2022 April-May Analysis

TBC Capital: Georgia’s tourism sector faces uncertainty following outbreak of war in Ukraine

As the war in Ukraine enters its second month, its impact continues to reverberate throughout the region, causing political and economic uncertainty. TBC Capital’s special report Tourism: What is at Stake? looks at the how the conflict may affect Georgia’s tourism sector in 2022.

As the war in Ukraine enters its second month, its impact continues to reverberate throughout the region, causing political and economic uncertainty. TBC Capital’s special report Tourism: What is at Stake? looks at the how the conflict may affect Georgia’s tourism sector in 2022.


Prior to the onset of war in Ukraine, TBC Capital’s forecasts for Georgia’s tourism sector predicted a strong recovery in 2022. In January, analysts estimated that visitor numbers would reach 62% of their 2019 level this year, with tourism revenue at 85% compared to three years prior. Hotel occupancy rates and the average daily rate (ADR) were expected to recover to 96% and 97%, respectively, of their 2019 levels.

TBC Capital’s Head of Research Irina Kvakhadze says that these optimistic expectations were further reinforced by the diminishing effect of Covid-19. “The Omicron variant seems to be a much milder variant than Delta. As a result, many countries have continued to remove their travel restrictions, even though case numbers may still be high. We’ve also had two years to learn how to deal with the pandemic and develop the necessary safety protocols. For these reasons, Covid-19 has become a much smaller factor in our tourism projec-tions.”


In 2019, before the pandemic shuttered Georgia’s tourism sector, Russian visitors accounted for 19% of international visitor trips and 25% of tourism revenue, making it a significant source market. Ukraine, on the other hand, represented a much smaller part of the market pre-pandemic, accounting for only 3% of visitor trips and 6% of revenue.

However, the significance of these source markets has shifted greatly during the pandemic. Ukraine’s recovery saw a robust rebound in 2021, with visitor trips and revenue recovering to 70% and 88%, respectively, com-pared to their 2019 levels. In January 2022, Ukrainian visitor trips and revenues surpassed their January 2019 performance, registering 21% and 52% growth, respec-tively. These numbers indicated that Ukraine was becoming a promising market for Georgian tourism.

Conversely, the Russian source market for tourism saw a much slower recovery in 2021; visitor trips registered at only 14% compared to 2019 and revenue reached only 20% of its pre-pandemic level.


As TBC analysts have noted, the outbreak of war in Ukraine has pushed the world out of a “business as usual” operating mode, resulting in the need for adjusted projections. For the tourism sector, this means evaluating how the war may affect Georgia’s source markets.

Beyond the more obvious repercussions for Ukraine and Russia, analysts see Belarus and Armenia as markets that may be significantly impacted given their close econom-ic and political ties to Russia. However, while these two countries did make up a combined 13% of visitor trips to Georgia in 2021, they only account for 6.3% of revenue, making their financial impact less significant.

Safety concerns due to the war and a perception that Georgia is a moderately risky destination may limit visits from non-neighboring countries. This includes visitors from the EU, US, UK, and Middle East.


In its analysis of the war’s impact on Georgia, TBC Capital has created forecasts based on two potential scenarios. The first scenario, deemed the “timely resolution scenario”, operates under the assumptions that the war will be short-lived, Russia will continue to export energy to Europe, and there will be a gradual easing of the existing sanctions. It also assumes that oil and gas, as well as other commodities, will surge in price globally.

If these assumptions are correct, TBC Capital forecasts that visitor trips will only recover to 47% compared to 2019, translating to tourism revenue that reaches 68% of its level three years prior, with migration contributing by 1.5pp to this recovery. In this scenario, potential migration flows from countries like Ukraine, Belarus, and Russia contribute USD 60 million of this revenue.

If the conditions assumed by this scenario are met, the Russian tourism market’s recovery is expected to contin-ue lagging, while the Ukrainian tourism market is expect-ed to dramatically decrease. Trips and revenue from the Middle East and Israel are still expected to grow by more than 30% compared to 2019.


In its second scenario, deemed the “delayed resolution scenario”, TBC Capital analysts operate under the assumption that the war will continue for more than a quarter and that oil and gas prices will surge before normalizing at the end of the year. They also assume that Western countries will impose full-scale sanctions, including a ban on Russian energy imports to Europe and a complete cut-off from the SWIFT system for Russian financial institutions.

If these conditions are met, visitor trips are only expected to reach 40% of their 2019 levels. Tourism revenue will amount to 55% of its pre-pandemic level (3.5pp recovery contributed by migration), with USD 100 million being accounted for from migration contributions. In this scenario, Russia and Ukraine barely contribute to Geor-gia’s tourism revenue, while Israel and the Middle East still register growth, albeit smaller than in the first scenario.

TBC Capital’s Kvakhadze classifies the current situation as somewhere between these two scenarios. “If you look at the assumptions we’ve used to forecast the two scenarios, neither are fully met at this time. The EU has not banned Russian energy imports, and SWIFT is restricted for many Russian banks but not all of them. We also don’t expect sanctions to be lifted anytime soon.”

She stresses that the situation is dynamic and could change rapidly. “Depending on how long the war lasts and what the resolution is, we could see a big impact on perceptions of Georgia as a safe destination. However, we do not expect tourism to be hit as hard as it was in the beginning of the pandemic. We will see an impact on our source markets, but we do not expect an entire shut down of the industry.” For now, she notes, TBC Capital will continue to monitor the situation and update its assessments accordingly.