid to receive a large number of guests. That’s the advantage of these hotels,” Mr. Kondratiev, Vere Palace, notes.
“When in 2007 and the first quarter of 2008 the demand for hotels increased businessmen started considering this direction as a profitable way for investing. These investors were counting on a stable political and economical environment when making the decision to start a business in Georgia,” Mrs. Guledani, Sheraton Metechi Palace, declares.
Mrs. Guledani believes that by the time the Radisson is ready to open the situation will be stable however demand for it and other already working luxury hotels will not really increase again for quite a while yet.
However competition is necessary for raising the quality of services, Mrs. Guledani believes. “It will stabilize prices on the market.”
Written By Madona Gasanova