FINAL REPORT Market and Technical Feasibility Study for Racha Development Project, Georgia 27 January 2016 Table of Contents 1 EXECUTIVE SUMMARY .......................................................................................... 5 2 INTRODUCTION .................................................................................................. 25 3 METHODOLOGY .................................................................................................. 27 3.1 KEY PERFORMANCE INDICATORS AND DEFINITIONS IN THE HOTEL INDUSTRY ...................................... 28 3.2 REFERENCES .................................................................................................... 29 4 GENERAL OVERVIEW OF GEORGIA ........................................................................... 30 4.1 GEORGIA – GENERAL OVERVIEW ................................................................................ 31 4.2 ECONOMIC OVERVIEW .......................................................................................... 32 4.3 ACCESSIBILITY AND COMMUNICATIONS .......................................................................... 35 4.3.1 General ................................................................................................. 35 4.3.2 Air Access .............................................................................................. 36 4.4 INVESTMENT AND REAL ESTATE TRENDS ......................................................................... 40 4.4.1 Investment trends .................................................................................... 40 4.4.2 Investment projects in Georgia .................................................................... 41 4.5 TOURISM ....................................................................................................... 45 4.5.1 Tourism in Georgia ................................................................................... 45 5 GENERAL OVERVIEW OF RACHA REGION ................................................................... 49 5.1 GENERAL OVERVIEW ............................................................................................ 50 5.1.1 General description of the region ................................................................. 50 5.1.2 Accessibility ........................................................................................... 51 5.1.3 Natural resources .................................................................................... 52 5.1.4 Infrastructure ......................................................................................... 53 5.1.5 Economy ............................................................................................... 55 5.1.6 Investment trends and projects - Racha ......................................................... 58 5.2 TOURISM-SPECIFIC MARKET DESCRIPTION OF RACHA REGION .................................................... 61 5.2.1 Tourism of Racha region ............................................................................ 61 5.2.2 Touristic attractions ................................................................................. 63 5.2.3 Supply and demand analysis ........................................................................ 66 5.2.4 International Tourism trends ....................................................................... 69 5.3 CURRENT STATE AND MARKET READINESS OF RACHA AND IT KEY ASSETS ......................................... 72 6 GENERAL OVERVIEW OF SELECTED KEY DESTINATIONS ................................................ 74 6.1 SHAORI ......................................................................................................... 75 6.1.1 Status Quo ............................................................................................. 75 6.1.2 Location ................................................................................................ 76 6.1.3 Climate ................................................................................................. 76 6.1.4 The Shaori Lake and the Cave ..................................................................... 76 6.1.5 Nature .................................................................................................. 77 6.1.6 Tourism ................................................................................................ 77 6.2 UTSERA ........................................................................................................ 78 6.2.1 Status Quo ............................................................................................. 78 6.2.2 Location ................................................................................................ 78 6.2.3 Climate ................................................................................................. 78 6.2.4 Mineral sources ....................................................................................... 79 6.2.5 Nature .................................................................................................. 80 Market and Technical Feasibility Study for Racha Development Project, Georgia Page 2 6.2.6 Tourism ................................................................................................ 80 6.3 SHOVI .......................................................................................................... 80 6.3.1 Status Quo ............................................................................................. 80 6.3.2 Location ................................................................................................ 81 6.3.3 Climate ................................................................................................. 81 6.3.4 Mineral waters ........................................................................................ 81 6.3.5 Nature .................................................................................................. 82 6.3.6 Tourism ................................................................................................ 82 7 GENERAL DEVELOPMENT OPPORTUNITIES AND BRANDING OF RACHA............................... 84 7.1 SWOT ANALYSIS OF RACHA REGION ............................................................................ 85 7.2 OVERVIEW AND COMMENTS ON THE FORMER AND CURRENT STRATEGIES ......................................... 87 7.2.1 Development strategy of the region for 2014-2021 years ..................................... 87 7.3 DOMESTIC AND INTERNATIONAL COMPARABLE AREAS AND DEVELOPMENTS ....................................... 89 7.3.1 Domestic comparable areas ........................................................................ 89 7.3.2 International comparable areas ................................................................... 93 7.4 RACHA AS A TOURISM BRAND .................................................................................... 96 7.4.1 Tourism Destination Management Organisations ............................................... 96 7.4.2 Creating of a place brand ........................................................................... 99 7.4.3 Best practice: Valais – ‘Engraved on my heart’ ................................................. 100 7.4.4 Branding of Racha in practice ...................................................................... 103 8 IDENTIFIED PROJECT DEVELOPMENT OPPORTUNITIES IN RACHA REGION .......................... 108 8.1 BASE ASSUMPTIONS OF OUR DEVELOPMENT CONCEPT AND FINANCIAL PROJECTIONS .............................. 109 8.2 SHAORI LAKE CONCEPT AND PRODUCT DEVELOPMENT ........................................................... 111 8.2.1 Former Plans .......................................................................................... 111 8.2.2 Development recommendations ................................................................... 111 8.2.3 Financial projections ................................................................................ 115 8.2.4 Investment Costs ..................................................................................... 122 8.3 UTSERA CONCEPT AND PRODUCT DEVELOPMENT ................................................................. 125 8.3.1 Former Plans .......................................................................................... 125 8.3.2 Development recommendations ................................................................... 125 8.3.3 Financial projections ................................................................................ 128 8.3.4 Investment costs ..................................................................................... 131 8.4 SHOVI CONCEPT AND PRODUCT DEVELOPMENT .................................................................. 133 8.4.1 Former Plans .......................................................................................... 133 8.4.2 Development recommendations ................................................................... 133 8.4.3 Financial projections ................................................................................ 135 8.4.4 Investment costs ..................................................................................... 140 8.5 IDENTIFIED OTHER TOURISM DEVELOPMENT OPPORTUNITIES ..................................................... 143 8.6 ADDITIONAL REVENUE STREAMS OF SHAORI AND SHOVI .......................................................... 148 8.6.1 Additional revenues streams of Shaori ..........................................................