The FINANCIAL -- People all over the world love traveling. Traveling lets us escape from a stressful work atmosphere, enjoy exciting adventure, gain valuable experience, meet interesting people, see new breathtaking places, and taste amazing exotic food. Therefore, it is not surprising that travel/tourism is one of the largest and fastest growing sectors in the world.
According to the World Travel and Tourism Council (WTTC), tourism and travel (T&T) slightly outperformed average growth of the global economy (2.5%), and was stronger than the growth in financial, manufacturing, public services, retail and distribution, and transport sectors in 2016. Furthermore, T&T directly supported 6 million net additional jobs in the sector.
In addition, T&T has a spillover effect on other industries directly related to tourism and, on some level, non-related industries as well. In total, T&T generated 7.6 trillion USD (10.2% of global GDP) and created 292 million jobs (1 job out of every 10) in 2016. This sector accounted for 6.6% of total global exports, and 30% of total global service exports (Economic Impact of Travel and Tourism 2017, Annual Update, WTTC).
Georgia is not far behind the world trends in tourism, and is emerging as a fast-growing travel market. According to the Georgian National Tourism Administration (GNTA), in 2016, the total value added in the tourism sector increased by 11.8%, compared to the previous year, and reached 2.06 billion lari. The growth rate of the tourism sector was significantly higher than the growth rate of the whole economy. As a result, the share of tourism in GDP continued to increase and reached 7.05% (see figure 1). Moreover, approximately 64.3% of Georgia’s service export revenue comes from tourism, and this sector generates 2.17 billion USD in foreign exchange income for Georgia, which is two times more than income from remittances.
Tourism is, therefore, an important driver of the Georgian economy and a significant source of foreign currency inflow.
The many faces of tourism
Is every foreigner arriving in Georgia automatically a “tourist?” Not really. According to the formal definition used by GNTA, a tourist is an individual that spends a period of at least 24 hours in a country different than his or her country of residence. In this sense, a truck driver carrying goods from Turkey to Azerbaijan via Georgia is not a tourist. There is also the concept of transit tourism, which defines the activities of a genuine, intentional tourist passing by or crossing a country, which is neither the country of origin nor the country of destination. This would be an example of, say, an American tourist heading to Armenia, but spending a couple of days in Georgia (see the table below for a classification of tourism flows). Just like the traditional definition, transit tourism does not include visitors who stayed in a country for less than 24 hours.
Despite the fact that transit tourism has been long known to be an important phenomenon in many developed and developing countries, international economic literature hardly addresses this issue. This type of tourism was first discussed by Markovik for Yugoslavia, and later Croatia. Nowadays, however, there is not even a consensus among scholars about the definition of this term.
Nevertheless, this type of tourism deserves particular attention in the context of Georgia and its South Caucasus neighbors. Transit tourism is an important magnet, mutually beneficial for all countries in the neighborhood; geographical closeness and the low cost of transportation attracts tourists who would never come to this region to visit only Georgia (or Armenia, or Azerbaijan).
Transit tourism in Georgia: where are the magic routes?
According to Ministry of Internal Affairs of Georgia, the country hosted about 2.7 million tourists in the first nine months of 2017, and out of these, 450 thousand people (16.5%) visited at least two countries – Georgia and an immediate neighbor – and, therefore, could be considered “transit tourists.” Table 2 below shows the most popular routes for transit tourism in January-September 2017. Turkey-Georgia-Azerbaijan and Azerbaijan-Georgia-Turkey were the most loaded routes, accounting for 22.7% of total transit tourism, and 3.7% of the total tourists. It may be worth noting that these numbers are somewhat overestimated, mainly because Turkish and Azeri truck drivers, who are facing long delays on the border, sometimes have to stay overnight or spend slightly more than 24 hours in Georgia.
The figures for the other three routes seem to be more informative and interesting, as they involve air transport, which indirectly implies that i) the data is not distorted by the number of truck drivers ii) the majority of these tourists are high-end tourists, iii) the route also includes tourists from outside of the region.
For example, detailed analysis of the Armenia-Georgia “Airport or port in Georgia” route further strengthens this conclusion. Around 39 thousand tourists came from Armenia to Georgia, and then left the country (traveled to their country of destination) from a Georgian airport or port. Unfortunately, there is no information where these tourists continued travelling, but based on their citizenship we can draw some conclusions. For instance, 15.5% of these tourists were Russians, 11.7% - Polish, 10.4% - Iranians and 8% - Germans, which indicates that the majority of transit tourists (except Russians) on this route were from outside of the region and represented high-end tourists. The Russian transit tourists were also most likely high-end tourists, who first visited Armenia for tourism purposes and then continued their journey in Georgia. Moreover, in the case of “Airport or port in Georgia” Georgia-Turkey route, Iranian tourists are dominating with a share of 31.7%, followed by Russians (14.6%), and Saudi Arabians (10.9%).
What should the Georgian government do in response to the increased demand for transit tourism? First and foremost, the country should keep improving airport infrastructure, and increasing the number of airline companies and direct flights. Improving the quality of tourism infrastructure in Georgia is equally important, as it makes the entire region even more attractive and competitive compared to other tourism destinations, especially for long distance travelers, who prefer to see a group of the countries situated in the same region per visit. In this sense, transit tourism is not a zero-sum game, and builds the case for close cooperation and coordination between countries in the region.
Where are the bottlenecks?
The share of total transit tourists out of total tourists is still limited (only 7.4% in January-September 2017), which might be the result of poorly developed internal transport infrastructure between the countries in the region. It makes things difficult and uncomfortable for foreign travelers who would otherwise like to visit a group of countries in the same region. Therefore, it would be productive to further improve the Kutaisi and Batumi airports (it is worth noting that the number of tourists who arrived or departed from these two airports is still far behind the same measure for the Tbilisi airport); create faster and more comfortable transport connections between neighboring countries; promote greater use of the Batumi port for passenger transport; and, direct ferries to Moldova and Romania. All of these measures will help the country to fully exploit its potential in attracting transit tourism.
Visiting the three South Caucasus countries
The other reason for underdeveloped transit tourism in the region is the absence of adequate advertising for packaged tours in the South Caucasus. There is no doubt the closed borders and non-existent diplomatic relations between Armenia and Azerbaijan further complicates the task of developing a common marketing strategy for the three countries, but Georgia has a unique opportunity to be a mediator country for foreign tourists wishing to visit all three South Caucasus countries on a single tour.
Just to give you an idea, in the first nine months of 2017, around 7.5 thousand tourists visited our region by the Armenia-Georgia-Azerbaijan route, and 3.5 thousand traveled on the opposite itinerary.. These numbers are even understated due to the fact that because of the relatively long distance between Baku and Tbilisi, tourists prefer to fly rather than use rail or road transport. Therefore, having cheap airlines like Buta Airways already operating in Tbilisi (it started operation earlier this year), it is expected that the number of tourist exploiting the “South Caucasus” travel route will further increase. Given the fact that the top origin countries for these transit tourism routes are China, South Korea, Russia, USA, UK, Iran, Germany and Japan, Georgian tour operators have a unique opportunity to attract high-end tourists into Georgia.