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HOSPITALITY INDUSTRY RESEARCH: TOURISM AND HOTEL RESEARCH: TOURISM AND HOTEL
INDUSTRY IN ARMENIAB i f P t tiBrief Presentation
INTRODUCTION
Ameria CJSC has initiated the implementation of comprehensive sectorial researches on the economy of Armenia. Short‐term plans include
h l d l d dresearches in Retail Trade, Hotels and Tourism, Food Processing, Mining, Telecommunications, which will be followed by other sectors of interest in Armenian economy The researches will enable all stakeholders toArmenian economy. The researches will enable all stakeholders to effectively assess the current market trends, their weaknesses and strengths, as well as emerging opportunities. g g g pp
This report presents the results of the first comprehensive study on Tourism and Hotel Industry in Armenia.y
The Tourism and Hotel Industry report could be of high interest for all the players in hospitality industry in Armenia, including existing hotels, tour p y p y y , g g ,operators, potential investors and also for other researchers.
2
SERVICE SECTORStructure of Services 2011 % Regional Distribution of Services 2011
20.622.322.9
ТransportationFinancial and insurance activitiesInformation and communication
Structure of Services 2011,%
95 4
87.4
79.2
88.5
4 6
12.6
20.8
11.5
Professional scientific and technical
Тransportation
Financial and insurance activities
Information and communication
Regional Distribution of Services, 2011
3.85.15.55.65.6
Human health and social work activitiesAccommodation and food service …
Administrative and support service …Education
Professional, scientific and technical …
72.9
87.7
95.8
86.5
95.4
27.1
12.3
4.2
13.5
4.6
Human health and social work activities
Accommodation and food service activities
Administrative and support service …
Education
Professional, scientific and technical …
1.73.23.7
0 5 10 15 20 25
Other service activitiesReal estate activities
Arts, entertainment and recreation
76.7
92.3
79.6
23.3
7.7
20.4
0% 20% 40% 60% 80% 100%
Other service activities
Real estate activities
Arts, entertainment and recreation
Yerevan Other marzes
24.3
1.1
Financial and insurance activities
Information and communication
Real Change in Services, 2011,%
The Accommodation and Food Service activities comprise 5.1% of all
‐2.1
2.1
‐7.2
0.2
Administrative and support service activities
Education
Professional, scientific and technical activities
ТransportationService activities comprise 5.1% of all services rendered to population,
The sector was among 4 top services by the growth in 2011
‐0.1
13.5
13.7
7.5
Real estate activities
Arts, entertainment and recreation
Human health and social work activities
Accommodation and food service activities services by the growth in 2011 (7.5%).
3Source: NSS RA
4.7
‐10 ‐5 0 5 10 15 20 25 30
Other service activities
GOVERNMENT TARGETS: TOURISMb h f d d b d lIn February 2008, the Government of Armenia adopted an ambitious tourism development concept
paper with the goal to increase the contribution of tourism to gross national income, balanceddevelopment, improvement of living standards and poverty alleviation in rural areas,
diti d th h i i t i i l i i t i d j bpreconditioned through an increase in tourism arrivals, an increase in tourism revenue and jobcreation. Targets established by the concept paper are as follows:
Targets 2020 2030
PRIMARY TARGETS
International Tourism Arrivals (CAGR – 9%) 1.5 million 3 millionIncome Generated from Inbound Tourism (CAGR 11% at 2007
US$1 35 billion US$3 billionprices)
US$1.35 billion US$3 billion
Internal Tourism Visits 1 million 1.5 million
Tourism Employment as a % of Total Employment 1.9% 2.0%
SECONDARY TARGETS
Armenia’s Market Share in Europe 0.18% 0.31%
Total Bed Spaces 49,315 51,370
Hotel Occupancy Rates 50% 60%
Per Capita Daily Expenditure (2007 prices) $60 $67
Armenia’s Ranking in WEF T&TC Index <60 <50
4
Government Tourism Expenditure US$ 7.9 million US$ 49 million
WEF T&T COMPETITIVENESS INDEX
Armenia (Rank) Georgia (Rank) Azerbaijan (Rank)
d ( f i )2011 Index (out of 139 countries) 90 73 832009 Index (out of 133 countries) 91 73 76Ranking among European countries (out f i )
40 36 ‐of 42 countries)T&T regulatory framework 58 35 59T&T business environment andi f
100 94 87infrastructure
T&T Human, Cultural and Naturalresources
107 92 105
5
INTERNATIONAL TOURISM ARRIVALS
558.4 575.3
684.0757.9
600
700
800
s Pe
ople
International Tourists Arrival to Armenia
603.1
590
600
610
Peop
le
International Tourists Arrival, 2012/2011
263.0318.6
382.2
510.6
300
400
500
600
Thou
sand
s
551.6560
570
580
590
Thou
sand
s P
114.5162.2
206.1
0
100
200
520
530
540
550
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
The number of international arrivals to the country – incoming tourism, is steadily
2011, Jan‐Sept 2012, Jan‐Sept
Source: NSS RA Source: NSS RA
growing since the celebrations of the 1700th anniversary of adopting Christianity in 2001,
The number of incoming tourists growth CAGR for the period of 2001‐2011 comprises around 18 74% which proves the high development potential of the sector in thearound 18.74%, which proves the high development potential of the sector in the country,
The number of incoming tourists equals to 603,074 for the first nine months of the year
6
The number of incoming tourists equals to 603,074 for the first nine months of the year2012, which is around 9.4% more than for the same period of the previous year,
INTERNAL TOURISM IN ARMENIA
447.2 435.7 456.4489.4
500
600
s Pe
ople
Internal Tourists
63 96364 000
66 000
Peop
le
Internal Tourists, 2012/2011
195.1239.8
270.2308.0
369.0
300
400
Thou
sand
s
56 50458 000
60 000
62 000
117.1 121.3
195.1
0
100
20056 504
52 000
54 000
56 000
02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
52 0002011, Jan‐June 2012, Jan‐June
Source: NSS RA Source: NSS RA
The number of internal tourists in the country is steadily growing at CAGR of around 13.9% for the period of 2001‐2011, which clearly shows the existing development potential of internal tourism in the countrypotential of internal tourism in the country,
The number of internal tourists equals to 63,963 for the first half of the year 2012, which is around 13.2% more than for the same period of the previous year,
7
% p p y ,
HOTELS SUPPLY: OVERVIEW
101110
118
142 143
120
140
160Number of Available Hotels
Armenia
Yerevan
873 372
9 64 204
8 005 9 692
10 000
12 000
s
Hotel’s Accommodation Capacity
Armenia
Yerevan
76
95 101
3341 45 42 42 46 4660
80
100
Units
6 8 7
6 299
6 46 7 2
3 056 4 161
2 894
2 898
2 924
3 052
3 223
4 000
6 000
8 000
Beds/places
33
0
20
40
2005 2006 2007 2008 2009 2010 20110
2 000
2005 2006 2007 2008 2009 2010 2011
During the period of 2005‐2011 the total number of hotels have almost doubled in Armenia,however the bed capacity increased only around 1.4 times, i.e. more facilities with small number of
h
Source: NSS RA Source: NSS RA
rooms were opened in the country,
During the same period the number of hotels in Yerevan grew for around 40%, while the numberof available rooms capacity for only 5%,p y y ,
Today Yerevan hosts around 46 different types of hotels with approximately 3,200 beds in total.Additionally, there are around 30 different types of guest houses, B&Bs and other accommodationsin Yerevan with around 700 beds in total Hence total accommodation capacity of Yerevan is
8
in Yerevan with around 700 beds in total. Hence, total accommodation capacity of Yerevan isaround 3,900 beds/places.
HOTELS SUPPLY: OVERVIEWNumber of Hotels by Type Distribution , 2012
Upper upscale
Economy
Number of Hotels by Type Distribution , 2012
The majority of hotels, operating inArmenia does not belong to any chain, neitheri i l l l
upscale3%
Upscale8%
77%
international or local,
There are mainly an economy class (around77%) and midscale class (12%) hotels
Midscale12%
Source: various online booking systems NSS RA 77%) and midscale class (12%) hotelsavailable in the country,
The main part of available hotel rooms are
Number of Hotel Rooms by Type Distribution , 2012
Source: various online booking systems, NSS RA
The main part of available hotel rooms areclassified as economy (around 39%), upscale(27%) andmidscale (24%),Upper
upscaleMidscale24%
Economy39%
upscale10%Upscale
27%
24%
9
Source: various online booking systems, NSS RA
HOTELS SUPPLY: ROOM RATESA A l R R t f 2010
500
600
345
559
USD
Average Annual Room Rates for 2010Single Room Double Room Junior SuiteExecutive Suite
100
200
300
400
199
97 76 53
228
12992 74
345
180124
94
239
136 109Ra
tes in U
0
100
Upper upscale Upscale Midscale Economy
Hotel Class
600 526
Average Annual Room Rates for 2012Single Room Double Room Junior Suite
200
300
400
500
200230
139
348
188127
231
139 116
Rates in USD
Junior SuiteExecutive Suite
0
100
200
Upper upscale Upscale Midscale Economy
10778 70
13994 86
127 104139 116
l l
10
Hotel Class
HOTELS SUPPLY: OCCUPANCY
63% 65% 65%
Annual Hotel Performance by Upper Upscale Hotels
53%54%
55%
54%56%
Annual Hotel Performance by Midscale Hotels
54% 56% 58% 60% 62% 63% 65% 65%
20%30%40%50%60%70%
47%49%
51%52%
52%53%
44%46%48%50%52%54%
0%10%
2008 2009 2010 2011 2012 (F) 2013 (F) 2014 (F) 2015 (F)
42%44%
2008 2009 2010 2011 2012 (F) 2013 (F) 2014 (F) 2015 (F)
62% 66% 69% 72% 72% 72%70%80%
Annual Hotel Performance by Upscale Hotels
35% 36%42% 44% 45% 46% 46% 47%
40%
50%
Annual Hotel Performance by Economy Hotels
56% 57%62%
20%30%40%50%60%70% 35% 36%
10%
20%
30%
40%
0%10%
2008 2009 2010 2011 2012 (F) 2013 (F) 2014 (F) 2015 (F)
0%2008 2009 2010 2011 2012 (F) 2013 (F) 2014 (F) 2015 (F)
Source: Expert Assessment
11
Source: Expert Assessment
REGIONAL COMPARATIVE ANALYSIS
50
2.03
2.82
562.0
2.5
3.0
on Peo
ple
Number of Incoming Tourists in Regional CountriesArmeniaGeorgiaAzerbaijan
.16
0.21 0.26 0.32 0.38 0.51
0.56
0.58 0.68 0.76
0.30
0.31 0.37 0.56 0.76 1.
05 1.29 1.5
0.58 0.77 0.99
0.69
0.68
0.73 1.
04
1.01 1.
28 1.5
0.5
1.0
1.5
2.0
Millio
As of the 2011 around 5.2 million people have visited South Caucasus countries on business, leisure
0 0 00.0
0.5
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
or other types of trips,
In 2011 Georgia is the most visited among South Caucasus countries by international tourists,followed by Azerbaijan and Armenia,y j ,
The share of people, visiting Georgia among all South Caucasus countries has doubled during therecent decade – from 28.8% in 2002 to 54.9% in 2011, while the share of Armenia remains almostunchanged (15 6% in 2002 vs 14 7% in 2011) and the share of Azerbaijan has declined (55 6% in 2002unchanged (15.6% in 2002 vs. 14.7% in 2011) and the share of Azerbaijan has declined (55.6% in 2002vs. 30.4% in 2011),
CAGR of the number of international arrivals is the highest for Georgia (25.2% over the last decade),f ll d b A i (16 7%) d A b ij (10 5%) Thi i di t h hi h i l t i
12
followed by Armenia (16.7%) and Azerbaijan (10.5%). This indicators show high regional tourismdevelopment potential, particularly for Georgia and Armenia.
RECENT HOTEL INVESTMENTSAccording to the plans of existing hotels, as well as the announced entries of newhotels, it is estimated that approximately 1,000 new hotel rooms will enter the Yerevanhotel market by 2015/16, of which approximately 48% are expected to be activelyunder development. A significant number of the new hotels are expected to beaffiliated with global brands and be of international quality and service offerings.Among new entries are:
Chain Brand Opening Date Number of Rooms/Beds
Hyatt Hyatt Place 2013 95/190
Wyndham Hotel Group Wyndham 2014 203/406y d a o e G oup y d a 0 03/ 06
InterContinental Hotels Group
Crowne Plaza 2014 140/280
Wyndham Hotel Group Ramada 2013‐2014 120/240
Accor Ibis 2015‐2016 176/429
Wyndham Hotel Group Howard Johnson 2014‐2015 120/200
Total 854/1,745Total 854/1,745
Also, it is announced that the current buildings of the Ministry of Foreign Affairs andPost Office will be converted to hotels by around 2016‐2017 adding in total 358 roomsto the market Also during 2013 2014 around 160 rooms will be added by existing
13
to the market. Also during 2013‐2014 around 160 rooms will be added by existinghotels.
FORECASTS OF INDUSTRY PERFORMANCEH t l I d t F t d Sh i GDP
0.66% 0.67%0.79% 0.79%
0.7%0.8%0.9%
100
120
USD
Hotel Industry Forecast and Share in GDP
72.1 77.595.2 99.6
0.2%0.3%0.4%0.5%0.6%
20
40
60
80
Volum
e, in
mln U
0.0%0.1%
0
20
2012 2013 2014 2015
Hotel Industry Forecasted Volume Industry Forecasted Share in GDP, %
The Armenian hotel industry turnover is assessed based on:
the average occupancy rate for each hotel class, revealed during the study,
current number of available rooms for each hotel class and their expected increase,
average room rates, adjusted for each distribution channel,
According to our assessment the Armenian hotel industry’s real turnover is expected to grow at an CAGR of around 8.4% during the coming years,
According to our assessment the Armenian hotel industry’s real share in country’s GDP is
14
According to our assessment the Armenian hotel industry s real share in country s GDP is around 0.66% and it is forecasted to grow up to 0.79% by 2015.
FORECASTS OF INDUSTRY PERFORMANCEA I di t f Diff t Cl H t l 2012 2015
Upper Upscale Upscale Midscale Economy
Average number of rooms 120 100 60 15
Average Indicators for Different Class Hotels, 2012 ‐ 2015
Average occupancy, %2012: 62% 2012: 69% 2012: 52% 2012: 45%
2015:65% 2015: 72% 2015: 55% 2015: 47%
Average room rate (ARR), USD USD 176.00 USD 98.00 USD 69.00 USD 63.00
Average IRR, % 11.8% 12.2% 13.6% 13.1%
Source: Expert assessment
Based on the findings above an analysis of average hotel performance in each category was implemented,
Relatively good performing Armenian hotels based on the average IRR are hotels in midscaleRelatively good performing Armenian hotels based on the average IRR are hotels in midscale category,
The performance of upper upscale and upscale hotels in terms of average IRR is approximately the same, however the upper upscale hotels perform better in terms of average EBITDA.
15
CONTENT OF RESEARCHSummary 4Summary……………………………………………………………………………………………………………………………………………………4
Macroeconomic Overview………………………………………………………………………………………………………………………….7
Service Sector………………………………………………………………………….……………………………………………………………….18
Government Targets: Tourism……………………………………………………………………..………......................................20
WEF T&T Competitiveness Index………………………………………………………………………………………………………………22
International Tourism Arrivals…………………………………………………………………..……………………………………………..25
Origin of International Arrivals…………………………………………………………………………………………………………………27
Place of Stay in Armenia…………………………………………………………………………………………………………………………..29
Purpose of International Arrivals………………………………………………………………………………………………………………30p
Internal Tourism in Armenia……………………………………………………………………………………………………………………..32
Purpose of Internal Tourism……………………………………………………………………………………………………………………..34
Hotels Supply 36Hotels Supply……………...…………………………………………………………………………………………………………………………..36
Distribution Channels……………………………………………………………………………………………………………………………….50
Capital Hotel Development Cost………………………………………………………………………………………………………………51
H l M P i 53Hotel Management Practice…………………………………………………………………………………………………………………….53
Regional Comparative Analysis …………………………………………………………………………………………………………….….54
Recent Hotel Investments……………………………………………………………………………………………………………………..…56
16
Forecasts of Industry Performance…………………………………………………………………………………………………………..58