Hospitality Industry Research - Ameria GroupIncameriagroupinc.com/wp-content/uploads/2016/01/armenian... · 2017. 7. 3. · Ameria CJSC has initiated the implementation of comprehensive

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.

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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.

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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

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Forecasts of Industry Performance…………………………………………………………………………………………………………..58