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Unicard Expecting 15-20% Growth by End See on p. 10 2012 “Great Potential for Tourism in Georgia,” Radisson Blu Iveria and Radisson Batumi GMs

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Teliani Valley Winemakers: The Best Georgian Wine is the Next We Make See on p. 21 Sotheby’s to Enter the Georgian Market

Holiday Inn to Offer Package Tours The FINANCIAL

H

oliday Inn is increasing the number of its rooms by adding one more floor to boost its current capacity. The hotel is currently the biggest in Georgia operating with 252 guest rooms. Holiday Inn does host leisure travellers, but the majority of its guests are business delegations. The owner company of Holiday Inn Tbilisi founded the first Georgian hotel brand ‘Rooms’ in

2012 and the first Rooms hotel has now opened in Kazbegi.

“We are growing considerably and this means that tourism in general in Georgia is on the path of significant development,” Valeri Chekheria, CEO of Adjara+ Limited, the owner company of Holiday Inn Tbilisi, told The FINANCIAL. “As well as the success of Holiday Inn Tbilisi, we have created the first Georgian hotel brand - Rooms. Our group has the burning ambition to make it a brand equal to international standards and operating with local concept. Today the first

Rooms hotel, located in Kazbegi, the mountainous region of Georgia, is up and running and meeting all international standards.

The hotel has already gained great popularity with both local and foreigner travellers. There is a Casino and various venues to host variety of events. A swimming pool and spa will be opened soon. All these facilities come with a great view over Mkinvari.

This makes the place especially outstanding and stunning.”

Continued on p. 14

Chateau Mukhrani Investing EUR 8 Million in Tourism Development The FINANCIAL

P

rince Ivane Mukhranbatoni-Bagrationi’s Castle, with its gardens, stable, antique cellars, Georgian and European restaurants, exhibition halls, wedding house, four Luxe Suites, amphitheatre, and much more. will be open

to tourists by August 2013.

Today the Bagrationi Estate in Mukhrani, located 35 km from Tbilisi, is already hosting visitors with its offers of exclusive wine degustation, visits to its ultra-modern wine factory, lunch or dinner with a range of tasty Georgian dishes, horse riding on Arab and English mounts, participation in churchkhela-making, tradi-

tional Georgian bread-baking and chacha distillation.

Bagrationi estate in Mukhrani was a center for the Georgian cultural elite in the 19th century. Ivane Mukhranbatoni, a well educated and talented landlord was famed for his winemaking.

Continued on p. 19

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Georgian Vodka Gomi in Demand on Turkish Market The FINANCIAL

SC Gomi Spirit and Vodka Company, leading Georgian alcoholic drink producer, aims to make Turkey the bestselling export market for its products. The company plans to increase sales by 15% in 2013 and start export to the Chinese market. The company is at present continuing cooperation with Israel on exporting products there. “Turkey is characterized by a modern lifestyle.

People are loyal towards alcohol beverage. At the same time there are some stringencies on the way to exporters, nevertheless we managed to succeed because of our professionalism,” Zaza Tabagari, Head of Strategic Planning at JSC Gomi Spirit and Vodka Company, told The FINANCIAL. As well as wheat vodka we produce the Georgian national drink Chacha (grape vodka).

The company plans to start exporting Chacha to Ukraine and other foreign markets. “Chacha will be without competition abroad,” Tabagari believes.

“2012 was characterized by great change and excitement within Georgia. People have become more hopeful about the future. The political changes did not influence our business, however. The sales volume reached a consistent level, around 7.5 million bottles, like in previous years,” said Tabagari.

Retail See on p. 29

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ECONOMICS LESSON OF THE WEEK. ROADS AND RURAL DEVELOPMENT. THE CASE OF SAMTSKHE JAVAKHETI A few days after the beginning of the August 2008 war with Russia, I found myself on an epic journey through Kvemo Kartli and the volcanic plateau of Samtkhe-Javakheti to Turkey. In an effort to take my family to safety, I was driving a fully-loaded off-road vehicle on what was marked on my map as a “road” from Tbilisi via Tetri Tskharo and Tsalka to Akhatsikhe. This journey of 270 km took about 36 hours, including one hard-to-forget night at a “hotel” in Tsalka (yes, there was and still is such an establishment in Tsalka!). Ok, I admit to taking a little detour and spending half a day for sightseeing in Vardzia. Still, very large portions of the “road” after Koda (30km from Tbilisi) did not exist, or, still worse, appeared to have been bombed by

In year-on-year terms, that is compared to November 2011, Kutaisi experienced the largest price hike (14%), compared to the more modest 3% and 5% in Tbilisi and Batumi respectively. Telavi is apparently enjoying a rather exception season: the local price of khachapuri is 15%(!) below its level exactly 12 months ago.

MCC staffthe and US Ambassador to Georgia John Bass Taking Senior the national average, annual (y/y) Kh-Index inflation comprised slightly less posing than 2%, for which is a tree-planting photo-op along the Samtske-Javakheti road very close to the annual measure of consumer price index (CPI) inflation. While an official GeoStat estimate (lake Sagamo in the we background). of annual CPI inflation is not yet available for November, expect it to be very close to zero.

Khachapuri Index (Kh-Index) and Consumer Price Index (CPI) 162

Kh-Index

3.5

160

3.0

158

2.5

156

2.0

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1.5

CPI

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146

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148

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n November 2012, the Kutaisi price of khachapuri added 3.4% compared to the previous month, while Tbilisi and Batumi prices rose by 2.2% and 1.1%, respectively. Telavi saw a tiny increase of 0.6%, continuing to take advantage of the larger-thanusual stocks of cheese brought down from Tusheti highlands at the conclusion of the grazing season. Calculated as a simple average of the individual city indices, the national Kh-Index added 1.8% compared to October 2012, reaching 3.33 GEL. At 3.42 GEL, Tbilisi has been so far able to maintain its position as the most expensive city for khachapuri enthusiasts, closely followed

by Kutaisi (3.40 GEL) and Batumi (3.37 GEL). Telavi, the cheapest city in our survey, is far behind (3.13 GEL).

In year-on-year terms, that is compared to November 2011, Kutaisi experienced the largest price hike (14%), compared to the more modest 3% and 5% in Tbilisi and Batumi respectively. Telavi is apparently enjoying a rather exception season: the local price of khachapuri is 15%(!) below its level exactly 12 months ago. Taking the national average, the annual (y/y) Kh-Index inflation comprised slightly less than 2%, which is very close to the annual measure of consumer price index (CPI) inflation.

While an official GeoStat estimate of annual CPI inflation is not yet available for November, we expect it to be very close to zero.

At 3.42 GEL, Tbilisi has been so far able to maintain its position as the most expensive city for khachapuri enthusiasts, closely followed by Kutaisi (3.40 GEL) and Batumi (3.37 GEL). Telavi, the cheapest city in our survey, is far behind (3.13 GEL).

Mar-12

By Eric Livny

In November 2012, the Kutaisi price of khachapuri added 3.4% compared to the previous month, while Tbilisi and Batumi prices rose by 2.2% and 1.1%, respectively. Telavi saw a tiny increase of 0.6%, continuing to take advantage of the larger-than-usual stocks of cheese brought down from Tusheti highlands at the conclusion of the grazing season. Calculated as a simple average of the individual city indices, the national Kh-Index added 1.8% compared to October 2012, reaching 3.33 GEL.

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KHACHAPURI INDEX IS UP BY 3.4% IN NOVEMBER 2012

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ECONOMICS LESSON OF THE WEEK. Monthly income per Annual change ROADS AND RURAL DEVELOPMENT. THE CASE OF SAMTSKHE JAVAKHETI

household (GEL)

Cumulative A Region/year few days after the beginning2009 of the August 2008 war2011 with Russia,2009I found myself on an epic journey 2010 2010through Kvemo Kartli and the(rank) volcanic plateau of Samtkhe-Javakheti to Turkey.2011 In an effort tochange take my↓ (rank) (rank) 2010 family to safety, I was driving a516 fully-loaded off-road was marked20% on my map as66% a “road” Samtskhe-Javakheti (5) 713 (2) vehicle 857 on (1)what 38% from Tbilisi viaMtianeti Tetri Tskharo and 270 km took about 36 hours, Mtskheta 418Tsalka (10)to Akhatsikhe.

552 (7) This 631journey (7) of32% 14% 51% including one hard-to-forget night at a “hotel” in Tsalka (yes, there was and still is such an establishment in Shida Kartli 489 (6) 592 (6) 682 (6) 21% 15% 39% Tsalka!). Ok, I admit to taking a little detour and spending half a day for sightseeing in Vardzia. Still, very

Guria Samegrelo Adjara Imereti Kakheti Kvemo Kartli Tbilisi

446 (8) 529 (9) 545 (4) 639 (3) 599 (2) 634 (4) 582 (4) 625 (5) 441 (9) 540 (8) 469 (7) 505 (10) 702 (1) 800 (1)

614 (8) 697 (5) 742 (3) 707 (4) 531 (10) 559 (9) 814 (2)

19% 17% 6% 7% 22% 8% 14%

16% 9% 17% 13% -2% 11% 2%

38% 28% 24% 21% 20% 19% 16%

Source: GeoStat Integrated Household Survey

the Luftwaffe during WWII (and never repaired).

Repeating the same journey in 2012 was a totally different experience. The whole trip, including a 10-minute nostalgic stop in the aforementioned Tsalka “hotel”, took less than 4 hours at leisurely speeds. What happened between my two observation points in 2008 and 2012 was no miracle, but the Samtskhe-Javakheti road rehabilitation project. At $209 million in U.S. (taxpayer) dollars, this was the largest investment by the Millennium Challenge Corporation (MCC) in Georgia implemented after the August 2008 over a period of about two years. Certainly a great success, at least judging by my before-and-after travel experience.

Now, since our main interest in this column is in Georgia’s economic development, we asked ourselves the following question: what was the impact of this road on the livelihoods of people in the Samtskhe Javakheti region?

While there are many aspects of livelihoods that we are not able to examine for lack of reliable data, what we can do is look at what happened to household incomes in the affected (“treated” in the professional impact evaluation jargon) region.

Monthly income (GEL) per household in Georgia’s regions, 20092011 (sorted by cumulative change) The results are staggering. In 2009-2011, household incomes grew in all Georgian regions in the post-August 2008 war period, yet, Samtskhe Javakheti experienced the highest income increases in both years under examination: 38% and 20% in 2010 and 2011, respectively. As a result, in just two years, this – until recently isolated – region registered a cumulative income growth of 66% (well more than twice the rate of income growth (29%) for all other regions!) and went from 5th to 1st in income per household ranking of Georgian regions. While not all of this improvement could and should be attributed to the MCC road project, there is no doubt on

my mind that this investment has had a major positive impact.

There is one more point I would like to make in conclusion. The income and welfare gains Samtskhe Javakheti experienced during the past three years are mainly the result of better access to the more lucrative Tbilisi market. The improved ability to transport and sell agricultural products (dairy, meat, potatoes) in Tbilisi was evidently a great boost for the Samtskhe Javakheti farmers (farming is the main occupation of the predominantly Armenian population of the region). With access to a larger market, local farmers were able to scale up their businesses by bringing into circulation and cultivating additional land, investing in infrastructure and machinery, and increasing their dairy and beef cattle herds.

The new road may have had other positive impacts by increasing the flow of tourists and transit traffic that the locals could service, by generating temporary construction-related jobs, and by providing the possibility to commute on a daily basis to Kvemo Kartli and Tbilisi in the low agricultural season. Yet, there is one way in which Samtskhe Javakheti is yet to benefit from a better connection to the Georgian mainland. The region’s GDP per capita performance – that is counting both salaries and profits by local firms that may or may not be passed onto local households – remains dismal due to its almost exclusive specialization in agriculture.

Whatever the virtues of smallholder agriculture, it cannot compete with manufacturing or the banking sector on labor productivity (i.e. output per worker). The small population size of Samtskhe Javakheti, especially in the more elevated part of the plateau, does not bode well for large-scale investment in manufacturing in the absence of “nudging” by the Georgian policymakers. Yet, investment in light industry, such as food processing, would be needed for this region to attract (cheap) labor from the neighboring regions (e.g. Kvemo Kartli), and move to the next level of economic development.

THE ISET KHACHAPURI INDEX The ISET Policy Institute (ISETPI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). ISET-PI designed a simple and robust way of tracking inflation and the differences in the cost of living across Georgia’s major cities. Unlike traditional “consumer baskets” used for monitoring price inflation, our “basket” includes only those ingredients that are needed to cook one Imeretian khachapuri (cheese, butter, flour, yeast, eggs, and milk) and energy inputs (gas and electricity). We conduct a monthly survey of the major markets in Tbilisi, Kutaisi, Batumi and Telavi to measure the differences in the cost of living across Georgia and to track the monthly fluctuations in the prices of all relevant ingredients.

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GTA to Offer 5 New Tourism Products from 2013

CFA Start Dates: January 25-27, 2013 Please contact Marika Vakhtangishvili at (+995) 599 31 07 05 or e-mail: Marika.Vakhtangishvili@ge.ey.com http://www.ey.com/GE/en/Services/CFA-Training-programme

Tbilisi Real Estate Conference Retail & Logistics

Nata Kvachantiradze, Chairwoman of the Georgian Tourism Association

Agenda Sunday 2 December 18:00 Welcome reception, Radisson Blue Iveria Monday 3 December, 2012: RETAIL 10:00 – 10:30 Welcome Coffee and Registration 10:30 – 12:00 Session 1: Georgia Real Estate Market Overview Welcome Speech: Mr. Gigi Ugulava, Mayor of Tbilisi Speakers: Omar Choudhury, Associate Director of Jones Lang LaSalle Ludovic Girod, Managing Director Experto LTD Moderator: Martijn Kanters, Senior Consultant IPM 12:00 – 13:00 Coffee Break and Refreshments 13:00 – 14:30 Session 2: Recent investments and opportunities Speakers: Archil Gachechiladze - Deputy CEO, Bank of Georgia Jean Louis Clary, General manager, MAF Carrefour Tim Wilkinson, Commercial Director, EastGate Shopping Village 14:30 – 15:00 Coffee Break 15:00 – 17:00 Site Visit to the main retail areas in Tbilisi: main retail high streets (Rustaveli Avenue, Freedom Square, Pekini Avenue), recently refurbished Agmashenebeli Avenue, Tbilisi Mall 17:00 Evening Event: Georgian cuisine, folk music and dancing; dinner brought to you by Bank of Georgia Tuesday 4 December: LOGISTICS 10:00 – 10:30 Welcome Coffee and Registration 10:30 – 12:30 Session 3: Economic overview, logistics market owerview, investment opportunities Speakers: Keti Bochorishvili, Vice - Minister, Ministry of Economy and Sustainable Development Iveri Kutsnashvili, General Director, Golden Fleece Capital LLC Omar Choudhury, Associate Director, Jones Lang LaSalle Zviad Archuadze, Head of Economic Affairs Ofiice, Tbilisi City Hall Moderator: Martijn Kanters, Senior Consultant IPM 12:30 – 13:30 Lunch 14:00 – 16:00 Site visit to selected investment sites 16:00 – 18:00 (Optional) B to B meetings

The FINANCIAL

By Mariam Papidze

G

eorgian Tourism Association (GTA), which unites leading private travel companies in Georgia, is working on implementing new tourism products in the country. GTA in cooperation with World Tourism Organization and the Agency of Protected Areas, intends to create five new products for four protected territories in Georgia. The programme will start in 2013.

“Products will soon enter the Georgian market that were not previously available,” Nata Kvachantiradze, Chairwoman of the Georgian Tourism Association, told The FINANCIAL. “We are still working on the project and selecting new programmes for our market.

Georgia is ready to accept these products. The market was explored and the final results have showed that Georgia has big potential in the development of various products for protected areas.

This is our largest prospect for the future, which will be oriented on the development of domestic tourism.

Within the framework of this programme we will provide trainings, research and create new products,” she added.

According to Kvachantiradze GTA has increased the number of its member companies. GTA now comprises 48 tourism organizations.

“We have about ten general

meetings per year where we are joined by on average two new members,” she added.

While summarizing tourism development in Georgia, Nata Kvachantiradze singled out the launch of domestic tourism as one of the most important achievements of 2012. “What was significant about 2012 was that domestic tourism became more active in Georgia. Newly rehabilitated cities have become very popular and in demand with Georgian residents. Infrastructure, which is a constant problem in Georgia, has been improved in many places as well. The level of service, which is another important component of tourism development, has seen significant progress due to the number of trainings being held in this sphere. One should assume that any tourist in any country requires much more than he/she is being offered; putting an accent on service quality is really helpful in such a situation. There are generally two types of problems when it comes to level of service: hotels’ internal service and food service. Hotels are being recommended to invest more in training programmes for their staff,” she added.

The recently held parliamentary elections hampered increasing tourist interest in Georgia, but it is still sufficiently high, according to Kvachantiradze. Despite that however, hotels in Bakuriani and Gudauri are already booked at full capacity. “Because of the recent political activity, the parliamentary elections specifically, interest in the country has slowed.

Our partners, who operate abroad, are waiting for more

stability in Georgia before sending their tourists here.

At the moment they are preparing for the winter season.

Georgia’s winter resorts are already prepared to welcome guests. Almost all the hotels in Bakuriani and Gudauri are being booked up which proves that interest from tourists is still very high. The new ski resort of Mestia is a more specific resort however. It is far from Tbilisi and therefore does not have as many visitors as Bakuriani and Gudauri do. But Mestia offers wonderful holidays to visitors in winter as well as in summer,” she added.

It is mainly tourists from Georgia’s neighbouring countries that flock to Georgia’s resorts, according to GTA. These countries are Azerbaijan, Armenia, Ukraine and certain European countries. Iran and Israel have become more active this winter season as well.

Q. Why is the country’s domestic tourism still not properly developed?

A. The previous government implemented several events last year to increase demand for domestic tourism. Each month there were different events being held in each region. As a result more Georgians have been spending their weekends out of town. Georgians are still in the process of moving from the culture of spending their weekends just visiting restaurants, to different, more intrepid activities, but this trend is gradually changing. Domestic tourism as well as incoming tourists will become popular if visitors have the opportunity to see some kinds of shows in certain place. The shows will

increase tourist interest in different cultural places. The state always tries to pass the responsibility of organizing such shows to the private sector. But as it requires a certain amount of money to organize the shows, the private sector’s interest is dampened. The private sector puts more of an accent on business which gives them large incomes.

Another problem is prices.

Georgia is one of the most expensive countries to visit.

Starting from air tickets everything here is very expensive. The hotels which are being built in Georgia are quite expensive. Tourists cannot find middle segmentoriented 2 or 3 star hotels, which will have European level standards and acceptable prices. Neither the private sector nor the state can interfere in hotel price regulation processes. The competition should regulate the prices. It is impossible to understand why private investors are not interested in building middle category hotels when the demand for them is very high. Hotels in Georgia are oriented on MICE tourism which is not so popular yet. It is true that lots of conferences and meetings are being held in Georgia but group tours are much more active. Tourism agencies find difficulty in accommodating middle segment tourists in the hotels as there is not enough room for them.

In contrast, the owners of guesthouses located near protected areas are becoming more active. They are making investments in improving their family businesses. When they have built one guesthouse, they see that demand is still very high and start building second and third guesthouses.

Q. The previous government was oriented on tourism development. What about the new government?

Do you think that the tourism sector will still be one of its priorities?

A. tourism is one of the top priorities for the current government as well. The fact that the new government is oriented on developing infrastructure and agriculture means that it is trying to improve tourism also. Without developed agriculture and proper infrastructure it is impossible to have a developed tourism sector. So attention to this direction has not slowed down yet.

Q. Which are the top destinations among tourists in Georgia and which direction is the most popular?

A. Adjara and Kakheti are the most popular regions among incoming tourists as well as domestic ones. In winter Bakuriani and Gudauri are the most widely-visited resorts. Overall Kakheti is the leader in terms of tourist interest as it has many cultural sites and offers wine tourism as well. The rehabilitation of Rabati led to increased numbers of tourists in Samtskhe-Javakheti, including Vardzia.

As for specific directions, cultural tourism was the most popular sort in 2012.

During the most recent times adventure tourism has fast been becoming attractive to tourists. Rafting, camping and other forms of extreme tourism are now very popular. Georgia has big potential in this direction.

FINANCIAL HEADLINE NEWS & ANALYSIS finchannel.com | 3 December, 2012

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Cyberattacks Are A Reality – Companies Need to Prepare Themselves The FINANCIAL

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n 2011, more than 232 million data records containing personal information were stolen or compromised globally, of which about 23 million records related to people in the United States.

According to the "Cost of Cyber Crime" study conducted by the Ponemon Institute, stolen data records can cost an average of US$ 200 per person. In Germany, crime statistics compiled by the police indicate that about 60,000 cases of cybercrime were recorded in 2011.

Cyberrisks can take a wide variety of forms. Virus infections, internet fraud, industrial espionage, misuse of personal data (identity theft), copyright

infringements or denial of service attacks that block targeted sites by overloading them with communication requests – the companies affected may suffer extensive loss either in terms of turnover or as a result of liability claims made by clients or business partners.

As Munich Re reported, most traditional property and liability policies provide no cover for cyberrisks. That is why there is increasing demand in the corporate sector for insurance solutions that address this new risk situation and especially its inherent potential for loss accumulation. Depending on their design, individual policies may now cover a wide range of first party and third party losses. A British market research firm reports that 30% of major US companies have already

acquired cover against cyberrisks, as compared to just 5% of the companies in Europe.

"Adequate insurance against data abuse should be a standard element of commercial insurance because this is a context in which any company can suffer loss of turnover or image impairment", states Thomas Blunck, member of the Munich Re Board of Management.

Cyberattacks can burden companies with substantial costs, for example: Due to business interruption resulting from the disruption of IT operations or the necessity of conducting a forensic investigation of the causes. For legal counsel, attorneys and penalties or for defence against lawsuits. For data and system recovery, notifying the clients affected and repairing reputational damage.

S

wiss Re estimates its claims burden from Hurricane Sandy at around USD 900 million, net of retrocession and before tax. This estimate is subject to a higher than usual degree of uncertainty and may need to be subsequently adjusted.

Hurricane Sandy, which made landfall in the US on 29 October 2012, caused high winds and storm surge, resulting in extensive flooding and loss of life and property.

Before it hit the US, Hurricane Sandy affected the Ca-

ribbean and The Bahamas.

"Swiss Re extends its sympathies to the families, communities and businesses affected by Hurricane Sandy, and especially to those who have lost loved ones and livelihoods in the storm," says Michel Liès, Group Chief Executive Officer. "Swiss Re will support our clients and partners in tackling this challenging situation, as we have done in so many instances in the past."

Swiss Re estimates its claims burden to be around USD 900 million, net of retrocession and before tax. This estimate is subject to change as the claims assessment pro-

cess continues. As Swiss Re Group reported, overall market losses are estimated at a range of USD 20 - 25 billion.

"The hurricane hit the densely populated NorthEast coast of the US," says Matthias Weber, Group Chief Underwriting Officer. "This led to prolonged power outages, disruption to public transport and damage to other infrastructure that have made recovery efforts very difficult. It also complicates the loss assessment process.

Our claims estimate therefore is subject to a higher than usual degree of uncertainty and may need to be subsequently adjusted."

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Intercontinental to Offer Charter Flights to Goa The FINANCIAL

By Tako Khelaia

I

ntercontinental, one of the leading tour operators on the Georgian market, will start charter flights to Goa, India, this December. According to Nino Makhviladze, General Director of Intercontinental, the company will be introducing updates in 2013 and offering people some new destinations as a result. As she says, 2012 has been a very successful year and quite busy for the company.

“The year 2012 has exceeded our expectations. It has been very successful. Egypt has proved to be one of our most exclusive and top destinations recently. Demand for Egypt this year increased by 20%. Intercontinental has made quite solid investments in promoting and popularising Egypt in Georgia. So the increased demand has been quite a good result for our company,” Makhviladze said.

“Although the year 2012 is coming to an end, we have managed to offer one more new thing to our customers.

Intercontinental is a company of innovations and always comes up with new projects for the market. This year, for the first time in Georgia, we are starting charter flights to Goa, India! A very large number of Georgians have been waiting for this opportunity. There is big interest in Goa among Georgian tourists. We will have our first charter flight for this New Year,” Makhviladze said.

“We started thinking about bringing this destination to Georgia last year. I visited Goa last winter, during the peak season there. I was introduced to the characteristics of tourism at this destination, which appeared to be quite specific and a bit hard. But Intercontinental is used to overcoming any obstacles and we think that this project will be successful. It is mostly young people that should enjoy seeing this little island as it is truly unique and exceptional.

It is the XXI century now after all,” Makhviladze said.

“Spending New Year in Goa will be exciting. I am inviting people to Intercontinental to arrange an unforgettable time there. It’s a very beautiful destination with a rich history and culture. I travel abroad very often, but visiting Goa has had a great effect

Nino Makhviladze, General Director of Intercontinental

on me. This is one of the first places to see. Plus, locally this is one of the cheapest places,” Makhviladze said.

Intercontinental has an exclusive offer together with Bank Republic for the Goa tour. They offer an interest free loan for 12 months.

“In comparison with Egypt Goa tour packages are a bit more expensive, so we are giving all people the opportunity to accept this great offer.

This is an exclusive contract between Intercontinental and Bank Republic.

People can only receive this product by visiting Intercontinental’s office.

The loan can be approved quickly and

easily. The main requirement for receiving the loan is to have a regular salary-paying job,” Makhviladze said.

“The cost of the tour is divided over twelve months in easy-to-pay instalments. The average cost of the packages will probably be USD 1,3001,500 per person per week. If people choose high class hotels like Hyatt or Kempinski then the cost will increase to USD 2,500 per person for two weeks,” Makhviladze said.

According to Makhviladze intensive promotion of tours to Egypt has slightly decreased the demand for European destinations at Interconti-

nental. Hence, in 2013 they are going to actively promote different European countries.

“Cuba is one of the most popular destinations among Intercontinental’s clients. We were the first to bring Cuban tours to Georgia. The Maldives have also become very popular, clients want to visit Caribbean shores.

This year, surprisingly, Jamaica was among the top destinations, although we didn’t promote it,” Makhviladze said.

“This past summer was very active and busy for our company. We had a significant increase of tourists.

This was an exceptional year for me, I couldn’t even manage to take a holiday myself due to the very busy summer and autumn we had at the company,” Makhviladze said.

“This year we changed our partner company and started working with Fly Georgia in regard to arranging flights.

This company has a very high level of service. Intercontinental has always been oriented on level of service and that’s exactly why we chose Fly Georgia to be our partner. This company has the newest airbuses which are of the year 2010-2011. The staff are very experienced and service is very nice, corresponding to European standards.

We are proud to offer our clients such good service,” Makhviladze said.

For summer 2013 Intercontinental will be adding some new countries and destinations. The VIP branch of Intercontinental in Vake will be opened next year on 7 April, Intercontinental’s birthday.

As Makhviladze said, although the company sometimes serves groups of foreigners and corporate clients visiting Georgia, Intercontinental will start working actively on incoming tourism in 2013.

“Georgia is a really beautiful country, with plenty of interesting places to see. Our country is famous for its historic buildings which are always interesting for tourists. Such unforgettable places as Svaneti (Mestia specifically) and Gudauri with its skiing facilities are always very appealing to foreigners,” Makhviladze said.

“Georgia is quite an expensive country. To promote the country and develop tourism here, I would start with offering low prices in order to attract tourists from different countries. We can start with low prices and when things develop they might later increase. Such brand hotels as we have in Georgia don’t have such high prices abroad. They correspond to the economic situation of the countries where they operate. This is one of the obstacles for foreign tourists in Georgia,” Makhviladze said.

“Flights to our country are also very expensive. We don’t have such low cost air companies as EasyJet. Transport isn’t cheap in the tourism sector here. Overall Georgian tour packages appear to be quite expensive.

The country and private businesses should invest a great deal in order to bring such expensive products to foreign markets,” Makhviladze said.

Tbilisi Exhibition Hosting Dutch Architects The FINANCIAL

By Madona Gasanova

O

n 19 December, widely renowned Dutch architectural companies will be presenting the latest trends and tendencies in the contemporary Dutch architectural sector. The exhibition aims to present leading Dutch architectural firms with innovative designs to a Georgian audience and architectural market.

Modern technologies, sustainable, intelligent buildings - which respond to nature, the environment, social needs, are innovative in their design and materials, are incorporated in the projects of these Dutch architects.

“According to the global picture, more than half the population is living in cities, cities becoming “places for urban exchanges”. All over the world, it turns out; there is enormous demand for convincing examples of architecture that provide solutions.

In many cases these solutions take the form of social projects, intended to bring about immediate improvement in living conditions,” Dr. Lena

Kiladze, Curator of Exhibition Days of Dutch, told The FINANCIAL. “In this case it’s becoming very important to have dialogue, discuss problems and define new language in contemporary architecture,” Kiladze said.

“Today Dutch design and architecture has established a world reputation. Dutch architects and construction have also established a strong

international reputation for their innovative, ground-breaking, problemsolving approach. Over the centuries, Holland’s architects and builders have been tried and tested by the country’s struggle against the sea and the challenge of accommodating the population in a small country. Today Dutch architecture is reinventing itself and proving that architecture works - not just in direct function, but

also in its programmatic reach, in its cultural effect, and ultimately in its value to society,” said Kiladze.

The following Dutch architectural companies will be participating in the event: Allard Architecture; Casanova + Hermandez Architects; Cie; Concern; Hans Moor Architects; Mecanoo Architects; MVRD; Neutelings; NIO Architects; UArchitects; UNStudio; Waterstudio; Rene van Zuuk

Architecture.

Kiladze said that with the collapse of the Soviet Union architectural problems in all former republics became more visible. “Georgian architecture started changing from state-controlled and state-approved architecture, globalization, critical regionalism, post-modern culture and integration with the West, forced a restructuring of Soviet architecture and soviet urban planning.”

She added that there are lots of questions on many problems, for example whether Georgia should move toward globalization or toward critical regionalism and how we can define contemporary Georgian architecture. “In today’s globalized world it is very hard to define the meaning of architecture,” Kiladze said.

“Architecture has always been a reflection of the collective consciousness, a physical encapsulation of evolving lifestyles. Our new perceptions of life arise from this changing society and develop according to which region, culture or city they are from. Our architecture reflects our life and our problems,” Kiladze told The FINANCIAL.

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Bakuriani - Best Investment in the Future of You and Your Family

B

akuriani- the place with unique nature and climate conditions creates a healthy and cozy atmosphere for you and your family.

Bakuriani is one of the most beautiful places among the mountain resorts worldwide. It is located on the northern slope of the Trialeti Range in Georgia’s Borjomi gorge. Long sunshine hours, moderate snow, high mountain climate, and fabulous views- all that makes your stay here unforgettable during any season of the year. The resort is almost fully covered by coniferous forests and Alpine meadows. Bakuriani is distinguished with the variety of mountainous Caucasus flora; different plant species include: Alpine, Altaian, Far Eastern, Carpathian timber plants. Overall, approximately 75 Caucasian plants(amoige) and 66 exotic tree plant species flourish in Bakuriani borough.

Remarkable nature, best climate conditions, moderate snow cover, fairy forest surrounded village of up to 2 400 people- this is a brief description of Bakuriani.

In the end of 19th century, due to certain circumstances, it turned

into the best resort in Georgia and outside the borders. The resort is constantly developing in order to offer best conditions to holiday makers. It is one of the most beautiful places among the mountain resorts worldwide. 12 different types of skiing trails, amazing views and family atmosphere and cozy environment make your stay here unforgettable during any season of the year, especially in summer and winter.

Bakuriani was granted a status of a borough in 1926. First skiing area was opened in 1926. The word Bakuriani carries a historic importance. Byzantine historian Giorgio Cedreno mentions Bakuriani with the noblemen who Caesar of Byzantium Basil II, having arrived in Tao to get the Kurapalatian inheritance, brought along with him and granted them the status of Patrikios. Megalith culture remains were discovered in Bakuriani, here is also an early feudal era religious building Pantnari Church. Thus, Bakuriani is a historical and tourism center of international importance. To those, who are not keen on mountain skiing sports only, the borough offers a number of interesting tourism tours.

Bakuriani is open to holiday makers for all seasons. Mountainski season here starts in December and lasts till mid-April. The resort has lots of visitors in summer as well. Resting here is useful during any season of the year.

Distinguished climate of the

resort, wet (often foggy) air is important for health, especially for people with respiratory tract issues. Climate conditions of the resort have useful and curable/ medical influence on bronchitis and lungs. In this respect, along with winter and summer, spring is also a favorable season, in particular the end of May- “Cone Blooming Period.”

The mountain resort is only a few-hour drive away from the capital. So, everyone can leave everyday issues behind and relax here with family and friends. Bakuriani is especially the best place to rest for families with children.

Thus, real estate acquisition here is an important investment for the future of your family.

Sanisle - a new project by Dexus Development, launched in Bakuriani, offers best place for family vacation to those who are looking for a cozy house in mountains. According to the company, during the object projection a special accent was put on creating family and cozy atmosphere for holiday makers. Sanisle offers all the conditions for comfortable family rest during any season of the year. The resort complex is located near Kokhta Gora, one of the best areas in Bakuriani.

Splendid views of the mountainclimate resort open from every side of the complex. Also, another special feature about the Sanisle complex location, as the company’s representatives explain, is that the territory is entirely

bounded by coniferous forest.

According to them, the complex advantage is also reflected in its close location to professional and amateur skiing trails, entertainment or different types of resting centers.

The project launched by Dexus Development will be constructed in accordance with modern standards, envisioning all the necessary safety norms. Along with housing space the complex will offer entertainment, resting, trade, ski storage and various types of areas.

Sanisle is a four-storey building. Most of the apartments will have own balconies and groundfloor ones will come with small own yards. Last floors will have mansards. Cafeteria and Laundry will be located in the complex.

Dexus Development representatives say they have taken into consideration everything that is essential for offering comfortable environment to holiday makers.

The housing complex consists of five different types of up to 200 apartments. Construction-installation works are already ongoing and will be completed by the end of 2013.

According to the developer, the complex will have various spaces for children entertainment. Sport playground and green square will be launched at the Sanisle territory. 3-D mini-cinema, with movie sessions for all age segments, will be installed in the building.

Sanisle will also include a special

entertainment center for children and an entertainment room for adults. Entertainment rooms will be divided according to age groups. Another attraction about Bakuriani is that here are separate mountain-ski and toboggan trails, which works best for children’s safety.

Bakuriani is the best place for mountain sports goers in winter.

The resort located on the Trialeti Range in Borjomi gorge, consists of several ski trails. Bakuriani attracts both professional and amateur sportsmen. Dexus Development took care of launching special service within the Sanisle complex for these types of consumers. To those who enjoy mountain sports, Sanisle will offer micro bus service, driving them comfortably to different ski trails and entertainment sights.

Currently, there are several places for resting and entertainment in Bakuriani. Here mountain sportsmen can drive to Kokhta Gora, 25-meter high trail (both for professionals and amateurs), Tatra, Didveli. Close to the Sanisle complex there is a skating rink as well where people of all ages can have a good time. Others, who are not much into these types of sports activities, can enjoy horse or bicycle riding. There are lots of hiking and bicycle tour places in Bakuriani and the surrounding area. Best places for taking a good rest are: Botanic Garden and Bakuriani Park.

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Unicard Expecting 15-20% Growth by End 2012 The FINANCIAL

By Madona Gasanova

U

nicard, the most popular bonus card in Georgia, expects to have 15-20% growth by the end of 2012. This year the company expanded its network to include Akhaltsikhe, Zugdidi and Kvareli. Unicard is successfully established in Tbilisi, Rustavi, Kutaisi, Batumi, Gori and Marneuli. Residents of Telavi will soon be able to start collecting bonus points too.

The Unicard community has grown to more than 1,200,000 cardholders, with 1.5-2 million monthly transactions. Cardholders can already collect bonuses at about 1,400 locations. There are 200 companies involved in Unicard Program.

As The FINANCIAL was told by company CEO Beso Abuladze, the specifics of this business are related to the retail sector, which did not experience any declines as a result of the tense political situation within Georgia during the recent months. “Groceries, pharmacy products, petrol and electronics are the types of services that we are connected to, and their consumption were not affected in 2012. I would therefore say that the political events of the current year within Georgia had no significant influence on our business. Every year we have had stable growth of 15-20% and we expect the same increase for the end of this year,” Abuladze said.

In 2012 the Unicard family

was joined by new partners from various sectors. The company started cooperating with the HoReCa sector and other fields of service sector.

Collaboration with gas refuelling companies in Tbilisi and the regions is considered a very important achievement of the company.

“Unicard is equally popular in Tbilisi and in the regions.

Consumer demand is the main principle encouraging us to enter concrete markets. We often receive calls from our cardholders asking us to enter a specific region. The Zugdidi case was a good example of that. We had planned to enter this city later but it was due to the big interest and demand of our consumers that we accelerated our entrance there,” said Abuladze.

One of the main criterions for Unicard when choosing a region is the number of population and its partners’ activity there. A region’s residents can easily collect points without the company’s service centre. Receiving prizes is also simple. Consumers can just ring the call centre or register on our website and make an order online. They will then receive their gifts by post, free of charge.

In Abuladze’s words, “Unicard offers a competitive advantage to its partners. Unicard is already a brand name.

There are more than a million people behind us that are focused on collecting points.

Offering Unicard to its clients increases a company’s customer loyalty. Many customers are asking the companies where they shop to switch to Unicard.”

“We plan to expand the

Beso Abuladze, CEO of UNICARD

number of our partners in the future. We will focus on those companies that are already operating in the regions,” Abuladze said.

Unicard has hundreds of users who have gathered more than 2,500 points. “This is the segment that saves up to the point that they can choose a tour package to Dubai or Egypt. For the same amount of points we will soon be offering trips to Istanbul.

From 2,000 to 4,000 points our customers are able to get consumer electronics: televi-

sions, laptops, cameras, etc.

Thousands of card holders are directly accumulating bonus points for these prizes specifically.”

The list of Unicard’s most sought-after prizes is the same in Tbilisi as it is in the regions.

The list of the most popular prizes includes: cell phone top-ups, utility payments, fuel refilling. Abuladze explained that the company chooses the list of its catalogue in accordance with the current popularity of the gifts. The whole inventory of gifts inside

the catalogue is made in accordance with the demand of cardholders. “Unicard’s gift basket includes 1,000 different prizes. This means that we take into consideration the variety of requirements of our individual users,” he said.

“Dozens of people have already taken advantage of our offer of tours to Egypt and Dubai. A large number of cardholders have already purchased the package and are now waiting for the right season to use them. Far more consumers use local tours.

Kvareli Lake has gained huge popularity among our customers. We took into consideration the popularity of this package and are therefore now also offering trips to Rabati castle in Akhaltsikhe. In the future the number of tour packages will be even more diversified. UniTour is a regular project. Accordingly in winter we will continue to offer our customers tours to mountain resorts,” said Abuladze.

In his words, the main advantage of Unicard is its flexibility and universality. “All this means better service for customers. Universality implies the quick accumulation of points, getting points entitles one to a variety of prizes.

We offer cardholders the opportunity to earn points for the exact gift they want to receive. All family members can collect points at the same time on the same account and this increases the card’s flexibility.

It is very easy to order and receive a gift at Unicard.”

According to Abuladze, the year 2013 will be a year of marketing innovations. In 2012 the company offered its consumers two highly suc-

cessful brands - UniTour and UniMania. With just a small amount of points cardholders can receive the prizes and also get great discounts on certain types of goods. The company will soon offer customers packages that are connected to the frequency of payments, or the amount of money they spend. “We want to encourage customer loyalty and so we will plan some new prizes for next year. UniTour is a project of infinite possibilities. The list of travel tours will continue increasing, including in 2013. We will be adding new directions. We are striving to make these tours accessible for all the price segments of our cardholders: those with high, medium as well as low point levels,” he explained.

Abuladze’s expectations for 2013 are optimistic. “I think that the economy will continue to grow. General market conditions will continue to improve which in turn will have a positive impact on our business.”

“In UniMania, we offer to our customers the discounts on the exclusive Swiss watches, Ikea and Breo products.

The company will continue to expand the list of exclusive brands that it offers in accordance with customer demand,” Abuladze told The FINANCIAL. Abuladze himself belongs to the category of people who do not spend their accumulated points daily but save up for more substantial prizes.

“However, the catalogue is full of very useful, everyday prizes and for that reason many prefer to spend their points on a daily basis,” Abuladze said.

Slightly Sympathetic Churchgoers Frank Klobucar

desirable neighbors – more religiosity means less support for homosexuality.

The interesting thing is that church attendance actually has the opposite effect, making those who attend church more frequently more likely to have sympathetic feelings.

GORBI

I

t’s pretty clear to anyone that lives in Georgia that the country is not particularly accepting of homosexuality. A gay rights march in May ended with violence and arrests, as several members of the Georgian Orthodox Church stood in protest of the march. The image of a line of priests confronting rainbow-clad protesters might have you thinking that religion is a core component to Georgian anti-gay sentiment. This is in fact correct, but perhaps not in the way you would expect.

The most recent European Values Survey was conducted in 2008 and surveyed 47 European countries in an attempt to gauge public sentiment on a variety of topics. Georgian Opinion Research Business International conducted the Georgian portion of this decennial survey, polling 1500 Georgians. The data reveal that there is a connection between anti-gay attitudes and religiosity, but that increased church attendance actually translates into increased compassion… up to a point.

Two weeks ago, during a discussion about Georgians’ social capital tendencies, I mentioned that homosexuals

Pious Sympathy

source: gazeta.ru/afp

Church Attendance

Yearly

< Yearly

Never

Homosexuality is justified (1 never – 10 always)

1.1

1.3

1.2

1.1

1.0

1.1

1.0

Would not want gay neighbors

74%

89%

91%

89%

95%

86%

76%

rank near the top of a list of undesirable neighbors, bested only by drug addicts. In fact, 87% of Georgians would not want to live near a gay person. In a question that asked whether respondents justify homosexuality on a scale from never (1) to always (10) the Georgian mean justifiability of homosexuality was 1.1, sitting at the bottom of a list that

> Weekly Weekly Monthly Holidays

includes prostitution, bribery, and suicide. There’s no doubt that Georgians are not gayfriendly.

Just as you might expect, religious devotion is closely tied to this homophobia: when Georgians were asked the question “how important is religion in your life?” 66% said “very important” and 28% said “quite important.”

More religious answers to this question negatively correlate to the 1-10 justifiability scale, meaning self-assessed religious people are more unforgiving of homosexual lifestyles.

This correlation is consistent with other attitudes on homosexuality, including whether homosexuals should be allowed to adopt children and whether they are

We asked Georgians how often they attend religious ceremonies. The scale included “more than once a week,” “weekly,” “once a month,” “holidays,” “once a year,” “less frequently,” and “never.”

Church attendance is the one measure of religiosity in the survey that negatively correlates to homophobia: those who attend church once a year have the strongest anti-gay feelings, and those who attend weekly are actually the most liberally minded. While self-assessed religiosity has a positive relationship to homophobia (.14), actual church attendance has a mirrored effect (-.13).

Of those who attend only once a year, 95% mentioned they would not appreciate gay neighbors. The same grouping of people gave homosexuality a perfect “1,” meaning it is never justified. Moving up the

scale to weekly attendees reveals a kinder cohort, though still solidly anti-gay: the mean justifiability is 1.3, and 89% said they would not like gay neighbors.

The scale does become less neat at either end, however.

Those who never go to church were indeed less accepting of homosexuality than average, with a mean of 1.1, but were also less likely to mention homosexuals as unwanted neighbors. The biggest churchgoers, the “multiple times a week” folks, were much less accepting than the weekly crowd with a mean of 1.1, but were also less likely to have a distaste for gay neighbors (75%).

Despite these fluctuations at either tail of the curve: in general, saying that you’re religious makes you more likely to be homophobic, but actually going to church more frequently could make you more compassionate. Visit our website at gorbi.com This report is exclusively provided to The FINANCIAL. Crediting The FINANCIAL is obligatory.

Visit GORBI website at gorbi.com

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“Great Potential for Tourism in Georgia,” Radisson Blu Iveria and Radisson Batumi GMs The FINANCIAL

By Tako Khelaia

A

ccording to the General Managers of Radisson Blu Iveria Hotel and Radisson Batumi, Michael Jacobi and Torbjoern Bodin respectively, Georgia has great potential for tourism development in the future. In their interview with The FINANCIAL, the General Managers spoke about their first impressions of Georgia and the main challenges that lie ahead for the tourism and hotel industry in the next few years.

Q. You have both only recently moved to Georgia, what were your first impressions of the country?

MJ: My first impression was extremely positive. I see a country with beautiful scenery and a long and proud history and traditions. The Georgian people are very hospitable and there is great potential for future development of the country’s tourism industry.

TB: I have mainly travelled around in Adjara and it is breathtaking, with everything it has to offer - not only the Black Sea. It is a well kept secret in Europe.

Q. What is your view on the tourism potential of Georgia?

TB: I agree with Michael, there is great potential for tourism in Georgia. The country is beautiful, the people are friendly and hospitable and the combination of food, wine, scenery and culture make Georgia a very attractive, yet unexplored, tourist destination. As I mentioned earlier, Adjara has big tourism potential, offering a different experience to the

Michael Jacobi, General Manager of Radisson Blu Iveria Hotel

continental part of Georgia.

Q. What do you feel needs to be done in order to develop tourism in our country?

MJ: We need to ensure that we continue to develop the tourism infrastructure. This includes improved accommodation facilities at some of the rural locations, improved access to the countryside and to the tourism spots around Georgia. It is currently very difficult to fly to Georgia and even if you find the right con-

nection to get here, you will most likely arrive very late at night which can put people off booking a holiday to here. We also need to improve how we communicate ‘Tourism in Georgia’ to the international market.

When travellers are in Georgia, we need to be able to offer packaged experiences. At the moment it is difficult to find tours and excursions that are easy to buy or arrange.

Q. How are your hotels contributing to the growth of tour-

Torbjörn Bodin, General Manager of Radisson Blu Hotel, Batumi

ism in Georgia?

TB: Carlson Rezidor Hotel Group with all its brands, of which Radisson Blu is one, is a global company.

We have sales teams all over the world to sell our properties and the destinations where we are present.

We were the first international hotel company to enter the Russian market and we are now the leading hotel operator in Russia, the CIS and the Baltics.

This large footprint in Georgia’s

neighbouring countries of course also helps to drive extra tourists to our properties in Georgia. In addition, we are aware of the responsibility of developing human resources in the countries we operate in and we spend a lot of time training all our employees to ensure that tourists’ experience of service is positive. We also aim to work closely with other stakeholders in the private and public sectors to streamline and promote Georgia to the world.

Q. Where do you see the main challenges for the tourism and hotel industry in the next few years?

MJ: The main challenge in my opinion is to develop more sustainable tourism for Georgia. This requires the leaders of tourism in the country to establish a long term tourism development plan which in turn requires the full support of the Government.

Q. How would you define the current PR image of Georgia from a tourist’s point of view?

TB: Georgia is somewhat of a Hidden Secret. Unless you are from the former Soviet Union or other neighbouring countries, there is a high chance that you might not know much about this beautiful country.

We can see from first time visitors that the vast majority is extremely impressed and positively surprised with what Georgia has to offer.

There is still a perception that Georgia is not a safe place, which is something we need to change urgently. However, there is light in the tunnel; in the Lonely Planet Tourist Guide, Georgia is mentioned as one of the top ten budget destinations to visit in 2013. This is a good achievement and will help put Georgia on the map internationally.

Georgia’s Labor Code and Business

By Daan Harmsen, Financial Manager, GeoCapital Microfinance Organization

T

he Georgian parliament has been discussing changes to the country’s labor code, with the aim of providing more protection to workers. What will these changes mean for businesses operating in Georgia? In this article, I will briefly touch on the current labor code, discuss some of the changes that are proposed, and finish with some thoughts on labor regulation.

The current Georgian labor code, passed by the former UNM-dominated parliament, is very flexible and barely offers employees any protection.The philosophy of the law seems to be to regulate only the bare minimum, and to allow employers and employees to define almost everything as they see fit in their employment contracts. In fact, the Georgian labor code (in English translation) is only 23 pages long.

Compare that with the French code du travail, of which the table of contents alone takes up 94 pages!

The Georgian labor code allows companies to fire employees at will, with only one month’s pay, or even none, if defined explicitly in the employment contract. However, it does offer some protection to strikers, who are allowed to strike for up to 90 days. The law also allows collective bargaining, but does not force

any employee to have his interests represented collectively instead of individually. The law does not set any minimum wage.

According to Radio Fortuna’s website, the parliament is considering making several changes the the labor code. Probably most importantly, it would make it impossible to for an employer to fire an employee for no cause without a 30-day notice and one month of pay. The law would also make it illegal to fire a woman during her maternity leave, and further protection of collective bargaining processes would be introduced.

While these changes are minor and won’t significantly affect companies’ hiring policies, they pave the way for more stringent labor regulation. In fact, the question that is often asked is: will Georgia move

towards an American model or a European model? When someone asks this question, they often imply a European model to mean stricter rules about employment termination, a relatively high minimum wage, more generous legally-mandated benefits, and more provisions for collective bargaining. On the other hand, they see the American model as having relatively easy rules about employment termination, a low minimum wage, and few legally-mandated benefits (although this may change with the new healthcare law).

However, this is the wrong question: Georgia’s model is on the right of both the American and the European model, and will probably stay that way for a long time: it is not even close to offering workers the same protections that the European and American labor codes do.

One reason for that is that the ability to hire and fire easily is critical for businesses in developing countries.

Most importantly, in a developing country like Georgia, it is harder to know whether a candidate is really ready for the job without hiring the person for a few months. The quality of education varies widely, and can be very hard to assess: while in the West, a fancy degree is usually a good indication of a person’s ability (although not always), in Georgia it may not mean much. Also, because in developing countries, many jobseekers have poor interview skills, it can be hard to pick the right candidate on just the basis of a series of interviews.

Minimum wage laws are another potential obstacle with regards to employment. Although the empirical evidence, mostly collected in de-

veloped economies, is inconclusive, classical microeconomics posits that when an employer is contemplating hiring a new employee, that employee is only hired if her or her contribution to the company (the “marginal product of labor”) is at least as great or greater than his or her salary and associated employment costs. If you set a minimum wage, for example at 3 GEL/hour, inevitably the low-skilled person who only produces 2 GEL of value every hour will not be hired anymore. Because there is much more low-skilled labor in developing countries than developed countries, this is a bigger issue in countries like Georgia. For example, a 1997 study by Oxford-economist Patricia Jones shows that the minimum wage in Ghana caused a reduction in formal sector jobs and an increase in informal sector jobs (that are not bound by minimum wage laws).

Keeping in mind the unique circumstances that developing countries face, the flexibility offered by Georgia’s current labor code is an attractive proposition for companies trying to do business here. While changes around the edges probably wouldn’t do much to the country’s investment climate, a large-scale overhaul would hurt the ability of businesses to grow, hire, and create jobs, and would leave a lot of lowlevel employees out in the cold, instead of helping them. daan.harmsen@geocapital.ge

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Holiday Inn to Offer Package Tours

Valeri Chekheria, CEO of Adjara+ Limited

The FINANCIAL

By Nana Mghebrishvili

H

oliday Inn is increasing the number of its rooms by adding one more floor to boost its current capacity. The hotel is currently the biggest in Georgia operating with 252 guest rooms. Holiday Inn does host leisure travellers, but the majority of its guests are business delegations. The owner company of Holiday Inn Tbilisi founded the first Georgian hotel brand ‘Rooms’ in 2012 and the first Rooms hotel has now opened in Kazbegi.

“We are growing considerably and this means that tourism in general in Georgia is on the path of significant development,” Valeri Chekheria, CEO of Adjara+ Limited, the owner company of Holiday Inn Tbilisi, told The FINANCIAL. “As well as the success of Holiday Inn Tbilisi, we have created the first Georgian hotel brand - Rooms. Our group has the burning ambition to make it a brand equal to international standards and operating with local concept. Today the first Rooms hotel, located in Kazbegi, the mountainous region of Georgia, is up and running and meeting all international standards.

The hotel has already gained great popularity with both local and foreigner travellers. There is a Casino and various venues to host variety of events. A swimming pool and spa will be opened soon. All these facilities come with a great view over Mkinvari. This makes the place especially outstanding and stunning.”

Weekends at Rooms Kazbegi cost USD 110 per day minus VAT and breakfast. Meanwhile weekdays cost from USD 90 up to USD 100. The price of breakfast comes to USD 10, but this is optional.

The total amount invested in Rooms Kazbegi comes to GEL 14 million. They are now adding a swimming pool and spa and after this the number will almost certainly be more.

Q. When will Holiday Inn in Batumi open? How is this pro-

cess developing?

A. Holiday Inn in Batumi is scheduled to open in May 2013. But we don’t rule out the possibility of postponing it slightly. We are working with InterContinental Hotels Group which is controlling the process. The contract is signed and we are bound to protect all standards. Therefore the building process may last longer.

But I do hope that there won’t be any interruption and that the hotel will be opened in 2013.

Q. Holiday Inn Tbilisi operates very successfully. Are you planning any changes in the hotel next year?

A. We are working on some novelties for Holiday Inn. A completely new menu will soon be available.

Our spa and pool as well as gym have already gained great success.

We are going to offer a packages throughout our properties around Georgia. It will be a whole tour. Visitors will arrive in Tbilisi, then go to Kazbegi, on to Borjomi and finish the trip in either Batumi or Tbilisi again.

“The ratings of Holiday Inn hotels are compiled according to region.

This year we are sharing the top positions within InterContinental Hotels Group’s EMEA (Europe, Middle East and Africa) ranking list and as a result we were presented on IHG’s Europe Hotel Awards. There were only four other 4 star hotels; the others all 5 star ones. This is a big success for us, that we are considered at the same level as 5 star hotels.”

Q. You planned to open a new hotel in Tbilisi, in the building of the previous publishing house Samshoblo. How is this project going?

A. Yes, we are planning to open another hotel in Tbilisi. We haven’t decided which hotel it will be. We are holding negotiations with several international brands. The successful operating of Holiday Inn has proved that we are very competitive in the market and can run a hotel business well. So we have won the trust of foreigners and now several international brands are interested in this property and in cooperation with

us. Despite this we’d like to open a hotel of our own brand - Rooms.

We want to offer traditional Georgian elements to visitors in Tbilisi.

But I can’t say much more for sure now. If we were to receive an ideal offer from any brand, then we would agree on its entrance.

Q. You were going to open Rooms in Borjomi. So when will the hotel be opened?

A. We have decided to develop a hotel in Borjomi. We are currently building a Rooms there. The restaurant of the hotel is already operating.

The hotel itself will be opened next year. Total investment in the project will be GEL 12 million.

Q. How would you assess the prices of hotels in the country?

Are you expecting any changes?

A. Price is regulated by demand and seasons. Businesses try to have high prices if the market gives them the possibility. I think that the hotel market including our hotel will maintain these prices and even experience a little growth.

Q. How can a Georgian brand compete with international ones, especially in Tbilisi?

A. I was recently at a conference in Baku where participants discussed how much in demand non-brand hotels could be. There is a new but fast-growing trend throughout the world that boutique style hotels offer better service in comparison to standard brand hotels. Brands are restricted by frames, whereas nonbrand hotels have more flexibility.

At the same time, they are important competitors in terms of price. We have a clear example of this.

The public and the business sector already know about the quality of our service. Rooms Kazbegi has proved that a Georgian brand can offer service of international standards. It has all it needs to compete with international hotels. Rooms Kazbegi has no star rating at the moment. But everything from the building to the service is on a par with 4 and 5 star hotels. It will be the same in Borjomi and Tbilisi. Our group shares the experience and talent

with Rooms as the personnel undertake trainings in this hotel. A hotel business or being employed at a hotel is quite a good source of income for employees.

Q. How are you going to promote Rooms Kazbegi?

A. Kazbegi is very popular with foreigners as well as local people.

The place is very popular among the diplomatic corps. Georgian guests mainly visit the hotel at weekends.

Rooms Kazbegi has all necessary facilities to host international level conferences and meetings. We are planning to make a ropeway behind the terrace.

We have a very interesting design as well as furniture and soft furnishings, designed by Georgian Designers. Considering the design and the concept of our property we are planning to boost the marketing activities of Rooms Hotel Kazbegi to present it on international level.

Q. Do you plan to expand the Rooms chain abroad?

A. Yes, we do, but we don’t have firm plans for the moment. Armenian, Azerbaijani and even Russian guests have been amazed by Rooms Kazbegi and expressed interest in the opening of such a hotel in their countries. There are no good examples of local hotel brands operating in Azerbaijan, Armenia, Georgia and part of Russia. But demand for local hotels is evident. Therefore they are interested in us. We would like to start expanding our brand to our neighbour countries by 2014. After gaining popularity in the Caucasus region, we will then enter the European market as well.

Q. According to the recent survey made by Jones Lang LaSalle, Georgia has a deficit of 2 and 3 star hotels. How would you evaluate this? Do you plan to fill this gap?

A. The lack of 2 and 3 star hotels is clear, but no one wants the service of 2 star hotels. In this case price and service quality is irrelevant.

Tourists coming to Georgia do not only want to spend an overnight at a hotel. The country has the capacity to have many 2 and 3 star hotels,

but they have to offer higher quality service. Holiday Inn Tbilisi is a good example of this. Representatives of InterContinental Group often say that Holiday Inn offers the service of a 5 star hotel. But in reality it is a 4 star hotel. As a result we have gained success and a high occupancy rate.

Q. You had the strategy to employ Georgians at your hotels. How is this trend developing?

A. The strategy was not only to employ locals, but to develop the talents, that’s why we are eager to train our staff on regular basis and give them the opportunity to be promoted on higher positions and share their experiences within our properties. The majority of those employed in Kazbegi are local residents. We support the local population in their developing professionally and financially. In total 112 individuals are employed there. This number will grow to 150 when the swimming pool and spa open. Holiday Inn employs 213 individuals in total at present.

Q. How does gambling affect the business of the hotels?

A. Casinos and gambling actually help us to attract more tourists.

Gambling is prohibited in Turkey, Azerbaijan and Russia, so many people really come to Rooms Kazbegi for its casino. Rooms Borjomi will be targeted at a slightly different segment, however. We are focusing more on spa and other healthy activities there, as Borjomi is known for its healing waters.

Q. State financing of tourism is being reduced from GEL 11 million to GEL 6 million. How will this influence your business?

A. We have to take care of our business and tourism development ourselves. I know that tourism financing is being reduced but we will be following the strategy of tourism development for next years and as we always did, try to contribute to the whole development process. We create and sell products ourselves.

Tourism sector has great potential.

The state’s support could be expressed by more liberal tax system.

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and Azerbaijan in the South, and Russia in the North. The country has had a turbulent history and geo-political disputes remain to this day with Russia, which occupies the territories of Tskhinvali and Abkhazia. After a short war in August 2008, the situation has been stabilised however. The Georgian government has pushed through some impressive and fast reforms in recent years, and particularly anti-corruption measures have been effective. In the World Bank’s “Doing Business 2012”, Georgia ranks 16th out of the survey’s 183 economies and the country has been named the “World’s Top Reformer” in 2011.

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Economic output consists of 9.3% agricultural production, 23.5% manufacturing and 67.1% services. Georgia’s main export products are metal alloys, scrap metal, other base metals, nuts and wine. The country is suffering from a chronically negative trade balance though, amounting to –USD 4.9 billion in 2011.

Georgia Real Estate Market Overview 2012 After a steep decline of economic growth in 2008, bottoming out at -3.8% in 2009, Georgian GDP growth quickly bounced back to 6.3% in 2010 and 7.0% in 2011. The fastest growing sectors are Financial Intermediation, Manufacturing, Trade, Hotel & Restaurants, and Real Estate. Foreign Direct Investment has been fairly modest at average levels of USD 800 million annually the past few years, and is concentrated in Transport and Manufacturing. Recent figures indicate however, that FDI is increasing towards levels of around USD 1 billion annually.

Summary Report • Strong economic recovery, an open and transparent business climate and supporting government have opened up new opportunities for real estate investment in Georgia • The capital Tbilisi is undergoing extensive reconstruction and upgrading of infrastructure, facilitating private developments • In the office market, the extension of the CBD to the newly refurbished Agmashenebeli avenue increases this district’s attractiveness for new occupiers • The recent entry of Carrefour paves the way for further expansion of the retail market, with specific opportunities for big box retailers • There is significant potential in the industrial and logistics market, evidence of which is the recent investment by Gebrüder Weiss • The hotel market is undersupplied, with a clear lack of international operators, particularly in the two and three star segments

Georgia: Economic Overview and Outlook Georgia is a country of 69,700 km² with 4.5 million inhabitants, located in the South Caucasus. It borders to Turkey, Armenia and Azerbaijan in the South, and Russia in the North.

The country has had a turbulent history and geo-political disputes remain to this day with Russia, which occupies the territories of Tskhinvali and Abkhazia. After a short war in August 2008, the situation has been stabilised however. The Georgian government has pushed through some impressive and fast reforms in recent years, and particularly anti-corruption measures have been effective. In the World Bank’s “Doing Business 2012”, Georgia ranks 16th out of the survey’s 183 economies and the country has been named the “World’s Top Reformer” in 2011.

Economic output consists of 9.3% agricultural production, 23.5% manufacturing and 67.1% services. Georgia’s main export products are metal alloys, scrap metal, other base metals, nuts and wine. The country is suffering from a chronically negative trade balance though, amounting to –USD 4.9 billion in 2011.

After a steep decline of economic growth in 2008, bottoming out at -3.8% in 2009, Georgian GDP growth quickly bounced back to 6.3% in 2010 and 7.0% in 2011. The fastest growing sectors are Financial Intermediation, Manufacturing, Trade, Hotel & Restaurants, and Real Estate. Foreign Direct Investment has been fairly modest at average levels of USD 800 million annually the past few years, and is concentrated in Transport and Manufacturing. Recent figures indicate however, that FDI is increasing towards levels of around USD 1 billion annually.

In the first two quarters of 2012, GDP increased by 6.8 and 8.2% respectively and annual GDP growth for this year is forecasted at around 7.5%.

Despite strong GDP growth, unemployment remains high at 15.1% at the end of 2011. A key issue is the fact that over 50% of the labour force is employed in agriculture, a sector that contributes less than 10% of GDP. As a result, average living standards are still relatively low with average monthly household income at USD 225 in 2011 and an estimated 22% of households living below the relative poverty line. In addition, strong increases in food prices since 2009 have been a leading cause of a surge in the inflation rate during 2010 and 2011. Since early 2012 however, prices rises have reversed (leading to a few months of deflation), and annual CPI stood at 0.6% in July, dropping further to -0.1% in September.

Although Georgia has made some significant economic progress during the last decade, the benefits of growth are not equally distributed. A key issue that remains is the fact that over half of the labour force is employed

Graph 1: Georgia GDP Growth 2007-2012 14 12.3

12 10 8

6.3

6

7.5

7.0

4 2.3

2

0

2007 2008 2009 2010 2011 2012* -2 Despite strong GDP growth, unemployment remains high at 15.1% at the end of 2011. A key issue is the fact that over 50% -3.8contributes less than 10% of GDP. As a result, average living of-4the labour force is employed in agriculture, a sector that standards are still relatively low with average monthly household income at USD 225 in 2011 and an estimated 22% of -6 households living below the relative poverty line. In addition, strong increases in food prices since 2009 have been a leading Source: National Statistics Office of Georgia cause of a surge in the inflation rate during 2010 and 2011. Since early 2012 however, prices rises have reversed (leading to fewfirst months of deflation), and GDP annual CPI stood 0.6% July,respectively dropping further to -0.1% in September.

Ina the two quarters of 2012, increased byat6.8 andin8.2% and annual GDP growth for this year is

forecasted at around 7.5%.

Table 1: Georgia Key Economic Indicators

Indicator

2009

GDP (USD mil.)

10,767

2010

2011

2012*

11,663

14,300

15,700

2.

GDP- per capita extension (USD) of the CBD; Vake-Vera a natural GDP per capita - PPP (USD)

2,455

2,629

3,215

3,497

4,770

5,074

5,430

5,809

3.

(USD mil.)

4,500 7,058 SaburtaloImports East and West - these areas are further from the CBD and 5,257 with larger and older buildings; Exports (USD mil.)

1,134 1,677 2,189

4.

FDIarea (USD mil.)to the recently refurbished Davith 658 Agmashenebeli 814 avenue, an1,117 1,000 “Davith”- the close upcoming business district.

Inflation rate (CPI) 3.0 11.2 2.0 -0.1 (1)

N/A N/A

The overall vacancy rate for offices currently stands at 13%, however there Exchange ratemodern (GEL/USD) 1.6858 1.7728is a wide variance 1.6703among districts.

1.6539 The (1) highest vacancy rate is in Vake-Vera Davith Agmashenebeli Unemployment rateat 30%, but in the developing 16.9 area around16.3 15.1 Avenue, vacancy N/A is close to zero.

Average nominal salary (GEL/month) 556.8 597.6 636.0 N/A % households in relative poverty 24 N/A 22 N/A With limited supply added to the market this year (9,000 sqm) the average rent is likely to remain stable in the short-term. In 2013 however, an estimated 34,771 sqm of space is due to be completed, of which 11,900 sqm will be owner-occupied Sources: Ministry of Economy, GeoStat, National Bank, Unicef (Procredit Bank’s new HQ in Saburtalo East). With 13,571 sqm of speculative space scheduled for delivery in Vake-Vera, the *=estimate/forecast (1) As of: September 2012 vacancy rate in this district will further increase, causing a continued downward pressure on rents. The pipeline is very limited in Davith and it is in this district where the best opportunities can be found for new office developments.

Although Georgia has made some significant(USD/sqm) economic progress during the last decade, the benefits of growth are not Graph 3: Office Rents in Tbilisi 2006-2012 equally distributed. A key issue that remains is the fact that over half of the labour force is employed in the country’s highly 35 unproductive agricultural sector. Unlocking this potential for labour productivity growth should be at the top of the policy agenda. Another top priority is boosting exports and FDI, which go hand-in-hand. The efficiency increase in the factors of production, associated with FDI, will help exports and improve Georgia’s chronically negative trade balance.

30 Parliamentary elections were held on 1 October, resulting in a victory for the opposition party Georgian Dream Coalition.

25 Currently, a new government is formed under the leadership of the anticipated new prime minister Bidzina Ivanishvili, who confirmed to continue the integration process of Georgia with NATO and the EU. Average rent 20 Prime CBD rent

Retail Market

Vake-Vera

15

Davith

10

Saburtalo

Retail Market 5 A large part of current retail supply in Georgia remains traditional, open market retail. Modern shopping centres are rare, as 0 the market is in an early stage of development. Traditional outlets are still the destination of choice for most Georgians. The 2006 2007 2008 2009 2010 2011 2012 supply of modern supermarkets is low.

Source: Jones Lang LaSalle/IPM

The total retail supply in the three main cities of Georgia (Tbilisi, Batumi, Kutaisi) is estimated at almost 700,000 sqm, of which more than half is in traditional formats. Outside Tbilisi, large modern shopping centres do not exist.

Graph 4: Retail Supply in Georgia’s3 main cities (sqm) 400,000

60%

350,000

50%

300,000 40%

250,000 200,000

30% Supply

150,000

20%

% of total

100,000 10%

50,000 0

0% Highstreet retail

Shopping centres

Big Box

Hyper‐ and Open markets supermarkets and other traditional retail

Source: Jones Lang LaSalle/IPM

Current modern supermarket supply mainly consists of the local chains Goodwill, Populi and Smart. The food retail market in Georgia is about to experience significant growth, with the recent arrival of Carrefour, who in September opened their first in13,500 the sqm country’s unproductive hypermarket inhighly Tbilisi. In the next 3 years, Carrefour plan to open 10 to 12 hypermarkets in Georgia, of which 4 agricultural sector.

Unlocking this po- and 1 in Telavi. to5 will be in Tbilisi, 1 to2 in Batumi, 1to2 in Kutaisi, 1 in Rustavi

Office Market – Tbilisi

Procredit. International office occupiers are typically accommodated in smaller schemes in the CBD, such as PWC, Ernst & Young and Booz Allen Hamilton.

Most modern offices were constructed in the previous decade, with average annual supply at less than 20,000 sqm. The year 2007 was the record year with 55,139 sqm of new deliveries. After a complete standstill in 2008, completions have picked up in the past few years and reached 40,781 sqm in 2011.

There are no dominating areas with office concentrations , but a few distinct office zones can be identified where most modern offices are located, these are as follows: 1. CBD - the area around Freedom square and extending towards parts of Old Tbilisi and Rustaveli avenue; 2. Vake-Vera - a natural extension of the CBD; 3. Saburtalo East and West - these areas are further from the CBD and with larger and older buildings; 4. “Davith”- the area close to the recently refurbished Davith Agmashenebeli avenue, an upcoming business district.

The overall vacancy rate for modern offices currently stands at 13%, however there is a wide variance among districts. The highest vacancy rate is in Vake-Vera at 30%, but in the developing area around Davith Agmashenebeli Avenue, vacancy is close to zero.

With limited supply added to the market this year (9,000 sqm) the average rent is likely to remain stable in the short-term. In 2013 however, an estimated 34,771 sqm of space is due to be completed, of which 11,900 sqm will be owner-occupied (Procredit Bank’s new HQ in Saburtalo East).

With 13,571 sqm of speculative space scheduled for delivery in Vake-Vera, the vacancy rate in this district will further increase, causing a continued downward pressure on rents. The pipeline is very limited in Davith and it is in this district where the best opportunities can be found for new office developments.

tential for labour productivity growth should be atretail the top of the policy Modern fashion is primarily organized by franchisors. The most aggressively expanding is the Retail Group Georgia, As the political and economic capiagenda.

Another topthe priority part of Saudi-Arabian Fawaz Al Hokair, official franchiseeisof the Inditex Group. They represent 40 international brands tal, 46.2% of the business services boosting andGap,FDI, goAldo. Reportedly, such as Zara,exports Marks & Spencer, Bananawhich Republic and their expansion plans are slowed down by the economy in Georgia is concentrated hand-in-hand.

The increase lack of available suitable retail efficiency space, in- and outside the capital city. in the factors of production, associ- in Tbilisi, accounting for over 16% ated with FDI, will help exports and of the capital’s economy. Outside of improve Georgia’s chronically nega- Tbilisi, in the regions, office-related GDP and employment is insignificant tive trade balance.

Parliamentary elections were held and currently, modern offices do not on 1 October, resulting in a victory for exist outside the capital.

Total modern office supply in Tbilithe opposition party Georgian Dream si currently amounts to 255,870 sqm, Coalition.

Currently, a new government is of which 47% is new-built and 53% formed under the leadership of the refurbished.

Remarkable is the high percentage anticipated new prime minister Bidzina Ivanishvili, who confirmed to of owner-occupation at 47% of total continue the integration process of modern office stock. Most of the large occupiers own their buildings, among Georgia with NATO and the EU. them Bank of Georgia, TBC Bank, and

A large part of current retail supply in Georgia remains traditional, open market retail. Modern shopping centres are rare, as the market is in an early stage of development. Traditional outlets are still the destination of choice for most Georgians. The supply of modern supermarkets is low.

The total retail supply in the three main cities of Georgia (Tbilisi, Batumi, Kutaisi) is estimated at almost 700,000 sqm, of which more than half is in traditional formats. Outside Tbilisi, large modern shopping centres do not exist.

Current modern supermarket supply mainly consists of the local chains Goodwill, Populi and Smart. The food retail market in Georgia is about to experience significant growth, with the recent arrival of Carrefour, who in September opened their first 13,500 sqm hypermarket in Tbilisi. In the next 3 years, Carrefour plan to open 10 to 12 hypermarkets in Georgia, of which 4 to5 will be in Tbilisi, 1 to2 in Batumi, 1to2 in Kutaisi, 1 in Rustavi and 1 in Telavi.

Modern fashion retail is primarily organized by franchisors. The most aggressively expanding is the Retail Group Georgia, part of Saudi-Arabian Fawaz Al Hokair, the official franchisee of the Inditex Group. They represent 40 international brands such as Zara, Marks & Spencer, Gap, Banana Republic and Aldo. Reportedly, their expansion plans are slowed down by the lack of available suitable retail space, in- and outside the capital city.

Other key retailers active in Georgia include consumer electronics chains Elit Electronics, Smiley, and Eurotechnics, furniture retailers Belux, My Home and Embawood. International DIY chain stores are not currently present and, modern big box supply is virtually non-existent in Georgia.

Modern shopping centre stock in Tbilisi (schemes >5,000 sqm) currently stands at just over 180,000 sqm. Although all of this has been delivered in the last decade, few schemes can be classified as modern European shopping centres, as most are relatively small and either of poor newly built construction or are poor

refurbishments.

The only sizeable modern shopping centre is the 72,000 sqm Tbilisi Mall, which was completed in April this year. The developer, Rakeen, has let a large part of the fashion stores to the Georgia Retail Group, who brought in Zara, Gap, Banana Republic and a number of other international brands.

In September, the hypermarket anchor Carrefour opened in Tbilisi Mall.

Tbilisi’s city centre retail provision is improving and expanding, but spread out over five unconnected main streets. In total, high street retail supply stands at 27,733 sqm.

The prime pitch is on Pekini street, where most international brands are located. Other established retail high streets are Chavchavadze, Rustaveli and Vaja Pshavela. In the near future, the prime pitch may (partially) shift to Agmashenebeli, which is undergoing a significant reconstruction programme and international brands are moving in.

Modern big boxes and retail parks do not exist in Tbilisi. Although there are a few big-box type outlets, such as the furniture retailer Belux, there are no international big box retailers are present.

Prime high street rent stands at USD 40-45/sqm/month, a level which has remained constant over the past 10 years. The most stable street is prime pitch Pekini, the area of choice for most brand stores. Recently however, high street rents are increasing on Agmashenebeli to the same level as on Pekini and are forecasted to grow to around USD 60, based on evidence of recent deals closed there. On Chavchavadze and Rustaveli, rents are expected to decrease slightly during the coming years, due to persisting parking problems and increased competition from Agmashenebeli.

For years, the highest shopping centre rents have been achieved at Pasaji, an old inner city scheme, but with very high footfall thanks to its orientation to discount fashion and household goods. Currently, the top rent there stands at USD 90/sqm/ month. Similarly, top asking rents at Tbilisi Mall are reportedly at USD 90 as well.

Industrial and Logistics Market

The industrial heartland of Georgia is formed by Tbilisi and nearby Rustavi, capital of the Kvemo-Kartli region; both regions account for over 60% of national industrial output. In the West, at the Black Sea, the harbour city of Poti is a growing industrial and transport hub.

Georgia’s road system extends to 20,329 km, of which 1,497 km is international motorway. It runs along the E60 Trans-Georgia Corridor, which runs from Batumi-Poti-Kutaisi-Tbilisi towards the borders with Armenia and Azerbaijan. The government has committed GEL 2.5 billion to improve the main Trans-Georgia road corridor. Recently, the Tbilisi bypass road was completed and the most important on-going works include: • Zestaponi-Kutaisi-Samtredia trajectory • Kobuleti bypass road • Tbilisi-Rustavi road • Samtredia-Grigoleti-Choloki trajectory In 2014, the Baku-Tbilisi-Kars international railway link will be completed, which will further facilitate cargo transport in the South Caucasus and strengthen Georgia’s position as a regional logistics hub.

Existing warehouse & logistics stock in Georgia currently amounts to 608,734 sqm, of which just 286,736 sqm could be classified as modern space, although not by European standards. Of this, 80.6% is located in Tbilisi, the remaining 19.4% in Poti. Elsewhere in the country, modern industrial space does not yet exist. A large part of existing warehouse & logistics space is owner-occupied in small units and large, developerled logistics parks do not yet exist in Georgia. The logistics market is still in a state of infancy, characterized by inefficient supply chain management and lack of third-party logistics (3PL) providers.

Total modern industrial and logisContinued on p. 29

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Chateau Mukhrani Investing EUR 8 Million in Tourism Development The FINANCIAL

By Nana Mghebrishvili

P

rince Ivane Mukhranbatoni-Bagrationi’s Castle, with its gardens, stable, antique cellars, Georgian and European restaurants, exhibition halls, wedding house, four Luxe Suites, amphitheatre, and much more. will be open to tourists by August 2013. Today the Bagrationi Estate in Mukhrani, located 35 km from Tbilisi, is already hosting visitors with its offers of exclusive wine degustation, visits to its ultra-modern wine factory, lunch or dinner with a range of tasty Georgian dishes, horse riding on Arab and English mounts, participation in churchkhela-making, traditional Georgian bread-baking and chacha distillation.

Bagrationi estate in Mukhrani was a center for the Georgian cultural elite in the 19th century. Ivane Mukhranbatoni, a well educated and talented landlord was famed for his winemaking. Even in the 19th century Mukrani wines were very popular in Georgia as well as abroad.

Since the first harvest in 1882, this outstanding quality has been highly acclaimed.

Mukhrani wines were exported to several countries including Ukraine, Russia, the Baltic States, Austria, France and even the USA. The wines were highly rated in wine exhibitions of the time. In Moscow and Paris wine exhibitions Mukhrani wines were awarded gold medals.

“We are rehabilitating the entire estate. The project comprises three stages, two of them have already been completed and the final presentation of the castle is planned for August 2013,” Petter Svaetichin, Director and CEO of Chateau Mukhrani, told The FINANCIAL. “The final amount of investment in the project depends on what kind of interior we choose for the castle. But it will come to approximately EUR 8 million in total. At the moment our main business is the manufacturing of premium quality winebut I am expecting our chateau and wine tourism to become as important as wine production in two years’ time.”

The company Chateau Mukhani has a great history as it was founded in the 19th century by Ivane Mukhranbatoni but its re-establishment occurred in 2002 with the help of Georgian businessmen. Swedish investor Frederik Paulsen acquired a share of the company in 2004.

At the initial stage he owned just five percent but later be-

Petter Svaetichin, Director and CEO of Chateau Mukhrani

came more interested in this business. Today he holds the majority share. The Company also has two Georgian shareholders - Badri Japaridze and Mamuka Khazaradze.

“This is the first Georgian chateau to have the three obligatory components including vineyard, manufacturing and history,” claimed Svaetichin. “We are trying to re-establish something which every Georgian can be proud of. There is a great sense of Georgian culture and history here. The Chateau used to host the country’s historical elite in the 19th century.

We are now trying to attract the modern elite of today as well. But this is a place for any kind of person. The prices are quite affordable, and as a result we also get quite a lot of

spontaneous visits from tourists. Foreigners visit our place regularly.”

The Chateau hosts several groups every day. Summer and autumn was incredibly busy for the company. The majority of foreign visitors are from Baltic countries and Ukraine. The tourism department of the company is cooperating with the leading tourist agencies to attract more foreign visitors. They are also working with hotels to bring visitors for outside conferences. The Chateau is now waiting for Christmas to host more corporate events.

“We worked for a long time on setting adequate pricing.

The price list should be accessible for most people, so groups on any budget can afford to visit. We did a lot of

comparative price checks with other places and we think that Chateau Mukhrani is comparably more affordable for people. The main factor that makes it that much more accessible is its proximity to Tbilisi; it is a 25 minute drive from the capital.

There are not many direct competitors of Chateau Mukhrani in terms of wine tourism. But the company considers all hotels in the country, as well as conference or exhibition halls, to be its competitors as it is intensively developing in this direction also.

Petter Svaetichin claims that Chateau Mukhrani is greatly supporting general tourism development in the country. Wine tourism is one of the main niches for Georgia

to develop further and attract more tourists in. “Georgia has done quite a good job to be promoted as a top tourism destination. More and more people these days are interested in visiting places like Georgia. It is exotic for travellers and at the same time interesting for its culture and history. But there are still some difficulties and problems in terms of infrastructure. The Government has to decide how they want to promote Georgia - whether as a cheap or premium destination.”

“We support the development process a lot as well.

Our contribution is having renovated the castle of Bagrationi, which plays a huge role in the history of the area.

In general Svaetichin con-

siders that there are not many problems for businesses and start-ups in Georgia. The company started its wine business in 2003 and brought in the first harvest in 2007.

They are intensively cooperating with the Wine Association and supporting the Association in its attempts to become strong. Mukhrani used to have 70 percent Georgian grapes and 30 percent foreign ones. But they are now changing some of them and will be trying to have more Georgian grapes in the next two years.

“Georgian grapes have nothing to apologise for when it comes to western species.

There are more types of grape in Georgia than in France.

The quality of Georgian wine is high as well. So we are able to compete in a healthy way.

Our chief wine-maker, Lado Uzunashvili, has got 110 international Gold, Silver and Bronze medals,” he added.

The winery has the potential to produce a million bottles of wine annually, though the company produces 700,000 bottles per year.

Mukhrani doesn’t plan to further expand production in the up-coming years as it is more concentrated on quality than quantity. The company produces 16 types of wines at present, including both Georgian and European ones, and 1 Chacha.

“We focused on the local market more at the beginning.

We believed that we could not export the product successfully without being well-known and gaining popularity on the local market first. Last year we worked very hard on our export markets.”

Currently Chateau Mukhrani exports 50 percent of production. The main export countries are England, France, Holland, Ukraine, China, Japan, the USA, Baltic States, Poland and Belarus.

Export to Israel was started, but was then temporarily put on hold.

“These are slightly easier markets, as they are familiar with Georgian wine. Entering markets like the USA and China is trickier. We started shipments to China a couple of weeks ago. China is especially interesting for two reasons. The Chinese market is very big. On the other hand, it is not yet a developed market.

The country is still very open to new production and impressions. The UK and some other western countries already know the taste of good quality wine and therefore have their own standards.

In contrast, China is still developing. 60 percent of wine traded in China is sold in gift markets. We have good packaging and therefore our products are suitable for this.”

Chateau Mukhrani is planning further expansion of its export. The company plans to expand export trading up to 80 percent. Only 20 percent will be local sales in two years.

“We all hope that the Russian market will be opened soon. But I plan to sell only 15 percent of our wine in Russia. Other companies probably won’t become as dependent on the Russian market as they used to be before the embargo in 2006 either. It is not healthy when a company is totally dependent on any market,” he explained.

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Teliani Valley Winemakers:

The Best Georgian Wine is the Next We Make

The FINANCIAL

By Madona Gasanova

G

eorgian traditional winemaking meets modern French knowhow in a bottle under the brand name Teliani Valley. “Winemaking is a constant process of searching. A good winemaker always fusses, looks for different tastes and in addition, stays true to centuries-old Georgian traditions,” Marc Dworkin and Simon Megutvnishvili, winemakers at the leading Georgian wine company Teliani Valley, told The FINANCIAL. “Georgia is unique, with a unique combination of climate-soil-varietal that doesn’t exist in any other part of the world and never will do,” Dworkin told The FINANCIAL. Composer, painter, archaeologist, journalist, hunter are those professions to which winemakers are compared. “A true winemaker is akin to Marco Polo,” Megutvnishvili said.

Q. How much is the winemaker responsible actually for in the production of high quality wine?

SM: Winemaking is a constant process of searching. A good winemaker always fusses, looks for different tastes and in addition, stays true to centuries-old Georgian traditions.

Just as you journalists look for good writing material, sensations and try to produce different and interesting, innovative material; at the same time you protect the code of journalists.

It is the same with winemakers. Our success is in the success of the wine.

MD: A winemaker is an artist.

He takes what nature gives him, he

takes care of the grapes as much as he can, and that way the fruit gets better.

Q. What have Georgian winemakers taught you and what have you shared with them?

SM: Marc is mostly working on the Georgian-French series. I make traditional Georgian wine. I keep in hand traditions and an enormous love of vines. I know Georgian taste and nature.

Marc better understands European tastes and the needs of foreign markets. He helps us in establishing modern technologies.

MD: Simon taught me a lot about Georgian Grapes and about traditional Georgian winemaking that is very old and different from other methods. He knows and understands the character of Georgian wine. I myself am trying to invent new European technologies. And this combination is I think very successful.

Q. Which profession would you liken winemaker to?

SM: A true winemaker is a composer, director, painter, journalist, hunter, maybe also a fisher, writer, poet, archaeologist; a winemaker is Marco Polo.

MD: Honestly, a painter.

Q. What tests has winemaking passed? What is the last word in winemaking?

SM: Georgian winemaking has passed numerous tests. With its quality it proudly stands next to French and Italian wines. As for the last word, the winemaking process is a constant search that never ends.

MD: There is no last word! Only the next vintage!

Q. What makes Georgian

wine different from others?

SM: We Georgians love wine in a different way. We respect traditions.

Wine is our pride and our symbol.

Georgians have an 8,000 year old tradition of producing wine and over 500 varieties of vines. We have a unique tradition of making wine in pitchers. The difference of our climate brings a different taste to the grapes. All this results in a different and most appreciated taste. You should love Georgian wine. For me it is the most holy.

MD: Georgian wines are different depending on their climate, their soils, their altitude, and their varietals.

Q. Global climate change has become a big challenge for modern winemaking. Do you already feel its impact and how do you plan to adapt to it?

SM: We still have a good climate to get the best grapes.

MD: I think nature can still be gorgeously generous, as in 2011, and terribly jealous and stingy, as in 2012.

Q. France has big traditions of winemaking. What makes French wine different and what innovations have you offered to Georgians in that respect?

MD: In fact, it is a story of a mentor, Michel Rolland, who changed the concept and approach to the ripeness of the fruits. He was my teacher in the early ‘90s and then, with my own experience, I have tried to adapt what I learnt and what I experienced. I don’t think French winemakers are that different.

Q. Tell us about yourselves please: what is your age, edu-

cation, work experience?

SM: I am 43, am married and have two children. I am a graduate of the Agricultural University of Georgia, a winemaking technologist. I have been working at Teliani Valley since 1997.

MD: I am 51, married, with four children. I have been working as an independent consultant for ten years, after fifteen years of working in Classified Growths in Bordeaux.

I am a consultant for wineries in Georgia, Romania, Bulgaria, Israel, India and China.

Q. What influenced you to choose the profession of winemaker?

SM: From my school age I tried to make Kakhetian wine. I first made wine at the age of eight. My uncle worked as a winemaker for many years, this is a family tradition and I wanted to develop it. I have a vineyard at Tsinandali and I press out at least two tons of wine annually. The whole of Kakheti waits for my wine.

MD: As I already said, having the chance to work with Michel Rolland.

As well as that, always having a wish to learn more and to share the passion.

Q. What’s your brewing/ winemaking secret?

SM: The secret is in searching and following traditions.

MD: I cannot tell you because I would lose my job.

Q. How would you compare Georgia to other countries, especially France, Italy and Spain, as the three leading wine producing countries worldwide?

MD: It is the wrong idea to always want to compare Georgia with other countries. Georgia is unique, with a

unique combination of climate-soilvarietal. It doesn’t exist in any other part of the world and never will do.

Q. Which is your favourite Georgian wine and why do you like it?

SM: Mukuzani is my favourite red and Tsinandali - white. They suit me well.

MD: The best Georgian wine is the next I will make.

Q. Teliani Valley has accepted prizes at various international festivals. What makes this wine different?

SM: The success of Teliani Valley wine is the result of the whole team that has been involved in this company for years. Each process is equally important: from taking care of the vineyard to its realization.

MD: The continuous caretaking of all the teams in the winery.

Q. How many sorts of grapes are used by Teliani Valley?

SM: Rkatsiteli, Tsolikouri, Mtsvane, Saperavi, Aleksandrouli, Mujuretuli, Ojaleshi, Cabernet Sauvignon, Sauvignon Blanc, Chardonnay, Tsitska, Kisi - these are the main sorts of grapes that we use.

Q. How would you describe Georgia’s wine drinking culture compared to that of your native country, France?

SM: Georgian wine-drinking culture is different. We do not like to drink alone, we can come together in a celebration simply over good wine.

Georgia is the only country that has the official position of ‘Tamada’.

Georgians can always tell a bad wine.

MD: I always knew Georgia was at the origin of Vitis Vinifeare. The origin and native place of the vine! I always respected this country for that.

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Aghmashenebeli to Become Tbilisi’s

Main Retail Street

The FINANCIAL

By Mariam Papidze

G

eorgian Retail Group is continuing its expansion on the Georgian market and intends to open new stores not only in Tbilisi Mall but on Pekini and Agmashenebeli Streets as well. The most popular brands Zara and Massimo Dutti will be replicated on Rustaveli Avenue at the end of February as they are seeing extremely good numbers in sales.

Global retailers Burberry and Escada are also coming to Georgia in the coming weeks.

“Tbilisi Mall was the first location for our stores in Georgia, but that was not enough to set up business. So we were looking at alternative areas to grow in,” Panagiotis Dimitroulopoulos told The FINANCIAL. “Areas like Pekini have a lot of new brands coming in. We are developing Aghmashenebeli Street into a main retail street. So there is a lot of investment from our side. In Tbilisi Mall we already have 33 brands spread out over 14,000 sq.m. We have another 3-4 brands coming in, which will be opened at the end of February. The new ones are two children’s brands, one from Portugal, one from France and an Italian brand called Primadonna. As for Aghmashenebeli Street, we will have a second New Look from the UK there. Because of their good indicators in sales, accessories’ stores that are operating in the Mall will be opened on Aghmashenebeli Street as well. As for expanding to Batumi or Kutaisi we are waiting for investors to open small malls there first, not as big as in Tbilisi necessarily, but then we will definitely enter there,” he added.

“I have heard that some brands are already arriving. Burberry will be opening here on Freedom Square fairly soon. I know that Escada is coming to Tbilisi Mall. At this stage it is slightly less expensive brands that are coming generally, which is really good for the market,” Dimitroulopoulos said.

About 15,000 to 20,000 people shop at the Mall during weekdays, according to Georgian Retail Group.

That goes up almost three times at the weekend. Tbilisi Mall has a steady flow of people coming from Russia, Armenia, Azerbaijan and Turkey as Georgia is the cheapest country in the region in terms of prices. “People come to Georgia to shop at the weekends because the prices here are lower. This is a big advantage for Georgia. As Georgia does not have import taxes the prices here are accordingly lower. Azerbaijan, Armenia and Kazakhstan have high import taxes. The prices are set in Spain and we cannot even touch them. The first day of sales in Tbilisi Mall was one of the highest ever done for our company worldwide. It was a record day for Zara. Some people were queuing for

LLC Retail Group Georgia was established in Georgia in 2011. The company brought to the Georgian market brands that had never before existed here, among them: Zara, Massimo Dutti, Aldo, Banana Republic, Gap, New Yorker. up to an hour at the tills just to pay!”

Dimitroulopoulos said.

Q. Could you please summarize your experience on the Georgian market as a retail group and discuss the development of the retail segment in the country?

A. Two years ago I would say that the real estate market was in a very, very bad condition. People, and especially individual owners, had no experience of dealing with brands and big companies. Nothing was set and there were no normal European standards on the market. When we first came here even negotiations with partners were difficult for us.

Negotiations with owners on opening our first two stores took six months before they understood what we were trying to tell them.

Since we finished the first two contracts it became easier because Georgia is a small marketplace and thereafter people easily started understanding us. Suddenly the market opened up. People came and they were already prepared to discuss twenty years of contracts; to discuss increases in rent after three or four years on European standard rates.

They became willing to discuss issues that they had previously not even been able to understand.

Compared to past years there has been so much development in the market. I do not consider our starting activities here to have been risky. It was just difficult, because the mentality was not there, just a lack of understanding of European standards. Retail was not developed

at all. We knew that people used to shop online or travel to other countries to shop. Basically we knew that we could attract all these people in Georgia by offering the same product, the same prices, the same quality. We had no concerns whatsoever about the financial situation in the country.

Q. As for the environment for doing business in the country, did you encounter difficulties in this regard as well?

A. This is the easiest country in the CIS to operate in. I would say that it is much easier operating here than even in many European countries. Usually, to set up a company in any other European country it takes more than a month; two months until you get all your paperwork together to get through the process. In contrast, it is possible to establish a company here in just a few hours.

The first stage, which is usually difficult in other countries, is extremely easy in this country. The second thing, the tax code, is a little bit difficult, especially when a contract is needed for doing anything. This takes a lot of time and energy. But it is very clear how to operate; there are no hidden things that we do not know about. If you operate properly you know exactly how you will be treated by the tax code.

Creating a company and opening stores quickly and without hassle; moving your stock around from brands into the country is very easy.

The customs’ operations are extremely efficient and very fast. Compared to other countries in the region where

it takes a week to ten days to import anything, in this country it takes only about five hours. This is amazing for a company like ours. Especially with Inditex brands like Zara, which depend on speed for the constant moving of goods. These points prove that it is easy to operate in Georgia.

Q. After explaining the problems of the Georgian retail market, what do you think is necessary for its further development?

A. Nothing significant. It is a matter of developing and rehabilitating real estate. If Tbilisi Mall were not built it would be very difficult for any kind of company to come in. Retail would be very widely spread and would be difficult to keep the image of what other European countries have. These countries have big city centres where people can move around with ease.

Here you cannot do that because the real estate simply does not exist here.

Tbilisi Mall was a big break through, which encouraged us to come in and open up. Besides that we are trying to grow in other areas as well, we know that other companies are planning to enter here. A lot of investments are coming for new malls.

A Mall should be a destination.

When a customer goes there he/she should have access to everything: supermarket, fashion, food and entertainment. Tbilisi Mall is still under development. I think in another six months we will see bigger potential.

By the end of the summer period, when the cinema will be opened there and kids’ entertainment facilities will be added then Tbilisi Mall will be-

come an established destination.

Q. How is Georgia’s image and awareness increasing worldwide? What is the attitude toward the country from your partner investors worldwide?

A. The first concern when we decided to come here was that everybody knew it as a soviet-type economy. Once we started talking to brands to bring them into Georgia we had a lot of resistance. They were saying that Georgia has just surfaced from a period of war. They said that Georgia was invaded four years ago

by Russia; that it was a very risky country to enter, because relations with Russia were still not good. Since they started coming to the country to understand the market however, they have changed their opinion 100 percent. Yes, the market was not developed and the retail market especially was very far behind but as a country, as people, they immediately realized that this market has a lot of potential. The permissions from them came very easily after that for us to open. We operate with brands from all developed countries - Italy, France, Spain, the UK, USA. Finally, I can say that the image of Georgia is really improving abroad based on our cooperation with the above-mentioned countries.

Q. You have mentioned three main locations to shop in Tbilisi - Tbilisi Mall, Pekini and Agmashenebeli Streets. Can you compare the popularity of these three places?

A. Our experience in the Mall was that as of September when Carrefour opened and busses started taking passengers there the number of our customers increased. Before then it was a big problem. 60 percent of our sales were done at the weekend. Up to 5-6 o’clock there was no traffic at all. After 6:00 there was some traffic. Now the new developments in the Mall have led to increased numbers of shoppers there. Their number has actually tripled.

At the beginning when Tbilisi Mall was first opened it attracted customers who really wanted to see what the Mall looked like in reality, because we were offering brands that had not ever been in Georgia. When they realised the difficulty in access to, and lack of stores at, the Mall their number decreased.

Pekini and Agmashenebeli Streets are different locations. There is real traffic there as people walk there or work at offices near these streets. Basically stores there are able to catch passersby. We opened the first store, Clarks, on Agmashenebeli Street two weeks ago and immediately saw a difference in daily trading. During the weekdays this store does better than the Mall. At the weekend we are opening another store, Aldo, followed by Blanco at the end of December.

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‘Georgia Has Quite a Few Attractive Niche Opportunities,’ Jones Lang LaSalle The FINANCIAL

By Nana Mghebrishvili

G

eorgia has great potential in the industrial and logistics as well as big box retail market, according to a survey which was conducted by Jones Lang LaSalle and IPM. The presentation of the report will be held at the Tbilisi Real Estate Conference in Tbilisi on December 3-4, 2012. This conference will feature investment opportunities identified by the latest research of Jones Lang LaSalle.

“This conference will bring together local and international players already active on the market, some potential new entrants and the local government,” said Omar Choudhury, Associate Director of Jones Lang LaSalle. “It is a good platform to discuss the best investment opportunities and start new cooperations to realize them.”

Jones Lang LaSalle is a financial and professional services firm specializing in real estate services and investment management. The company is in business to create and deliver real value for clients, shareholders and people in a complex world that is constantly changing.

Omar Choudhury is General Practice Chartered Surveyor with 15 years experience, in the UK and Europe, across all asset classes specialising in Valuation, Professional Services, Development Consultancy, Asset and Investment Management and Real Estate Work out\value re-

covery. Currently based in Croatia, Omar has undertaken instructions in a number of markets including the United Kingdom and Germany and since 2006 the CEE\SEE and Caucusus markets, namely Austria, Greece, Hungary, Czech Republic, Poland, Slovakia, Romania, Bulgaria, Moldova, Croatia, Slovenia, Macedonia, Montenegro, Serbia, Bosnia, Turkey, Georgia and Azerbaijan.

“Although the Georgian real estate market is small, there are quite a few attractive niche opportunities.

In addition, Georgia is a good place from which to operate a large South Caucasus development programme, which can include Armenia and Azerbaijan. Also, the strong economic growth in the economy coupled with the ease of doing business has attracted Foreign Direct Investment which in turn has created pent up occupational demand for certain sectors of real estate.”

Q. What are the concrete segments which could be interesting for investors? Which have the most problems?

A. The most attractive segments are the logistics, hotels and big box retail markets. Our research clearly showed that the residential market has suffered most from the global economic downturn. Particularly in this segment of the real estate market, the Government should play a stronger role. It will be great if they put in place a housing policy.

Q. How could Tbilisi be developed as a major trade and transit hub? What are the advantages of Tbilisi compared

Omar Choudhury, Associate Director of Jones Lang LaSalle

to other cities in the South Caucasus?

A. Tbilisi sits at the crossroads of major regional transport infrastructure and is a natural hub between Turkey, Russia and Azerbaijan-Armenia. Continued upgrading of the motorway system and development of affordable modern logistics space are key to its further development.

Q. According to the survey, retail and logistics markets have the biggest potential, unlike the residential and office markets. What are the specific opportunities and problems of these markets?

A. The residential market in

Tbilisi could face the risk of oversupply given the large scale of some pipeline schemes. Remaining low incomes coupled with high levels of home-ownership have a downward pressure on demand. As a result housing prices have stabilized and stopped increasing. The low level of office employment in Tbilisi is the main constraining factor on the office market. Tbilisi would need to develop a sizeable market services sector and only if that happens would the office real estate market get new impetus.

Q. The survey reports that the main problem of all real estate segments is high owneroccupancy. Why is that a problem? How can it be solved?

A. The high level of owner-occupancy is seen in all sectors. This limits the involvement of international institutional investors, as the availability of leasehold A class income generating properties is scarce. Some opportunities may be found in Sale and Lease Back deals, however. Also, developers in Georgia should learn from the mistakes made in other developing markets in the CEE and CIS regions, where developers have sold off space in shopping centres and office buildings in addition to leasing space, creating split ownership. This has created management problems and deterred the developers from finding future purchasers. The solution therefore is not to sell off commercial space in developments so ensuring that all the space is leasehold.

Q. According to the report,

the hotel market is undersupplied, with a clear lack of international operators, particularly in the two and three star segments. How can the sector develop?

A. We think that the market will respond by itself. The numbers speak for themselves and it is likely we will see new international chains arriving soon.

Q. How can the Government support real estate market development?

A. The Government can support real estate market development in many ways. First, there is a clear need for more targeted economic and urban development strategies and policies, coupled with an evaluation of the investment incentives package. Second, new ways of financing are available and we see, for instance, favourable conditions for Public-Private Partnerships.

Q. What should investors investigate and take care of while investing in the Georgian real estate market?

A. They should realize that the Georgian real estate market has become a “segmented” market, with different conditions in each segment. Competition is increasing, so investors need to carefully evaluate their proposed investment against the reality on the market. For instance, most developments have typically included a large proportion of residential spaces. We believe it is time for other types of investment that are not residential-led.

Georgia Tops Ranking Of 23 Lower Middle Income Countries In Four Dimensions Of The Rule Of Law, Says Wjp Rule Of Law Index 2012

G

eorgia tops ranking of 23 lower middle income countries in four dimensions of the rule of law— absence of corruption, regulatory enforcement,civil justice, and criminal justice, according to the World Justice Project’s Rule of Law Index 2012 report. Weaknesses in government accountability were also found.

Released last week in Washington, D.C., the report ranks countries across eight areas impacting on the rule of law: limits on government power, corruption, security, fundamental rights, open government, regulatory enforcement, civil justice, and criminal justice. The report is the product of interviewing 97,000 members of the general public and more than 2,500 experts in 97 countries.

According to the report, “Georgia is the leader among lower middle income countries in four dimensions— absence of corruption, regulatory enforcement, civil justice, and criminal justice. The country ranks sixty-sixth in the world in providing effective checks on the government’s power and fifty-fourth in open government.

Political interference within the legislature and the judiciary is common.

Although the country is relatively safe from crime,outbreaks of violence in and around the borders are a source of concern.”

Estonia leads the EasternEurope and Central Asia region in most dimensions of the ruleof law.

“Achieving the rule of law is a constant challenge and a work in progress in all countries. The WJP’s Rule of Law Index is not designed to shame or blame, but to provide use-

ful reference points for countries in the same regions,with comparable legal cultures and similar income levels,”said World Justice Project founder William H. Neukom.

About the World Justice Project The World Justice Project(WJP) is an independent, non-profit organization working to advance the rule of law fort he development of communities of opportunity and equity worldwide. Its work is carried out through three complementary programs: Mainstreaming the rule of law including the convening of the World Justice Forum; the Rule of Law Index; and Research.

The WJP’s multinational, multidisciplinary efforts are dedicated to stimulating government reforms, developing practical programs at the community level, and increasing public awareness about the concept and practice oft he rule of law.

For more information about the World Justice Project, please visit www.worldjusticeproject.org.

About the WJP Rule of Law Index® The WJP Rule of Law Index is a quantitative assessment tool designed by the World Justice Project to annually measure countries’ adherence tot he rule of law as it is experienced by ordinary citizens, and tot rack changes across time. The WJP Rule of Law Index 2012 report is the third in an annual series.

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Georgian Vodka Gomi in Demand on Turkish Market The FINANCIAL

By Madona Gasanova SC Gomi Spirit and Vodka Company, leading Georgian alcoholic drink producer, aims to make Turkey the bestselling export market for its products.

The company plans to increase sales by 15% in 2013 and start export to the Chinese market. The company is at present continuing cooperation with Israel on exporting products there. “Turkey is characterized by a modern lifestyle. People are loyal towards alcohol beverage. At the same time there are some stringencies on the way to exporters, nevertheless we managed to succeed because of our professionalism,” Zaza Tabagari, Head of Strategic Planning at JSC Gomi Spirit and Vodka Company, told The FINANCIAL. As well as wheat vodka we produce the Georgian national drink Chacha (grape vodka). The company plans to start exporting Chacha to Ukraine and other foreign markets.

“Chacha will be without competition abroad,” Tabagari believes.

“2012 was characterized by great change and excitement within Georgia. People have become more hopeful about the future. The political changes did not influence our business, however. The sales volume reached a consistent level, around 7.5 million bottles, like in previous

years,” said Tabagari.

Every year the Gomi factory hosts tourists who can observe the production process and taste the products on site. “There are various directions in the tourism industry incorporating cultural, wine tours and others.

Georgia has huge potential in developing various segments. We plan to become more active in the direction of offering vodka tours to customers for example,” Tabagari said.

Tabagari distinguished two directions in which the Georgian economy should develop in 2013. “World famous brands should enter the Georgian market and they should be focused on Georgia as a regional hub. The second task is to start creating brands that will become popular on foreign markets. These brands can be related to food, logistics, tourism, the creative industry. As for our company - our goal is to fit into this larger context, we are trying to increase awareness of the Gomi brand on a global scale,” he said.

Out of Gomi’s total volume of production, 95% is made up by the local market and the remaining 5% by export. Vodka Prestige is the most popular product with both Georgian and foreign consumers.

Gomi is currently exporting products to Turkey, Tajikistan and Ukraine.

Various factors determine the advantages of the company Gomi. “The most important thing is that we have

Zaza Tabagari, Head of Strategic Planning at JSC Gomi Spirit and Vodka Company

been producing spirits and alcohol products of the highest quality. The production of Gomi is a 110 year tradition. The use of high-quality alcohol is essential in the production of vodka. We have implemented the equipment of modern production and Western culture of organizing work. We have our own distribution networks. We are in constant communication with our consumers and the public. We are focused on international markets, which forces us to establish high standards of quality,” explained Tabagari.

For New Year 2013 Gomi plans to offer some surprises to its customers. Details will be revealed at a later stage. In the meantime Tabagari shares his recipe for the popular cocktail Winter Horses that can be drunk on New Year’s Eve: Mix: 45 ml Gomi Vodka Prestige, 15 ml Gomi cherry liquor, 60 ml pomegranate juice. Then simply blend ingredients in a shaker, pour in a glass and add ice.

Tabagari suggests that a little bit of alcohol is good for relaxation and for stimulating neural activity. “Alcohol has no negative effects if it is drunk in moderation. Remember though that we are talking about exclusively natural products. On the Georgian market you can still find numerous alcoholic beverages of originally very low quality. Gomi tries to counterbalance the negative image of alcohol by offering its customers exclusively high quality products,” said Tabagari.

Advantages “Gomi is a spirits producing company, founded in 1903. Gomi has its own seeding. We use wheat for making spirits.”

Gomi Spirit and Vodka Company is the legal successor of Gomi Spirit and Vodka Distillery, which is located in the village of Gomi, in the Khashuri region. The factory started functioning in 1903 using raw materials: wheat, bread, maize and oats.

During this period the production of

the factory didn’t exceed 150-200 l in 24 hours.

After World War II, the Gomi factory started using sugar beet nectar/ Melasa for producing spirits and the production volume of the factory increased up to 500 dal. In subsequent years it increased up to 1,500 dal per 24 hours. During this whole period, till 1997, the factory aimed at processing only sugar beet nectar/ Melasa and Chacha raw spirits.

In 1994 by the decision of governmental organizations the Gomi factory appeared on the list of privatization units and on the factory base, Joint Stock Company “Rektifikati” was legally established.

In 1996 the factory was completely reconstructed and different kinds of construction-montage activities were carried out. The system of two, permanent action four block spirit production equipments (the equipment produces 1,800-2,000 dl in 24 hours), was completely changed - usage of new technologies facilitated the automatic operation of the equipment.

Considering the experience of the factories of Europe and CIS the new modern technology scheme was utilized, which enabled the Gomi factory to produce high quality wheat spirits.

During past years the Gomi Spirit and Vodka Company received several golden and silver medals in various international exhibitions.

Schuchmann Wines Planning to Enter Russia while Continuing Investment in Georgia The FINANCIAL

By Nana Mghebrishvili “I love Georgia. As I have my business here I am also a believer in thinking that international business activities and foreign capital inflow is a positive challenge for the Georgian economy,” said Burkhard Schuchmann, German investor in Georgia.

Burkhard Schuchmann, a German investor in Georgia, who signed his contract on 11 August, 2008, is intensively promoting Georgian wine as well as wine tourism locally and abroad. His company offer corporate packages for businesses. Schuchmann Chateau is a good place for MICE tourism as well.

“I’m a Vice Chairman of the board of Patentes Talgo SA, Madrid, and Chief Executive Officer of Alternative Rail Investment AG, Frankfurt.

I have quite extensive experience in the railway sector. But I decided to start a totally different business and in another country when I retired,” Schuchmann said.

Schuchmann Wines is a medium size company producing highly sophisticated wines by using both modern and ancient Georgian winemaking technology. As well as that they are working in the tourism sector offering exclusive service in wine and gastronomic tourism to visitors.

The company, which is working in wine production and wine tourism, is preparing to enter the Russian market soon.

“At our winery one can discover an excellent place to wine and dine,” Burkhard Schuchmann, owner of Schuchmann Wines, told The FINANCIAL. “We are building a French style château with ancient Georgian elements. We offer authentic wine tours. In our Vinoterra restaurant visitors can try delicious courses made with organic food by our internationally experienced cooks. In

our restaurant it is possible to have Georgian traditional food as well as a European menu. Our small hotel, with its views of the Caucasus mountains and Alazani Valley, is the perfect place to relax and appreciate the good things in life.”

The initial investment project which started in 2008 included total reconstruction and expansion of the existing small winery by using details of modern and traditional East Georgian architecture, installing new winemaking machinery and bottling line, building a new Qvevri cellar for Kakhetianstyle wines and erecting an integrated hotel and restaurant of high international, sophisticated standards.

The company owns 120 ha of vineyards. Two thirds of the portfolio is represented by Saperavi, the leading red grape variety in Georgia. 12 ha are of the Rkatsiteli variety which represents our main white wine. The portfolio is completed by Mtsvane, Kisi and a small portion by the European grapes Malbec, Merlot, Cabernet Sauvignon and Chardonnay. The company produces over 500,000 bottles per year and we have more than 10 wine assortments in our portfolio.

“In terms of prices we are a premium and high segment wine producer.

We are concentrating on producing more Qvevri wines. Nowadays our distribution of Qvevri wines is about 30 percent, and stainless steel wines - 70. In the nearest future we plan to have it the other way round. Schuchman strongly believes in the future of Qvevri wines,” he claims.

Q. Following the government changes, the Russian market may soon be opened for Georgian products. From your point of view, how will this influence your business and the wine market in general?

A. There are some talks and discussions at the moment about the probable opening of the Russian market and cancellation of the current wine embargo. I view it in a very positive

Burkhard Schuchmann, German investor in Georgia

way, not only for the Georgian wine industry but in general for Georgian trade policy. But we have to analyze the fact that the Russian market will not be as it used to be in past decades.

We also have to compete with other foreign wines there. Schuchmann wines will be oriented on quality and definitely on quantity, because of the size of the Russian market.

Q. You signed the contract on 11 August, 2008. How did you reach such a decision? Weren’t you afraid given the strained situation at the time and the war?

A. Yes indeed, my decision was made when Georgia was in conflict with Russia and at the time when the financial crisis was happening across the globe. But I made the decision to invest in this wonderful country and the wonderful area in Kakheti without any hesitation or fear. I believed in this country and the Georgian people, that everything would be resolved very soon and that Georgia would become the most attractive

country in the region. And now, with hindsight, I am very proud to have made that decision.

Q. What were the main difficulties and obstacles that you had to face at the time?

A. Starting a business is usually not easy, but in Georgia everything runs quite smoothly. The country’s ‘Ease of Doing Business’ status was one of the main incentives of my decision.

Getting licenses, dealing with government bodies, working with Georgian people and many other factors meant I was able to run the business without any problems. We have managed to build up such a wonderful factory - Schuchmann Wines Georgia, a synergy of modern and ancient technologies and knowledge. We are developing rapidly and hope that we will positively influence the general development of the Georgian wine industry.

Q. Four years have passed since you first entered the market. Please can you compare these two periods - 2008 and 2012?

A. Schuchmann Wines entered the market in the post-Russian embargo period. Georgia had already by that time started offering its wine to the global wine market. If it were not for that then Georgia would not have been able to sell its wines and compete with other foreign wine producers especially.

Indeed, business operation was not easy, but I don’t like things to be easy, so I appreciated that that was more of a challenge for me.

From the beginning we had a clear idea and vision that our wines had to be high quality wines. So we concentrated on boutique wines. We have achieved this with the support of our fantastic winemaker Mr Dakishvili and excellent team who were working very hard to maintain the top brand name of Schuchmann and Vinoterra Wines.

Q. How have political chang-

es and instability influenced your business?

A. We are a business entity and Georgia is a liberal country. No political changes have influenced our business so far. And we hope that the new government will maintain its solid position among international partners and will create an effective policy for business-economic and social development.

Q. Starting a business in Georgia is quite easy. But is operating a business easy as well?

What are the main challenges for foreign investors in Georgia?

A. I will evaluate the advantages of Georgia from an investor’s point of view. It is obvious that Georgia is a leading reformer in the world. The country has achieved many successes which have positively influenced the Georgian economy. I would list the main incentives that make the investment climate attractive as: Strategic geographic location; Stable macroeconomic environment; Liberal trade regimes; Low taxes; Simplified licensing and permitting procedures; Developing infrastructure; Choice of law for contracts; Georgian jurisdiction corresponding to European law standards; Strong banking policy including high interest rate of deposits.

But any investor needs to have a good partner in Georgia.

Q. Schuchmann Invest is the sister company of Schuchmann Wines Georgia. What kind of activities does the company operate?

A. It operates in the field of agriculture and tourism. The main target is wine promotion, investor relations, marketing and sales. Also the company implements know-how projects and promotes internationally in order to attract investors and add value to the Georgian economy. Schuchmann Invest is open to cooperating with any interested parties and building up solid business relations.

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Sotheby’s to Enter the Georgian Market “Sotheby’s will help foreigner investors to find property for sale or for rent in Georgia,” Itsik Moshe, IsraelGeorgia Chamber of Business, told The FINANCIAL Itsik Moshe, the President of Israel-Georgia Chamber of Business

The FINANCIAL

By Mariam Papidze

A

fter six months of negotiations Sotheby’s, luxury homes and real estate company, has finally decided to accept the initiative of the Israel-Georgia Chamber of Business and enter the Georgian market. Experts of Sotheby’s are going to research the market in Tbilisi over the next two months. The company will make special projects for the 5 star Rixos residential penthouse. Itsik Moshe, the President of Israel-Georgia Chamber of Business believes that RixosIS penthouse will be assessed at USD 10 million and will be the most expensive apartment building, not only in Georgia but in Georgia’s neighbouring countries too.

“Sotheby’s will help foreigner investors to find property for sale or for rent in Georgia,” Itsik Moshe told The FINANCIAL in an exclusive interview. “Those who contact Sotheby’s International Realty will be automatically connected to a team of local experts, known in their communities for their integrity and the

exceptional level of service they provide. Working with Sotheby’s agents, buyers gain access to comprehensive and up-to-the-minute knowledge of the local property market, allowing them to fully understand the options and opportunities currently offered. If they are interested in purchasing beyond their local area, buyers also benefit. Membership in the Sotheby’s International Realty network enables Sotheby’s agents to provide insider access to a select group of real estate professionals in the world’s most sought-after locations,” he added.

Besides the entrance of Sotheby’s, 50 business projects of Israeli companies will be implemented in Georgia in 2013, consisting of USD 200 million of investments. The top fields for Israeli business projects are real estate, tourism, agriculture, communications, and aviation.

As there will be a deficit of 10,000 rooms in Georgia Israeli investors see big potential in building hotels in the country. Borjomi, Kvariati, Svaneti and Kakheti are the regions where Israeli investors are going to build hotels. Other big projects will

be implemented in the agriculture sector.

The tourism sector is one of the most attractive sectors for Israeli investors in Georgia as a large number of Israeli tourists come here.

“60,000 Israeli tourists visited Georgia in 2012. The Chamber expects the arrival of 100,000 tourists for 2013 and intends to increase their number to at least 200,000.

Eight percent of the tourists from Israel are from the medical sphere.

As the statistics show, each tourist spends about USD 1,000 in Georgia,” Moshe said.

“USD 300 million of Israeli investments was implemented in Georgia from 2004 to 2008. In terms of private investments Israel is a leader in Georgia. These investments do not include tenders and the big amount of money which flows from World Bank and other institutions. We have been operating in Georgia for fifteen years and for us the IsraeliGeorgian relationship is not only about numbers, but about building a bridge between the two countries,” he added.

The President of the Israel-Geor-

gia Chamber of Business welcomes the Georgian Government’s initiative which means co-participation of Georgian funds in foreign investment projects. He believes that this initiative will encourage Israeli companies to continue their business activities in Georgia, will stimulate potential investors and will attract new investments. Itsik Moshe says that this is kind a fund that exists in Jerusalem. The fund has already started cooperation with Ministry of Economy of Georgia for studying experienced method.

The Israeli Government supports the business forums in Georgia. This year’s forum aims to represent the result of Georgian-Israeli economic relationships to the new government and discuss plans for the future with them.

“This year the Forum’s format is a little bit different. Business needs a developed market. The world crisis is coming to an end. If the Government really increases the investments and stimulates the business sector then we believe that next year will be the peak of Israeli investments in Georgia. When 80 businessmen come

from Israel to Georgia and both the governments support it, this means that we are talking about a different level of relationship. Out of 100 businessmen 70 percent are not born in Georgia and this fact proves how the Georgian market is attractive for Israeli investors,” said Moshe.

Within the framework of the Business Forum, eighteen local meetings will be held in Tbilisi.

“Our advice for foreigner investors is to not do the same as local developers do; always bring new technologies, a new system of management and new brand; listen to the local people’s opinions and adapt international standards according to their ideas. If they apply a method which is proven in other countries they will fail. For example investors should not calculate a business plan for 1.5 million people which is the total number of Tbilisi’s residents when there are only 100,000 wealthy people out of this number,” said Moshe.

The FINANCIAL is one of the main media sponsors for the Israeli Business Forum in Georgia, to be held in Tbilisi on 7,8,9 December, 2012.

Georgia Real Estate Market Overview 2012 Continued from p. 16

tics) space in Tbilisi currently stands at 230,979 sqm of which 73.1% newbuilt and 26.9% refurbished. Old, unrefurbished space still makes up the largest part of industrial real estate supply, with an estimated 316,504 sqm. A significant share of existing industrial stock is owner-occupied and in small units.

The overall vacancy rate for modern warehouse and logistics space in Tbilisi is 15%, but with a large variance between Agrade and B-grade.

A-grade vacancy is just 4.5%. Prime industrial rent in Tbilisi currently stands at around USD 5/sqm/month for A-grade space.

The largest concentration of modern warehouse and logistics space in Tbilisi is in the Lilo district, with a total of 102,279 sqm. The majority of this space is located in small buildings, and very few are of a grade A standard.

A second concentration area is in the Samgori district around Kairo street, with 41,028 sqm mostly new-built.

The third area is close to the airport, which currently has 38,424 sqm of space.

The only significant pipeline project in the Airport Settlement zone is planned by Austrian logistics provider Gebrüder Weiss, who has secured a land plot of 8.8 ha. The first phase will be a warehouse measuring 10,000 sqm, scheduled for delivery in May

2013, and a second phase will add another 35,000 sqm of logistics space.

This project is an important sign of the potential of the logistics market in Georgia and it can be expected that it will attract further foreign investment.

Outside of Tbilisi, the supply of modern warehouse & logistics space is almost non-existent. Only in the city of Poti, where APM Terminals has acquired the port, 55,758 sqm of modern space can be found. The prospect of further development of logistics space is favourable, with recent investment including the development of a Free Industrial Zone by Saudi-Arabian developer Rakeen and the acquisition of a 10 ha plot by Mittal Steel. As of today, Rustavi has no modern warehouse & logistics space.

Abundant land plots are available for development though, mainly in the form of existing industrial plots (at least 5,000 ha.) and land located along the road to Tbilisi. Rustavi’s proximity to Tbilisi and its location along the main international road and rail corridors offer excellent opportunities for the development of multi-modal logistics facilities.

Hotel and Leisure Market Tourist arrivals increased steadily during the period 2006 to 2009 and

exponentially in 2010 and 2011. Total tourist arrivals reached 2.8 million in 2011, with almost 60% arriving from neighbouring Armenia, Azerbaijan and Russia.

In the past five years, the number of registered guests in accommodation facilities has almost quadrupled and reached 853,049 in 2011.

With the average length of stay stable at 4 nights in Georgia, the total number of overnight stays in 2011 is estimated at around 3.4 million.

With the recent boom in tourism demand, supply has yet to catch up.

While demand grew by 140% during the period 2009 to 2011, the volume of hotel beds increased by just 38% to 25,833. As a result, average hotel occupancy rates increased significantly to 36% in 2011.

The capital Tbilisi and the Black Sea coast resorts in and around Batumi are the main tourist centres of Georgia, both accounting for almost 70% of registered guests in accommodation facilities. Although tourism infrastructure is undeveloped in other parts of the country, significant tourism potential exists throughout Georgia. Mountain resorts such as Gudauri, Mestia and Bakuriani offer significant potential for further development of winter tourism. The Kakheti region, east of Tbilisi, is increasingly appealing to tourists, with its winemaking tradition, historical sights

and dramatic landscape flanked by the greater Caucasus mountain range.

Residential Market Georgia is a country of home owners. In 1992, the government transferred ownership of dwellings to residents by decree, which was carried out by municipalities charging citizens only a transfer tax. As a result, home ownership in Georgia is one of the highest in the world at 91.5% in 2011. The speed and scale of the privatisation programme was such that many Georgians became home owners without having the capacity to fulfil the obligations of ownership. This coupled with the fact that a large share of the housing stock was constructed between 1960 and1990 in the form of short life-span prefab tenement buildings, led to an increasing share of the housing stock to deteriorate.

Given the above, a significant share of future demand for housing stock will be replacement demand, as newly constructed buildings will gradually replace obsolete stock. The scale and nature of future demand will depend on population growth, the dynamics of average household size, incomes and financing conditions.

After two years of negative growth in 2007 and 2008, the population of Georgia has been increasing since 2009, albeit at a slow pace. The to-

tal population now stands at almost exactly 4.5 million, and the current growth rate is at around 1% per annum. Although urban population has been growing at a slightly faster pace, Georgia remains a relatively rural country with a current urbanisation rate of 53%.

The housing stock in Tbilisi currently amounts to 339,106 dwellings units, with a total size of 30.2 million sqm and a relatively large average dwelling size of 89 sqm. More than half of the housing stock has been constructed in the 1960 to1990 period, in the form of pre-fabricated tenement buildings, many of which are in a state of serious disrepair. Much of the older stock, mainly located in the city centre, is deteriorating as well due to lack of maintenance capacity and funds.

After a decade of virtually no construction activity, output has increased at an exponential rate since 2006, averaging around 12,500 dwelling units annually. Construction activity has been even greater, but many new developments are stopped, because of bankruptcies or lack of sales progress. Reliable and comparable data are available on the number of sold apartments in Tbilisi.

In Tbilisi, four price segments are distinguished: low, medium, high and premium. After a general increase during 2006-2008, prices have more or less stabilised and the average housing price in Tbilisi now stands at around USD 1,000 per sqm.

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From Majestic to Tbilisi Marriott Hotel - 10 Years of History The FINANCIAL

By Mariam Papidze

T

he decision to build a European standard hotel in Georgia was enforced when the hotel Majestic was built in Tbilisi, known as the calling card of the city. From 2002 Marriott continued to build international standards in the country and became key to majestic moments in the capital. Throughout the ten years of its history Tbilisi Marriott has hosted almost 400,000 guests, among them: George W. Bush, Hilary Clinton, Andy Garcia, Malcolm McDowell, Brian Adams and many more.

“Presidents, Heads of States of over 45 countries, Hollywood stars, international pop and movie stars, worldfamous composers, producers, opera

singers, and many more choose Tbilisi Marriott - in which we take great pride and joy,” said Giorgi Togonidze, General Manager of the Tbilisi Marriott Hotel and Courtyard by Marriott Tbilisi.

“In this field, we as a nation already have an advantage, as hospitality is in our blood. Yet even those skills that come natural still need training and sustainable development. It is one thing to like hosting guests in your own home, but completely different in terms of establishing and maintaining the highest level of standards in hygiene, food safety, life and health safety aspects and other fields of operation of the hotel. We host guests from different national, ethnic, religious and cultural backgrounds and to keep them all happy and satisfied it requires standardized procedures that ensure the highest level of quali-

ty in every aspect related to guest satisfaction. Continuous training of associates is the core of any success and is an essential contributor to countrywide improvement of the hospitality industry,” he added.

To celebrate its ten year anniversary of operating on the Georgian market Marriott held an event considered one of its most successful ones, according to the feedback the Hotel received from its dear guests and friends.

Tbilisi Marriott hosted over 400 people. The building was illuminated in red (as the corporate colour of Marriott) and two fairytale-like ladies standing on tall podiums (also dressed in long red dresses) greeted guests upon entrance to the hotel.

The reception area was decorated in colourful flowers and the centre-piece arrangement was a huge number “10”

carved and all covered with dark red roses. The lobby area was transformed into a real fairy-tale experience where lighting effects and a laser show created a magical atmosphere in the lobby, where angels, butterflies and figures appeared to be “dancing” on the walls and the ceiling of our lobby. Parnas Café was transformed into a fabulous lounge and the restaurant became a majestic-style royal court. A big feast table was decorated with beautiful flowers and food from all over the world: lobster, caviar, Spanish ham, salt-encrusted whole fish, traditional Georgian suckling pig, roasted turkey, duck, royal hors d’oeuvres and endless desserts.

Another highlight of the event was the ten year anniversary cake - created by pastry chef Temur Gigauri, which was the most popular phototaking spot of the entire evening. The

cake was created in the actual shape and form of the Tbilisi Marriott Hotel, in its full glory and the tiniest of details recreated on the cake, such as lighting, flags, entrance carpets, balconies and windows. The cake measured almost one metre in length and stood one metre tall.

During its 100 year history the building of the Tbilisi Marriott Hotel has witnessed all the main political and historical turbulences of the country. The building was always one of the most distinguishing sights of Tbilisi. In Soviet times all VIP guests to the country - including John Steinbeck, Jean Paul Sartre, George Balanchine, Fitzroy McClain, Margaret Thatcher and many others, stayed at this hotel. Tbilisi Marriott Hotel is continuing down the path of its predecessor, the Majestic, and retaining the status of Tbilisi’s calling card.

Mamuka Khazaradze, Irma Tskitishvili, Badri Djaparidze

George Togonidze

Irakli Baidashvili

Aleko Kvaratskhelia, Lali Javakhia, Zviad Pochkhua, Mariam Papindze

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