HOSPITALITY SECTOR CURRENT DYNAMICS

MARY CHACHANIDZE, CFATBC CAPITALMANAGING DIRECTOR

PRESENTATION OVERVIEW

• EXPECTED OCCUPANCY BY CURRENT BOOKINGS

• ADR DISCOUNTS AND OTHER REVENUES

• REGIONAL RECOVERY DYNAMICS

• EXPECTATIONS FOR 2020-2022

3JULY EXPECTED OCCUPANCIES UP ON THE BACK OF DOMESTIC TOURISM

Source: Survey of 25 large and 20 small and medium hotels; Note: Pre-COVID booking shares derived from somewhat smaller samples

• Current bookings: highest occupancies observed in Kakheti in large as well as small and medium hotels

• Booking timing: starting from August, most books are made pre-COVID by foreigners. With continuous border closures, these bookings are expected to be canceled, some

replaced by new bookings by local visitors

• Weekend occupancy: throughout the last month and a half, the weekend occupancy exceeds the weekdays occupancy by on average 1.5-2

Forward occupancy rates (%) by current bookings in large hotels Forward occupancy rates (%) by current bookings in small and medium hotels

4%

13%

16%

28%

0%

10%

20%

30%

40%

Jul Aug Sep Oct Nov Dec

Weekly change for July:

+0pp, +2pp, +1pp, +6pp

Tbilisi Seaside Other regions Kakheti Pre-COVID

1%

13%

10%

22%

0%

10%

20%

30%

40%

Jul Aug Sep Oct Nov Dec

Weekly change for July:

-3pp, +6pp, +3pp, +2pp

Tbilisi Other regions Kakheti Seaside Pre-COVID

4WITH DISCOUNTS IN ADRs, IT IS IMPORTANT TO MAINTAIN OTHER REVENUES

• Price discounts: in July, larger hotels offer the most sizeable ADR discounts, however as a single category, the small seaside hotels offer the highest discounts. In order to

attract domestic tourists, the tradeoff between the room price and the occupancy becomes important to consider

• More “other” revenues: with the current ADR discounts at hand, the shortage on room revenues can be substituted by other revenues (food & drinks, restaurant, bar). Last

month’s softening regulations on MICE tourism poses an additional opportunity for large hotels to receive new revenues

YoY Change in ADR according to current bookings (%) YoY change in hotel revenues (%) 2020

-50%

-45%

-33%-30% -29%

-27%

-13%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Jul Aug Sep

Seaside - smallKakheti - largeOther regions - largeTbilisi - largeSeaside - largeOther regions - small

Source: Survey of 25 large and 20 small and medium hotels, TBC Bank; Note: hotel service category includes all expenses that are paid for at the POS terminals in hotel receptions; Jul* includes the period of 20 Jun – 19 Jul

-97% -97%

-69%

-60%

-99% -99%-90%

-82%

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Apr May Jun Jul*

Hotel service Hotel restaurant, bar, night club, other

5GROWTH IS MORE VISIBLE IN REGIONS; RECOVERY IS MORE EVIDENT IN LARGE HOTELS

Source: TBC Bank; Note: Growth in non-cash turnover is based on POS and E-commerce payments through TBC channels; *Jul includes 20Jun-19Jul periodThe decline rates are based on the same sample of hotels for 2019 and 2020, and represents an apple for apple comparison of the change in non-cash turnover

YoY change in non-cash turnover (%): Tbilisi and regions YoY change in non-cash turnover (%): By hotel size (Regions)

• Tbilisi and regions: Non-cash payments in hotels continue stable growth with the average change for the last 30 days at -82% YoY; Growth is more visible in regions

(-68% YoY) while spending in Tbilisi is close to zero (-96% YoY)

• Hotel size: Recovery is more visible in large hotels, indicating higher opportunity to attract visitors through discounts. Recovery is lower in medium and small size hotels

-99% -98%

-79%

-68%

-99% -99%

-90%

-82%

-99% -99% -98% -96%-100%

-80%

-60%

-40%

-20%

0%

Apr May Jun Jul*

Tbilisi Regions Total

-99% -98%

-85%

-77%

-99% -98%

-83%

-70%

-100% -100%

-70%

-61%

-100%

-80%

-60%

-40%

-20%

0%

Apr May Jun Jul*

Other hotels, hostels, guesthouses 50-120 Room hotels >120 Room hotels

REGION OF ABKHAZETI

Samegrelo-Zemo Svaneti*

Beds 8%

Racha-Lechkumi,Kvemo Svaneti*

Beds 2%

ImeretiBeds 8% Shida Kartli

Beds 1%

Samtskhe-Javakheti

Beds 12%

Guria*Beds 5%

AdjaraBeds 28%

Kvemo KartliBeds 1%

TbilisiBeds 25%

Mtskheta-Mtianeti

Beds 6%

KakhetiBeds 5%

HIGHER RECOVERY IN THE REGIONS CLOSER TO TBILISI, OR SUMMER DESTINATIONS 6

Source: GNTA, TBC Capita*The YoY decline for Racha-Lechkhumi, Svaneti, Samegrelo and Guria is calculated for a sum of these regions and is -% YoY in June

YoY decrease in July 45-60%

YoY decrease in July 60-80%

YoY decrease in July >80%

7RECOVERY IS MOST VISIBLE IN KAKHETI, FOLLOWED BY MTSKHETA-MTIANETI

• Kakheti and Mtskheta-Mtianeti continue recovery on the back of domestic tourism, driven by the close distance from Tbilisi

• Adjara: Even with the increasing spending from domestic tourism in the summer period, the decline is expected to remain profound

• Samtskhe-Javakheti: Improvement is expected to be driven by hotels located in popular Borjomi and Bakuriani summer destinations

• Racha-Lechkhumi, Samegrelo, Svaneti and Guria: Even with the increasing trend and higher share of hotels, tourism total turnover is small with minimal effect on the industry

• Tbilisi, Imereti, Kvemo and Shida Kartli: Recovery is less visible

YoY change in non-cash turnover (%): June & July* 2020

Source: TBC Bank; Note: *July represents past 30 days as of 15.07.2020

-59%

-45%

-66%

-54%

-70%

-62%

-85%-78%

-86%

-75%

-91%

-76%

-93% -91%-97% -95%

-100% -99%-94% -91%

-100% -99%-100%

-80%

-60%

-40%

-20%

0%

Jun

Jul

Jun

Jul

Jun

Jul

Jun

Jul

Jun

Jul

Jun

Jul

Jun

Jul

Jun

Jul

Jun

Jul

Jun

Jul

Jun

Jul

>120 roomsSmall hotels &

guesthouseSmall hotels &

guesthouse 50-120 rooms >120 rooms

KakhetiMtskheta-Mtianeti

Rahca,Lechkumi,Samegrelo,

Guria,Svaneti Adjara

Samtskhe-Javakheti Imereti Tbilisi

Kvemo &ShidaKartli

Source: TBC Capital

Change (%) in occupancy, ADR and RevPAR, compared to 2019

8FORECASTS: RevPAR IS EXPECTED TO DECREASE BY 85% IN 2020 (USD)

• Current dynamics: Postponing of commercial regular flights to September is somewhat offset by the positive trend of local demand. TBC capital projections for 2020

occupancy are improved by 5%

• TBC Capital projections: Hotel Average Daily Rate (ADR) in USD, average occupancy and Average Revenue Per Available Room (RevPAR) is expected to decrease by

-30%, -80% and -85% respectively in 2020, compared to 2019; Occupancy is expected to recover in 2022 to 2019 levels while price are expected to remain c. 0-5%

lower, compared to the same period

-100%

-80%

-60%

-40%

-20%

0%

Q1 2020(estimate)

Q2 2020(estimate)

Q3 2020(forecast)

Q4 2020(forecast)

Q1 2021(forecast)

Q2 2021(forecast)

Q3 2021(forecast)

Q4 2021(forecast)

2022 (forecast)

Change in ADR (vs 2019) Change in occupancy (vs 2019) Change in RevPAR (vs 2019)

9

KEY DEVELOPMENTS

• JULY EXPECTED OCCUPANCIES ARE UP ON THE BACK OF DOMESTIC TOURISM

• WITH THE SIZEABLE DISCOUNTS AT HAND, MAINTAINING OTHER REVENUES IS IMPORTANT

• RECOVERY IS MORE VISIBLE IN REGIONS CLOSE TO TBILISI AND SUMMER DESTINATIONS

• RECOVERY AT A FASTER PACE IS VISIBLE IN LARGE HOTELS, SINCE THEY CAN OFFER HIGHER DISCOUNTS

• ADRS IN USD, AVERAGE OCCUPANCY AND REVPAR ARE EXPECTED TO DECREASE BY -30%, -80% AND -85%

RESPECTIVELY IN 2020, COMPARED TO 2019

• OCCUPANCY IS EXPECTED TO RECOVER IN 2022 TO 2019 LEVEL WHILE PRICE WILL REMAIN C. 0-5% LOWER, COMPARED

TO THE SAME PERIOD

LEGAL NOTICE

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Mary Chachanidze, CFAManaging Director

Otar NadaraiaChief Economist, TBC Group

Tornike Kordzaia, CFAHead of Research

Aleqsandre BluashviliHead of Macro-Finance Department, TBC Bank

Givi AdeishviliSenior Research Associate

Anna MzhavanadzeAnalyst

Andro TvaliashviliResearch Associate

Mikheil MghebrishviliIntern

Luka ChigilashviliResearch Associate

Tel: +995 32 2 272727 Email: research@tbccapital.ge

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