Tuesday, June 18, 2013

The Rezidor Group VP: More about Georgia

Photo: The Financial
18.06.2013. The Rezidor Hotel Group, the managing company of Radisson Blu hotels in Tbilisi and Batumi, would like to have up to ten hotels in Georgia. Tom Flanagan, Area Vice President of the Rezidor Hotel Group, currently residing in Moscow, has said that good relations with Russia are essential for the development of tourism in Georgia. Mr. Flanagan spoke with The Financial last Wednesday at Radisson Blu Iveria Hotel, where Rezidor Hotel Group held its regional conference in Tbilisi .

“Due to the increasing level of business activity as well as development of Georgia’s meetings facilities that meet international standards such as at Radisson Blu Iveria Hotel, Tbilisi , the demand for Georgia as the business destination and event’s venue is growing” said Flanagan.

“The more positive relations with Russia of late are a very exciting part of the potential in Georgia. This is unbelievably positive progress for the country. We see the tourism figures of arrivals for the country jumping and Russians are starting to contribute to that. So, these growth figures are extremely important for the hotels as a feeder,” said Mr. Flanagan.

Flanagan said that he first met some Georgians on the airplane when he was flying to Tbilisi . After some initial conversations they promptly became good friends. The Georgians, among them the Director of the Opera House in Tbilisi , invited him to dinner. “This is a typical example of Georgian hospitality, which is fantastic,” Flanagan said. “Tbilisi is my favourite city to visit out of all the countries that we have hotels in. What the local government has done to the streets is a miracle,” he said.

Flanagan said that restoring relations with Russia is critical for Georgia. “You are very strategically located. I believe you can get more out of this relationship and vice-versa. You   have so many resources here which you can supply. And an absolutely huge area for products that are easy for you to sell. Borjomi water is renowned in Russia as one of the best waters to drink.”

“We tasted many great wines last night from five different local suppliers and every one of us has become fascinated by the wine here. This again has the possibility for huge distribution in Russia once it gets approved and will be opened up for trading. So, Georgia is absolutely the winner in this relationship.”

“The risks are purely political and intangible. The average person in Russia has a very respectful attitude towards people in Georgia and most people in Georgia feel absolutely no ill will towards Russian people. It is all on an intangible level. The people from both countries like each other.  It is just the politics that needs to be sorted out at the top level,” said Flanagan.

Q. Why did you choose Georgia as a venue for the annual regional conference of Rezidor Hotel Group this year?

A. I have a very adamant GM working here. He insisted on promoting Georgia and the hotel. Last year we had a conference in Istanbul. My office is based in MOSCOW and we have about eleven countries in our region. So, logistically it is quite difficult to get here from some of the countries. We are so proud of this hotel though, the owners and the potential development in Georgia, we had to come. We wanted to show people something different. People do not know about Georgia. Many have never met Georgians before. Katie Melua is the only famous Georgian they have ever heard of.

We felt that we wanted to show appreciation for all their hard work here, since it’s considerably easier to work in key cities in Eastern Europe.

Q. What is the main challenge that the HoReCa industry currently faces in the region?

A. The biggest challenge in the region is geopolitical instability, which can have a huge effect on business. Like, for example, in Ukraine ; for a long period of time governmental instability reduced investor interest in the country. This caused us to have lesser occupancy on average house rate. Across the region and in Georgia specifically, recent governmental changes have been relatively successful but I do hope that it stays that way.

Q. What is the general strategy of the Rezidor Hotel Group regarding business development in Georgia, Azerbaijan, Armenia and Turkey?

A. We have 85 hotels in our region that are opened and under development, only opened properties – 45 hotels on around 12 000 rooms. We have a very big pipeline of hotels in the area. The fastest growing region is Russia. We have approximately 20 hotels in the pipeline there. The next biggest region, which is only now starting to grow seriously, is Turkey. Georgia is an extremely important country for us. In three to four years’ time we would like to have up to ten hotels in Georgia. This is a significant number of hotels for this country. Georgia can be compared to my home country - Ireland. For many years we had just the one hotel in Dublin. People thought we were a little bit crazy to develop in such small cities. Today we have ten of our hotels in Ireland and most of them are very successful. This is what might happen in Georgia. We have Radisson Blu Batumi hotel, we have a project in Tsinandali, we are supposed to fly to Mestia to look at a project there, we have an enquiry for a project in Borjomi, as well as several other interesting projects that people want to develop.

We are looking into some projects in Tbilisi as well as many other brands that are looking to enter Tbilisi . By the time they are developed I would expect arrival numbers to have increased significantly which would then feed those new rooms. So, there is potential for leisure business from Turkey, Russia, Ukraine , Azerbaijan and neighbouring countries, but most of all business travel as you have an extremely favourable corporate tax rate here in Georgia. In Russia, for example, there is 18% tax rate. That is automatically an invitation to large companies to set up here, which means instant increase in business travellers. We recently had a familiarization trip with large business and tour operators in Russia. We brought them here to show them the hotel. We then instantly had five bookings from that one trip. People have to see it to believe it. They do not really understand the beauty of the country, the quality of the hotels; they really have to see it for themselves. We are going to continue bringing people to the country to experience it. Tbilisi was extremely popular with Russians in the past, and remains very well known to this day. So, I think that it will be very easy to attract them back. The visa free regime for Russians to Georgia is also very important and a big advantage. From the Soviet Union everybody remembers that Georgia was a place for vacations. Lots of Russians remember spending holidays in Georgia, and they still want to come back.

Q. In 2009 you gave a positive estimation of the Russian and CIS countries in terms of market development. What has changed since that time? Which particular regions now have more of a chance for rapid development?

A. Even through the crises of 2008-2009 we still managed to increase our portfolio of hotels to more than those of our competitors. We are the largest international hotel operator in Russian and  CIS, but we increased the gap between us and the next biggest competitors even further. Countries that are less optimistic are perhaps countries that have been over-invested in, that have political issues, like Ukraine . Baku is another market that has seen an incredible amount of supply increase. But for Russia, for Georgia and for the neighbouring countries in the area like Turkey, we still feel extremely confident because not only have you got factors like domestic business in Turkey with over 70 million people, you have factors in Georgia with very favourable business conditions for startup business and for new international companies coming in. Russia simply has an undersupply of quality international tasks. With all these factors we are very optimistic and our growth targets are not being reduced for the number of hotels in this area. I hope that for the next 10-20 years we will still be the number one international hotel chain. It is very difficult for others to catch up to us given our position.

Q. How can the Sochi Olympics influence the development of regional tourism?        

A. Sochi’s development is extremely interesting. We are one of the biggest operators to open new hotels there. In total we are going to have five hotels in Sochi. After the Olympics there will be an adjustment period where we will have too many rooms that we will have to recreate demand for. This will be a sensitive issue depending on the Russian Government to follow through with promises to redevelop the Olympic park and to promote the destination of the ski facilities, redevelopment of the congress centres and aqua parks; this is central to redeveloping from the post-Olympic state to a desirable leisure destination. The main question is how long it will take for the airlines to be commercial and varied in terms of pricing to be attractive for common tourists. Currently there is quite a monopoly in terms of access as there is very premium price because of the activity there at the moment, which really has to change. It is temporary demand which the Olympics is creating; a long term oversupply will need to be tackled in terms of destination management.

Q. Turkey is the main regional tourist competitor of the Georgian Black Sea regions. Considering your background of working on the Turkish market, what would you suggest Georgian tourism professionals implement in order to compete with Turkey?

A. In some ways Turkey is similar to South Spain for Europeans. I believe that the largest numbers go there because the prices attract them. Turkey is for a certain type of individual. Here in Georgia you have a more novel experience and I do not suggest you should ever look for those mega volumes that Turkey is getting. I think it is a more delicate, cultured country in terms of the size, capacity, and infrastructure. There is something special about Georgia that we need to retain in terms of its natural appeal, but for that you would be looking probably at the more expensive visitors. People that are willing to pay a little bit more. So, it is a really different segment that you have here in Georgia. You have the casino business which is very attractive for many nationalities, including getting the Turkish over here, getting the Russians, Azeri and also other surrounding countries’ peoples to come. So, you do have uniqueness. Georgia has been slightly closed off for the past couple of years, especially to Russia, so automatically you are going to increase your competitiveness by being open.

Q. The newly elected Georgian Government was planning to ban gambling. Do you think that would be the right step?

A. I believe that the Government should control the operations of casinos, cancelling them should not be a priority. That should be a priority in a number of years when you have a replacement strategy for that business. Now you should focus on all your selling points instead.

Q. What should be done to improve infrastructure?

A. I loved the Airport arrival, so friendly, so unique, and so fast that it does not need improvement. The roads are great, redevelopment of the city centre is amazing, but needs to be promoted more. The money needs to be spent on promoting Georgia outside of Georgia. Because once you get here it sells itself. People have not heard about the changes that have happened here over the last couple of years. As a tourist I would like to know more about Georgia.


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