assessment of wine tourism in georgia

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Support Added Value Enterprises ActivityPhase-II

AgVANTAGE

Assessment of WineTourism In Georgia

August, 2005

Prepared by:Sandra A. Chesrown, AICP

Urban Planner & Tourism Specialist

This work is performed under United Stated Agency for International Development/CaucasusContract No: 114-C-00-02-00086-00.


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Table of Contents

EXECUTIVE SUMMARY .................................................................................................2

SECTION 1. INTRODUCTION........................................................................................4

SECTION 2. PROJECT BACKGROUND........................................................................5

SECTION 3. CONDITIONS FOR DEVELOPMENT OF WINE/RURAL TOURISM RAPID TOURISM ASSESSMENT (RTA)........................................................................7

3.1 INTERVIEWS .......................................................................................................83.2 VISITOR PROFILES ANDTARGET MARKETS.........................................................143.3 ASSOCIATEDTOURISM SEGMENTS......................................................................153.4 HUMAN RESOURCES THE LEGENDARY HOSPITABLE LOCALS..........................203.5 INFRASTRUCTURE.................................................................................................213.6VISITOR INFORMATION AND GUIDES....................................................................213.7 MARKETING,PROMOTIONS,AND PUBLIC RELATIONS.........................................22

3.8 VISITOR PLANNING ..............................................................................................223.9 INDUSTRY ORGANIZATION AND LEADERSHIP......................................................223.10 INVESTMENT IN WINETOURISM ........................................................................23

SECTION 4. WINE TOURISM CLUSTER/COMPETITIVE ASSESSMENT..............23GETTING THE COMMUNITIES AND WINERIESREADY .......................................................23

WINETOURISM CLUSTER DEVELOPMENT STEPS.......................................................234.1 STRATEGIC PLANNINGATANGIBLE FRAMEWORK FOR DECISION MAKING.....234.2TRAINING AND PUBLIC AWARENESS (TRAINED MANAGERS ARE CRITICAL TOSUCCESS).....................................................................................................................244.3DESTINATION MANAGEMENT ...............................................................................244.4 INFRASTRUCTURE AND FACILITIES DEVELOPMENT (PRIVATE AND PUBLICINVESTMENT) ..............................................................................................................244.5 PRODUCT DEVELOPMENT AND VISITOR ACTIVITIES ...........................................244.6MARKETING,PROMOTION AND BRANDING ..........................................................254.7COMPETITIVE ASSESSMENT ..................................................................................25

SECTION 5. ACTIVITIES TO MOVE GEORGIAS WINE TOURISM FORWARD .265.1 CHART OF PROPOSED ACTIVITIES .............................................................265.2 PROJECT OUTPUTS AND INDICATORS........................................................325.3 MONITORINGMETHODOLOGY .............................................................................335.4 GEORGIASWINETOURISM AT THE END OF THIS PROJECT .................................33

APPENDICES...................................................................................................................34

APPENDIX 1SCHEDULE OF MEETINGSHELD IN GEORGIA APRIL 21MAY 5...............34APPENDIX 2GEORGIASGLORIOUSGRAPETRAIL.........................................................36APPENDIX 3 ORGANIZATIONAL CHART FOR WINE TOURISM.......................37

BIBLIOGRAPHY .............................................................................................................38ACKNOWLEDGMENTS TO THE PROJECT TEAM....................................................39

Assessment of Wine Tourism in Georgia Sandra A. Chesrown


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LIST OF ACRONYMS

AgVANTAGE Support of Added-Value Enterprises

AgVSG AgVANTAGE Strategy GroupCRI Community Resources InventoryCTO Community Tourism OrganizationDMG Destination Management GroupDoTR Department of Tourism & ResortsEBRD European Bank for Reconstruction and DevelopmentGEF Global Environment FacilityGHA Georgia Hotel AssociationGoG Government of GeorgiaGRDF Georgian Rural Development FundGYWA Georgia Young Wine Growers AssociationKWGA Kakheti Wine Growers AssociationLOP Life of Project

M&E Monitoring and EvaluationMED Ministry of Economic DevelopmentMoC Ministry of CultureMoE Ministry of EnvironmentNPS US National Park ServicePAD Protected Areas Development ProjectPIU Project Implementation UnitPMC Product Market ChainPWG Product Working GroupRTA Rapid Tourism AssessmentSO Strategic ObjectiveSWOT Strengths Weaknesses Opportunities Threats AssessmentTA Technical Assistance

TIC Tourism Information CenterUNESCAP United Nations Economic & Social Commission for Asia & the PacificUSAID United States Agency for International DevelopmentWTO/UN World Tourism Organization/United Nations



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EXECUTIVE SUMMARY

The largest economic sector in Georgia is agriculture, with grapes as an importantproduct, particularly in the Kakheti Region. Georgia had 145,000 ha in production at onetime, but the Soviets destroyed many of the fields. In 1990, there were 117,000 ha used

for grape growing, but that number has been reduced to 68,000, with room for growth toperhaps 90,000 ha. Kakheti supplied three-fourths of the grapes for wine production.However, after the fall of the Soviet Union, wine production was greatly reduced due todeteriorating machinery, wine counterfeiting, and highly competitive export wine marketsin dozens of other countries. Supply still greatly exceeds demand, and the wineries arebuying many more red than white grapes, leaving farmers with lower prices and a largeunwanted quantity.

But the wine economy is improving, and in 2004, grapes and wine brought Georgia $36million in export revenues, primarily to Russia but also to Ukraine, Switzerland,Kazakhstan, China and the US, and accounted for 8% of total exports. Governmentsupport for the wine is just beginning, with a January 2005 decrease in taxes on the wine

industry from 20% to 15%. Loans to the wine industry have also dramatically increased,and revised laws on foreign investment have attracted internationally known wineries,such as the US based Wente Brothers and French based Pernod Ricard, as investmentpartners.

A major issue that Georgian wineries face is wine falsification or wine that is of a lowerquality being bottled and sold less expensively as Georgian wine. It was said that this is aparticular problem in Moldova and Ukraine, where cheap powder, not grapes, are used toproduce cheap wine. To battle counterfeiters, the Georgian government established theWine Quality and System Formation Fund under the Ministry of Agriculture, with apromised control unit in Kakheti that has not yet opened, and adopted the LisbonAgreement, an international treaty that obliges signatory countries to ensure that products

are branded with the correct country of origin. In December of 2004, the GermanGovernment/GTZ opened a $1.7 million wine testing laboratory.

Tourism on the other hand, which only began in independent Georgia in 1995, is a largelyuntapped sector. Georgias deep rooted wine culture, mild weather, historic monuments,charming villages, and accessibility to a large Euro wine tourism market make it an ideallocation for tourism to thrive. Although there were 300,000 visitors to Georgia in 2004,according to the Department of Tourism and Resorts only 15,000 to 25,000 were actualtourists under WTOs definition. Georgias share of the Euro market can besignificantly expanded, and its share of tourism in the Americas, SE Asia, and the MiddleEast can also grow with proper master planning, strategic planning, product development,public relations, and marketing.

Poverty alleviation through sustainable tourism development, as recently detailed byUNESCAP research, is possible. Remote areas, such as those found in the Caucasus,often experience the most poverty and joblessness, yet at the same time they offer the bestculture and nature-based tourism opportunities. Rural villages would be attractive totourists for their heritage traditions and unspoiled beauty, which can in turn be supportedby the development of tourism infrastructure and training programs. Wine tourism can bethe crowning glory of cultural and nature based tours.

The AgVANTAGE consultant spent April 21-May 5th in Georgia doing a baselineassessment of resources, talking with various tourism stakeholders and visiting cultural

heritage sites and wineries throughout Tbilisi and the Kakheti region. At the end of thesite visit, the consultant and AgVANTAGE held a roundtable called Wine, The Soul of


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Georgian Soil, in which the stage was set for wine tourism in Georgia, assessingresources, visitor services, challenges and opportunities, and explaining case studiesfrom the Old (Europe) and New (US, Australia, New Zealand, South Africa, and EasternEurope) Worlds of winemaking. About 35 stakeholders participated, discussing projectideas and future steps to build wine tourism in the Kakheti region.

It is the consultants assessment that tourism, in general, has a broad future in Georgia,and that wine tourism has a small but bright future, and could be an important contributorto the economy through training and limited supply side development. Georgia offers aunique and authentic wine and food heritage which can be readily linked to tourism andexpanded in support of agricultural products such as walnuts, hazelnuts, bread, cheese,fruit, mushrooms, poultry and ham. The cultural landscape around Telavi is quite intactwith its picturesque stone and brick villages, historic churches, ancient fortifications, andfacilities of the vine including grape vineyards, wineries and maranis. Those who work insubsistence agriculture with little hope for advancement could be trained in morelucrative tourism jobs. Tourism can act as a catalyst for not only sustainable ruraleconomic development, but also for regional development of infrastructure and

conservation of heritage and nature.

As instructed, the purpose of this report is not to delve into general tourism issues,including national policies impacting tourism as a recognized sector and investment inhotels across the country, which is sorely needed. Rather, the purpose is to focus directlyon wine tourism. However, it is important to mention some general principles and tounderstand categories that apply to all forms of sustainable tourism, including touristfacilities, tourist services, and infrastructure.

Successful tourism is about supply and demand, but sustainable tourism is always aboutcommunity involvement, local ownership and jobs, and preservation and management ofthe cultural and natural heritage. Tourism creates jobs for local communities directly

through lodging, dining, shopping, etc., and indirectly through construction and services.It stimulates entrepreneurs and diversifies economies, particularly in rural areas whereemployment and income may be sporadic or insufficient. It can also enhance rural qualityof life through the construction of cultural and recreational facilities, if they are built to beshared. Lastly, tourism generates foreign exchange.

Along with such positives are negatives, and communities must manage potentialenvironmental and social costs, such as degradation of protected natural areas fromoveruse, traffic congestion, litter, vandalism and damage to historic sites, crime, anderosion of cultural values. This is as true for wine tourism as any other form of tourism.

Wine tourism could have a relatively long season, as tours would be on-going throughoutthe year with the peak period being the spring and summer. Another peak might be theharvest from September 15-October 15, when special industrial tours allowing tourists toactually see the wine making process could be included. Festivals and special eventscould be held all year. On the days that vineyards advertise they are open to tourists, it iscritical that trained staff be present for tastings.

The obvious immediate target market for wine tourism is comprised of local leisurevisitors, international expats (including business people, consultants, donor agency staff,NGO staff, and diplomats), regional tourists from the former CIS including Russians(who have traveled the world and are now looking for Soviet nostalgia packages), Azeris,Armenians, Ukrainians, and Turkey, international adventure travelers who are

unconcerned about a lack of infrastructure. All are looking for weekend getaways andleisure/family vacations.


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The longer-term market is more complicated, as marketing funds will be scarce.Successful wine tourism for Kakheti will be difficult, and in Racha even tougher. Butwine is the soul of Georgian soil, its unique 8000 year old legacy for the future. InGeorgia, to quote Vladimir Mayakovsky, who was born near Kutaisi, using his wine

metaphor for Georgian wine tourism: We are not yet wine. We are still just machari.Through the activities that are detailed in this report, particularly in Section 5, the projecthopes to move wine tourism from machari to a well aged product with excellent color andbouquet, as Mother Georgia challenges from her post above Tbilisi.

SECTION 1. INTRODUCTION

This report was compiled by Sandra Chesrown, AICP (Wine Tourism Consultant)following a mission to Georgia, totaling 12 days in April and May of 2005, followed byfive days of reporting in the US. The work was performed as a consulting assignment to

AgVANTAGE, ACDI-VOCA, and funded by USAID.

The preliminary findings were obtained from an intensive schedule of site visits andinterviews. They were presented and discussed in a roundtable at AgVANTAGEsheadquarters in Tbilisi to Georgian tourism industry and wine industry stakeholders. (Seethe Power Point presentation at Appendix 1.)

Findings were also discussed with AgVANTAGE staff and presented to USAID inTbilisi. The outcome of those discussions with stakeholders has helped to shape thisreport.

The assignments Scope of Work (SOW) was as follows:

1. Evaluate current conditions for development of wine and agro tourism in Georgia;2. Assess and make recommendations on industry organizational models and help to set

the stage for an institution or institutions with whom USAID can work in the future;3. Develop drafts of strategies and mechanisms for creating necessary infrastructure of

tourism activities, including training, (and operational), and promotional components,tour modules (wine tourism route), etc.

4. Develop drafts of strategies for developing, organizing, promoting of wine tourismservices in Georgia;

5. Facilitate a seminar on wine tourism, presenting successful models in the US orelsewhere. The audience will be travel agencies, tour operators, wineries, andrepresentatives of the Department of Tourism in Georgia;

6. Make recommendations to AgVANTAGE staff in defining the best effectiveassistance mechanisms to local tourism organizations and farmers in aspects of agro-tourism development.

7. If the countrys potential merits the effort, the consultants report will be a draftproposal for follow-up technical assistance activities.

Required deliverables include this Final Report with a Draft Strategy.


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SECTION 2. PROJ ECT BACKGROUND

AgVANTAGEs mission is to strengthen the capacity of Georgias agricultural sector torespond to export opportunities by mitigating critical constraints and by enablingGeorgian producers, processors, and marketers to compete successfully in international

markets. Georgias rural communities are struggling to build their local economies.Georgias ancient tradition of wine-making and viticulture is part of Georgias importantagricultural sector, and wine grapes link them to wine tourism. Although wine productionin Georgia dates back literally thousands of years, the wine tourism industry is in itsinfancy and is poorly organized and presented. As wine production is primarily a ruralactivity, wine tourism could dramatically increase the number of jobs and revenue to ruralcommunities.

Therefore, in December of 2004, AgVANTAGE staff met with the Governor of theKakheti region, to discuss potential AgVANTAGE assistance to the region. TheGovernor expressed an interest in technical assistance to help the local grape growingfarmers to improve their growing practices, and in developing a pilot program of small

wineries under the Georgia Rural Development Fund. In response, AgVANTAGE metwith four major wineries and the Georgian Rural Development Fund.

AgVANTAGE found that the Georgian wine making industry had been steadilydeveloping over the past decade, with major private investments into large vineyards, andwine processing and bottling factories in Kakheti, Racha, and other regions. Most of thewine is exported to the former Soviet Union, especially Russia, Ukraine and the CentralAsian republics.

Stakeholders identified three major problems with the wine making industry:1. grape production and consolidation;2. processing and marketing;3. quality control.

Grape Production and ConsolidationGeorgia produces 500 different grape varieties. Of those up to 40% are used to makewine. 75% of the grapes are grown in the Kakheti region, but only 15% are used bycommercial wineries. Other wine producing regions are Gori (Atanuri wine) and Racha.

The number of large tract farmers, or those who have more than 50 ha of vineyards withplans to increase to 100 ha or more, is not significant but it is growing as more and morevineyards are being planted. During Soviet times, Georgia had about 140,000 ha ofvineyards currently, GE has slightly more than 20,000 ha. Formerly, Georgia produced620,000 tons of grapes per year it now produces 200,000 tons or about one-third of theformer capacity. Problems that large tract farmers face include obtaining good qualitychemicals, trellis poles, and rootstocks, affordable crop insurance, maps on topographyand soil composition, and accurate regional data on grape varietals.

Large wineries are gradually planting their own vineyards on plots of 100 ha or more andcreating their own production base. Some have already made significant investment intraining and human resources to improve management and market research (into grapevarietals and demand) and in facility design to improve operations. However, they allneed improvement to meet the demands of wine tourism.

Medium sized farmers or those with 10-50 ha of land, comprise about 10-15% of grape-

growing farmers. They are experiencing the same problems as larger scale farmers andsome are in need of new agricultural machinery, market and pricing information, as well.


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Medium sized farmers are normally less sophisticated in their practices and varietalselection. Therefore, productivity and quality are usually inferior.

Larger wineries, which receive grapes from on average 10-20 medium sized farmersusually provide assistance to medium sized farmers during the growing season, better

preparing them for harvest time.

Small sized farmers, who have between 0.5 ha and 5 ha of land (average of 1.5 ha)constitute the majority of Georgian grape growers. They are subsistence farmers, who areextremely dependent on wineries in terms of price setting at harvest time. Most haveSoviet style vineyards, low yields, and low quality production. Some sell their grapes tolarge vineyards (average of 200 per vineyard).

The fragmentation of the grower base has created a need for middle-men who consolidategrape production and sell to large vineyards. The vineyards complain that the middle-men seek unfair profits, yet mix high and low quality grapes, which results in significantinvestment by the vineyards in quality control. As large vineyards increasingly produce

their own grapes to alleviate quality control issues and increase profits, medium andsmaller sized farmers could be pushed out of the commercial market, unless they arewilling to consolidate their production base through cooperatives or associations.

Processing and Marketing CapacitySales of Georgian wine are increasing, although they are still not at levels experiencedduring the 1980s. Because of significant domestic and foreign investment over the pastdecade, large scale Georgian wineries are improving, resulting in modern bottling linesand improved marketing strategies. Imports to traditional Soviet Union countriescontinue while new distribution channels to Europe, the US, and Japan are opened.Marketing is not the biggest challenge. The biggest challenge is reaching full production,due to a lack of quality grapes and raw materials.

Quality ControlThe major threat to Georgias wine industry is very poor quality control and falsifiedwine production, or others selling inferior products with additives and colorants,particularly to Russia, under Georgian labels. This is negatively impacting the reputationof Georgian wine, distorting prices through unfair competition, and creating potentialhealth hazards to consumers.

AgVANTAGE AssistanceAgVANTAGEs approach to development of commercial agriculture through market-chain development interventions was found to be applicable to the Georgian wineindustry, although common interventions such as association building and demonstrationsites were felt to have little impact. Modern nurseries exist and operate commercially.Consolidation centers were felt to have little long-term commercial viability, as mediumand large scale vineyards would be more competitive. It was felt that direct technicalassistance to small and medium growers is already provided by larger wineries and wouldbe a duplication of effort.

The most positive areas identified for technical assistance included updating of maps anddata (to organizations like the Institute of Horticulture and Viticulture), but probablythrough other donor funded assistance (as AgVANTAGE is commercially focused).

This analysis led AgVANTAGE to analyze processing and marketing interventions to

wineries, but as previously mentioned neither are of high priority as markets withincreasing sales have been established. The most impact could be achieved through


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establishment of a market information system to coordinate grape supply and demandduring harvests and avoid significant price fluctuations.

Georgian Rural Development Fund (GRDF)The GRDF is funding a pilot project regarding the establishment of small wineries. It

targets the domestic market of restaurants and hotels, as international markets are difficultto penetrate without expensive marketing and promotion efforts that most small wineriescant afford. Pending the outcome of this project, AgVANTAGE could help small andmedium sized farmers in the processing and marketing aspects of establishing smallwineries. However, limited production capacity would also limit the development impacton a small number of farm families.

Quality Control InterventionsAlthough AgVANTAGE has the technical expertise to help to establish internationalstandards for a quality control program like ISO 9001, it was felt that large wineriesalready have the financial resources to contract service providers on a commercial basis,and that small to medium sized wineries do not have the financial means to set up and

maintain such quality control programs.

AgVANTAGE staff could help to create an industry driven quality control programthrough the establishment of a strong industry association, the seal of which could curbwine falsification. However, this requires a strong public awareness campaign, and thoseresources are not available without negatively impacting other sectors where staff arecurrently engaged.

This analysis led to the conclusion that the best technical assistance could be provided inevaluating the potential for wine/rural tourism.

Therefore, USAID engaged AgVANTAGE to complete a 19 day study that evaluates

current conditions for development of wine tourism and makes recommendations for thissegment of the tourism industry. .

SECTION 3. CONDITIONS FOR DEVELOPMENT OF WINE/RURALTOURISM RAPID TOURISM ASSESSMENT (RTA)

From April 20 May 5, 2005, the Consultant conducted a Rapid Tourism Assessment(RTA) for Wine Tourism in Georgia. During this field visit, the Consultant completed aseries of site visits and interviews.

In the tourism industry, beer is a beverage but wine is a life style, and it fits Georgiascultural landscape. Wine tourism, defined as visitation to vineyards, wineries, festivalsand shows for which tasting and the wine region are the prime motivating factors, can bemarketed on a continuous basis to local and expat leisure tourists, and during most of theyear to regional and international tourists. For international cultural heritage tourists, whoare usually well educated, well traveled, relatively affluent, and interested in high qualityexperiences, wine is usually a value added factor of a 1-2 day visit on a longer culturalheritage tour. Wine tourism is often a half to one day visit on a nature based oradventure tour.


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3.1 INTERVIEWS

A total of 45 interviews were held with individuals either directly or indirectly involvedin wine tourism, including discussions with the following:

AgVANTAGE staff,

USAID international donor programs, The head of the Department of Tourism and Resorts of the Ministry of Economic

Development, two local government representatives in Kakheti (Governor and tourism head), six inbound tour operators in Tbilisi, six representatives of wineries in Kakheti and Marriotts sommerlier in Tbilisi, two viticulture associations - one in Tbilisi and one in Telavi, seven major handicraft artisans, NGOs, and galleries in Tbilisi, nine hotel and guest house operators in Tbilisi and Kakheti, four Ministry representatives (one DoT/Economic Development and three from

different departments of Culture),The various concerns are summarized below:

AgVANTAGEPilot projects should pertain to AgVANTAGEs mission and produce direct benefits torural economies.

USAIDThe assignment does not pertain to Georgias general tourism sector, but rather to wineand agro or rural tourism. The sub-sector should be linked to agriculture, job creation,and poverty alleviation in rural areas, with the identification of strong counterparts toimplement and continue the project. Human resources should be strengthened.Performance should be measurable, with strategies and indicators.

Department of Tourism, Ministry of Economic DevelopmentAlthough under the umbrella of the MED, the Department with a lean staff of nine has itsown budget, which increased ten-fold over the past year but is still lower than needed.

The DoT has no written strategic plan, but the Chair has one in mind. They are currentlyworking on political issues (bonding, corporate liability, civil court procedures toencourage free markets), and are meeting with embassies to discuss travel advisories.

Immediate target markets include local and CIS countries, and they would like to buildinternational cultural heritage/wine, adventure, and nature tourism by targeting Europe,the US, Canada, Japan, China, Taiwan, Brazil and Argentina They believe there is somepotential for health tourism, as well. DoT is planning to work closely with the Ministry

of Culture (MoC) to market cultural heritage sites (with the MoC doing the conservation,management, and ticketing), open Travel Information Centers, and promote the KakhetiWine Festival the end of October. However, DoT is not planning to do any wine routesbut is leaving that to the tour operators. DoT is active in international trade fairs and ispaying part of smaller local tour operators costs to participate (ITB Berlin, London,Istanbul, Madrid, Japan and in the future Dubai).

The Chairman, Saba Kiknadze, is hopeful that the Department will receive assistance totrain department heads in statistics, marketing, and other areas. He confirmed that manyassociations are needed to promote tourism Tour Operators, Hotel, Tourism some ofwhich exist on paper but are not operating. There is no formal training program forguides, and tour operators train their own, although DoT is hoping to start a practical pilot

project with the Ministry of Education (28-30 schools have tourism courses but all aretheoretical).


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(See proposed Organizational Chart, Appendix 3.)

Local GovernmentThe Kakheti tourism staff and Governor are expanding from one staff to two in June of2005. They have been actively promoting wine quality and trying to stop counterfeiting,

and the Governor is forming a wine unit to check quality in restaurants. They are alsodeveloping the framework for new visitor facilities (auctioned off hotel near the castle toa local investor and are hoping to auction off a hotel at Chachavadze/Tsinindali), and theyplan to create a tourism information office with DoT and a wine route with a map andbrochure. They also want to promote grappa to locals through a grappa complex that wasowned by the former President and might be privatized.

In addition to links to Kakheti cultural heritage sites, they would like to link a Kakhetiwine route to nature based tourism in Tusheti, where there are seven to eight lowerquality guest houses that offer lodging from June to October, mainly to journalists andexpats, who go to trek, fish, or hunt..

Inbound Tour OperatorsAll companies featured wine tours as a one day excursion as part of a longer cultural ornature based tour. Caucasus Travel, a sophisticated and impressive local tour operatoroperating since 1990 with strong ties to international tour operators, has alreadyestablished a week-longWine Route tour consisting of 3 days in Tbilisi, a day inMtskheta where they visit a cognac producer, and 3 days in Kakheti where their groupsstay at local guest houses.

All operators agreed that the wineries need to improve their presentations and tastingswith trained staff, and noted that their clients prefer heritage buildings and drinking fromglass rather than plastic. Tourists have expressed that inconsistent wine quality is a bigissue for wine tourism, particularly at guest houses. Tour operators also recommended

that, if a prototype guest house is developed, that it have rooms with private bathrooms,consistent hot water, and electricity.

Some had not focused on the US as it is too time consuming to find a partner, and theyhad not attended a trade fair in the US. Some have strong working relationships withoperators in Baku and Yerevan, as their strongest regional target markets are Armenia andAzerbaijan.. None had focused on Turkey as a regional partner because it is a stand alonedestination for Europeans; however, they agreed that it could be included in a regionaltour to Americans. International target markets included Europe (Germany, Italy, France,Netherlands), Japan, and Israel. Australia and the Americas were a distant market. Noneseemed to have seriously considered Scandinavia. 75% of their tours were cultural, about25% nature based including mountain hiking. Many operators housed international tourgroups at one to three star hotels that are not international standard. Most have guidesthat speak the languages of their target markets, and most participated in majorinternational trade fairs in their target markets (Berlin, London, Milan, Japan). Noneparticipated in a trade fair in the Americas, although one had excellent workingrelationships with major US based tour operators..

Israel was seen as a major opportunity. Many Georgian Jews moved there 20 years ago,and now there is a direct two hour flight to Tel Aviv. All viewed the Department of

Tourism has a good promoter for Georgia. Although all agreed that there was a need fora tour operators association, there is an obvious lack of mutual interest between inboundand outbound operators.


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Unusual concerns arose such as excessive dog barking in Telavi, pushing tour groups toquieter smaller villages a problem for guest houses - and pagan rituals that omit womenfrom participating. Infrastructure, particularly poor roads to mountain regions, is a hugeissue, and the lack of it is reducing their marketing of ecotourism to expat and regionalmarkets. Tour operators hope that the Silk Road Express train would improve its

facilities and services, to encourage more regional travel from Baku. None were aware ofeither the International Youth Hostel Association or Elder Hostel and the strong potentialit offers for tourism.

WineriesIn all cases, the large Kakheti wineries are just beginning to develop wine tourism, andgenerally they are moving forward. All are understanding of the need for consistentquality at the wine tastings, although none performed a professional tasting for us witheducational interpretation. Some are more understanding of the concept than others.

All of the tasting rooms, visitor circulation, parking, architecture and landscaping needimproving. Some thought that offering museum areas and guest lodging were

priorities, although internationally neither is common. The wine artifacts are interestingand could be part of the tasting rooms. However, only small boutique wineries, with astrong heritage concept, usually succeed when mixing wine/vineyard management andhotel management. None of the wineries offer picnicking areas, which is one of theprimary motivating factors for wine tourists, although one had an outdoor dining area.None were thinking of restaurant or caf areas, although the traditional supra, such astrong tradition in Georgia, is another area in which the wineries could participate.Wedding and conference facilities, which often offer opportunities for additional incomeif managed properly, were not part of the programs.

At Telavi Wine Cellars and at GWS, the Consultant discussed the importance of afacilities master plan that results in correct placement of buildings to allow for protection

of view-sheds of the vineyard and tour circulation. Both seemed interested in physicallyimproving their wineries as tourist attractions.

None have formal staff training programs to provide formalized friendly service, butsome were sending staff to Europe to train and staff were wonderfully passionate abouttheir wine.

In terms of winery marketing and promotion, most are just beginning to organize theirformal relationships with tour operators, and marketing on their web sites. There is littleinterpretation at the wineries, and guests are not aware or educated about the culturalimportance of the grape. A couple of the large wineries have sophisticated brochureswhich have been used in international trade fairs and export promotions. There is ampleopportunity to use Georgias rich history in wine promotion and link it to internationaltourism marketing, including such themes and imagery as Jason and the Argonauts/theGolden Fleece, Tbilisis historic architecture, Kakhetis vernacular village architecture,the Caucasus, the cult of Dionysus, St. Nino, David the Builder, King (Queen) Tamara,the link to Buffalo Bill Cody, and The Knight in the Panthers Skin.

There are also wineries in Imereti (Kutaisi) that produce sparking wine and in Racha,famous for a semi-sweet red wine, which should be integrated into a regional wine route.Unfortunately, there was not time to visit those wine areas.(See Appendix 2, The Glorious Grape Trail)

Telavi Wine Cellar Winery Strong potential for wine tourism.


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Good management. Good quality wine. Interesting existing facilities. Needs bettermaster plan with protected viewsheds. Good location between Telavi and Gremi in quietcountryside.

The winery has operated for eight years on 150 ha of vineyards, with 200 more haplanned. With 60 permanent employees plus 300 part-time, all of whom are local people,

they produce 3.5 million bottles of wine per year, mainly selling to Russia and CIScountries, but also to the US (California, NJ, NY), Switzerland, Germany, New Zealand(CIS immigrants), and Japan.

Last year Caucasus Travel brought them 5-6 buses of tourists. They believe in thebenefits of wine tourism, and their tasting facility and a small lodging area are being builtand should be ready by 2007. Regarding a wine tour, they do not want to take touriststhrough the bottling area, but because it is very high-tech state-of-the-art facility thatexhibits quality they do wish to show bottling from the window above it. Their primaryproblem is financing.

The head is also the head of the five year old Kakheti Winegrowers Association, which

produced the first Georgian Dictionary of Winemaking, a web site, and two magazinesthrough a $30,000 grant from the Eurasia Foundation. The problem is that localwinemakers, who have no understanding of the benefit of working with each other, didnot want to contribute fees, and the association fizzled to dormancy. Regardless, hebelieves that they must have an association to make wine tourism work, and they mustwork with local guest houses to serve higher quality wine. He sees value in the recent tripthe Governor took to Napa Valley, as it is important to see how wine tourism works.

GWS Co. Strong potential for wine tourism. The winery was established on 700 ha ofvineyards in 1993 by the French company, Pernod Ricard (most tour operators thought itwas the best for wine tourism). The winery produces 4-5 million bottles per year undervarious brands (including Tamada, Dzveli, and Tbilisi), and 70% are of medium and high

quality and are exported to Russia, Ukraine, Kazakhstan, Belarus, and the Baltics.200,000 trial bottles have been sent to the US, under a stricter quality testing project withlabels in English. 30,000-40,000 bottles are sent to Japan and 30,000 have been sent toNYC to an area of Russian and Georgian immigrants. A few have been sent to Cyprusand Turkey. The winery employs 160 permanent staff and 50 seasonal staff, and buysgrapes from 500 farmers in Kakheti, 300 farmers in Racha, 150 farmers in Imereti, and 50in Akareche village. (If there are 5 people per average household, this one wineryprobably feeds 5000 people.) A tasting room has been set up in a charming building, andthere is an opportunity to feature warm weather tastings on a traditional wooden balconybridge. The young staff, some of whom studied in France and California are knew theNapa Valley quite well, is pushing the management to re-organize for professionally runwine tastings and to set up a wine museum.

Teliani Valley Winery and Mildiani Winery Some potential for wine tourism. Needsstrong improvement to facilities and training of staff for tastings. Good sommelier.With the appearance of a real factory, Teliani is leasing space from Mildiani, but isrenovating an auto factory for future use later in 2005. Teliani produces 650,000 bottlesannually, and they sell to Ukraine, Bulgaria, Kazakhstan, Russia, and the US (NY andGeorgia). They have 35 permanent and 10 seasonal employees, and 50 farmers processtheir grapes there. Teliani is pure Georgia owned with a 28% share by the EuropeanBank for Reconstruction and Development (EBRD). EBRD plans to sell its share in fouryears with the first right-of-refusal to purchase to Teliani.

Teliani is also hoping to build a hotel (seven rooms) in the winery for tour groups(although the Consultant explained that a more scenic location might draw more tourists),


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and they plan to have a trained staff and sommelier, an old style murani, and a tastingroom with a good view of the Caucasus. Their vineyard will be integrated into thewinery, and staff has participated in wine tours to Italy, France, and the Napa Valley(Mondavi, Beringer, Phillips). Their wines include Teliani Cabernet Sauvignon,Mukazani, and Menavi (like a NZ sauvignon blanc).

Mildiani is owned by a Georgian family from Svaneti, and they also own Saperavi WineFactory. The two wineries share the same wine expert, and he is planning his ownboutique winery and guest housein a renovated old house with a view of the vineyardselsewhere in Kakheti, the best prototype we have seen for wine tourism.

Shumi Winery Some potential for wine tourism.Needs improvements to wine quality, tastings, staffing, facilities.

Viticulture and other Wine AssociationsThe Institute of Viticulture and Horticulture was established in 1930 on a picturesque 20ha campus with some Soviet style and some charming buildings on the edge of Tbilisi, to

do scientific research on viticulture, horticulture, fruit production and processing. TheInstitute has a small academic program of 12 undergraduate students working towards a4.5 year degree. The Institute also offers technical advice to the private sector includingfarmers. They have an old museum, some of which is interesting. Three regional officesoperate in Najara, Mskheti, and Kutaisi/Sakara Village, and the latter could be integratedinto a tourism wine route. The Institute interacts with wineries but not tour operators,who have taken it off their tour route.

A number of associations have been formed in Georgia, including the GE WineAssociation, the Hotel Association, and the GE Association of Sommeliers, but they allappeared to be dormant except the GE Young Winegrowers Association (GYWA) whichwas enthusiastically forming under a woman from Tara Winery with staff of GWS,

Mildiani, Bagrationi, and a GTZ person. Members are young people who have studied inthe West and believe in the lobbying power of associations and the need for membersupport to push both the wine industry and wine tourism forward. They are preparing aweb site and they will be looking for members from the Department of Tourism, Ministryof Agriculture, private sector wineries, and others. Some of them are pushing theirmanagement to improve their wine tourism facilities and tastings.

Handicraft Artisans, Art Galleries, Academy, MarketsTourists, no matter which segment, like to shop and take home memories of their trip.Shopping is under-developed in Tbilisi. The lack of credit cards is a major issue, and itdeters tourists from spending. Supposedly, this issue of high rates charged to retailers bylocal banks is being solved. There are active NGOs training and marketing ruralhandicrafts, and there are a number of high quality galleries in the Old Town of Tbilisi.

There is very little tourist shopping in Telavi/Kakheti, other than wine in grocery stores,or surrounding villages. Only one wood carver was visible in Telavi. There are no shopsor galleries, and products are brought to Tbilisi to be sold. . Primary products includeheritage dolls, art, tapestry, wood carvings, bone carved knives, carpets (many importedfrom Azerbaijan), archaeological jewelry and artifact reproductions, enamel jewelry, teka(felt products), paintings, photographs, and many others.

There are few wine related products. The most visible are various types of wine hornsand ceramic wine bowls. The concept of an Art/Wine Walk was very exciting to the high

end galleries of Tbilisi. All were unusually concerned about preservation of Georgiasheritage and were interested in stronger associations with wine tourism. The NGO


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handicraft associations were appreciative of DoTs help (trade fair participation) andwanted to strengthen their programs in the rural areas.

Hotel and Guest House OwnersHotels, other than the few international standard, appeared to be a weak sector. The Hotel

Association is either dormant or dead. International standard hotels in Tbilisi, which arequite impressive, indicated abnormally high occupancy rates, regardless of the smallnumber of tourists in the current market. There is room for growth in supply. Otherthan the Georgian owned Marriott which has an excellent sommelier, managers did notseem to be very focused on wine tourism. Smaller hotels did not seem to reallyunderstand the basic concepts of successful tourism, including lobby and room design,public relations, marketing, food and beverage, etc.

Lodging in Tbilisi is limited to six or so quite good international standard hotels with aroom capacity of approximately 553. Each hotel features a good restaurant. They includethe Tbilisi Marriott/150 rooms, Marriott Courtyard/116 rooms plus 10 suites, SheratonMetechi Palace/150 rooms, Hotel Betsys/35 rooms, Kopala Hotel//40 rooms, Hotel Old

Metechii/35 rooms, and Villa Berika/17 rooms. There are many other small hotels of adecent but lower standard and a couple charming B&Bs such as Villa Mtiebe in the Old

Town with a room capacity of approximately 200 additional rooms, for a total roomcapacity of less than 1000 rooms.

Lodging in the regions is limited. Although there are no international standard hotels inKakheti region, lodging for wine tourism is available. There are at least two operatinghotels which are clean and somewhat attractive, including the country based, classicalRussian style Shuamara, seven kilometers from Telavi, and another is under constructionin Telavi. There are other hotels slightly farther from Telavi.

There are about 25 guesthouses in Telavi alone, and they can accommodate up to 150

people. Six or so are of a good quality with approximately 30 rooms. Four higher endguest houses, grouped together on one street, have 20 rooms with shared baths. Theywork together to meet the needs of tour operators from Tbilisi. The guesthouses seem tohave no interaction with the Department of Tourism in Tbilisi, but some interaction withthe local Governors tourism staff. Some owners did not like the idea of advertising theirbusinesses, perhaps due to tax implications.

Although there are no written statistics, it appears that about 300 visitors per year stay atthe nicer guest houses in Kakheti during the peak period (month of June and August-September) and the non-peak period (July, October, fewer in April and May). Tourism isalmost dormant in the winter from November through March. The average rate is 30GEL or Georgian Lari ($20 US) per person per night including dinner and breakfast.

Although no restaurant managers were interviewed, Tbilisi offers numerous charmingestablishments of Georgian cuisine including opportunities for the supra or table feastsimilar to a medieval banquet with traditional music headed by a tamada or toastmaster.

There are no international standard restaurants in Kakheti region, although there are acouple of cafes in Telavi that are lunch spots and guest house food was quite good. Thecuisine offers ample opportunity for traditional, delicious fast food that self-drivetourists could pick up along the wine trail, including katchapuri and lobia or bean stew.

MinistriesCulture

There is no historic survey of local monuments and no law for heritage defense, and thiswill become a bigger issue as tourism develops and looks to demolish vulnerable historic


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buildings for space. There is no preservation standard for renovation of Old Tbilisi City.National monuments have been surveyed to some degree, and there are three WorldHeritage sites: town of Mtskheta, Gelatii Cathedral in Kutaisi, and Chajaghe Village inSvaneti none have management plans. Vardzia Cave City has been nominated. AFrench organization has indicated interest in helping to restore some historic villages.

Private funds were used to restore Gremi. There are 12 archaeological sites whereministry staff are employed and are charging admission, but they all need training,preferably exchanges where they can see how sites are managed. ICCROMrepresentatives are arriving soon to assist. There is a big need for architecture staff to betrained abroad.

The Ministry presented a questionnaire to locals communities as to their tourismexpectations and how villagers would support preservation. With regard to museumdevelopment, they are interested in better design and presentation, and they arecoordinating with the Department of Tourism and plan to print and distribute twoproducts: a tourist map listing all the museums in Tbilisi and brochures on the culturalheritage. They have asked local communities to prepare the signage.

EnvironmentThe Ministry is very active in establishing management plans for national parks andnature based tourism through the World Bank/GEF funded project. The project is calledthe Protected Areas Development Project to improve the conservation and sustainableuse of Georgias biodiversity, including its tourism potential, by developing a system ofnational parks. The integrated parks would replace the current system of fragmentednature reserves. It is proposed that 80% of the revenue generated by the parks will returnto the parks conservation, operations and management needs, while 20% will go to anational fund to be used for resource protection elsewhere in the country.

3.2 Visitor Profiles and Target Markets

The Georgia Department of Tourism and Resorts provided some information on visitorprofiles and target markets, but there are few statistics available. Although 300,000visitors arrived in 2004, Georgias Department of Tourism estimates that approximately15,000 - 25,000 were actual tourists. . This number has significantly dropped fromlevels in the Soviet era and in the late 1990s, which is attributed to internal politicalturmoil, but is expected to increase in 2005. Exact visitor profiles (estimated arrivals,receipts, per day expenditures, length of stay) were not available, and data collection is

just beginning. Landing cards would help to provide more reliable information onvisitors. The Department indicated that most regional tourists are from the neighboringstates of Russia, Turkey, Armenia, and Azerbaijan.

Prior to the breakup of the Soviet Union, the number of visitors to Georgia from SovietRepublics was quite high, but it was not detailed because they were considered to bedomestic tourists. International tourists entered Georgia and all Soviet states throughMoscow. The local travel trade indicated that the number of Soviet tourists to Georgiawas in the millions. This number was greatly reduced when former Soviet citizens wereallowed to travel outside the Soviet Union. Very few INTOURIST facilities from theSoviet era were of an international standard, and tourism has gotten much moresophisticated in the past two decades. Like all economic sectors it will take years to buildproper infrastructure and tourism facilities in Georgia.

According to a report by Arthur Consulting Group International for the US Trade andDevelopment Agency, which cites statistics from WTOsArrivals at Frontiers of Touristsfrom Abroad, the number of tourists to Georgia in 1996 was approximately 117,000, but


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only about 7000 tourists were from Europe (Germany, France, Italy and UK), of apotential out-bound market of 160 million tourists. In 1997, it grew to approximately124,000 with the largest source market being Turkey. Most were business tourists orfamily/leisure tourists. However, while Georgia was receiving 124,000 tourists,neighboring Turkey had nearly 10 million visitors. This illustrates the positive direction

Georgia could move with appropriate tourism development and marketing as a regionaldestination on the Silk Road (with Azerbaijan, Armenia, and Turkey) and as anindependent destination in the Caucasus and on the Black Sea..

Wine tourism is seen as a sub-segment of the important, large cultural heritage tourismmarket. It is also associated with other tourism segments detailed below. Wine tastingsand visits to vineyards are a 2-3 day activity that tour operators include as part of longertours. Local, regional, and expatriate tourists from Tbilisi are clearly important, on ashort and long-term basis, to wine tourism in Georgia.

In addition to local and expat tourists, Georgias regional targets are Ukraine, Czech,Poland, Russia, and Turkey. A slightly more distant but equally important market are the

Mediterranean states of Israel, Cyprus, and Lebanon, and their strong linkages to wineand cultural heritage sites. In Europe, target markets are Germany, Italy, Netherlands,Austria, UK, France, Spain, Belgium, Sweden and Norway. Target markets in theAmericas include US, Canada, and Argentina. In Asia, target markets include Japan,China, Singapore, and Australia.

3.3 Associated TourismSegments

Cultural Heritage TourismThe Consultant, with the assistance of AgVANTAGE staff, took a sampling of Georgias

resources and attractions for cultural heritage tourism that would be part of a winetourism circuit. Wine tourism and cultural heritage have traditionally been linked in theOld World wine tourism markets. In France, for example, in a 1990s survey, 80% ofwine tourists primary motivation was culture. In Italy, 98% of the wineries had heritagevalue. The same link applies to Germany and Austria. Even in New World wine tourism,such as the Napa Valley, Virginia, and South Africa, and closer competitors Bulgaria andRomania, winemakers are linking historic character and heritage value to vineyards todraw tourists. .

Although international tourism is highly competitive, Georgias cultural heritage isunusually authentic and rich, particularly in Tbilisi city and its surroundings. Tbilisi isseen as the primary base for Georgias existing and future tourism industry. Its cultural

heritage includes: Old Town (kala) with its Tbilisi Art Noveau and other historic architecture and

heritage walk of Betlemi Quarter (SAVE and ICOMOS), a wide array of museums, some with very interesting collections including the

National or State Museum, Modern Fine Arts Museum, Money Museum, FolkArt Museum (incredible collection but very run down), and the Folk and AppliedArts (Architecture) Museum,

the Georgian Arts and Culture Center, a select variety of handicrafts the studio of knife artisan Kakhaber Zurnidze,

commercial galleries, including Chardin (ancient enamel art) and the Gallery ofCarpets and Handmade Dolls, and the Drybridge (riverfront) Market,

unusually strong art photographers, historic churches and their precious frescoes,


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restaurants in adaptively reused old buildings, Nabadi folk theatre, and The Georgian Institute of Viticulture and Horticulture.

There are numerous other theatres that could be integrated into cultural tourism. Most of

the public sites require protective conservation and restoration measures.

Nearby Mtskheta sites, Georgias ancient capitol, include the well conserved WorldHeritage complex of churches dating from the 6th 11th C. including:

Jvari Monastery, C. Svetitskhoveli Cathedral, and Shiomgvime Monastery.

The Consultant also traveled to Kakheti, the Wine Capital of Georgia and one of therichest regions in terms of architectural monuments with its many layered history(including Persian, Ottoman, Russian occupiers), focusing on both the cultural heritagesites that tourists frequently visit and other sites that have potential for stronger visitation.

In Kakhetis capital of Telavi and nearby, cultural heritage including wine specific siteswere surveyed:

Batonistsikhe Castle, relatively well restored, the A. Chavchavadze Estate with its amazing complex of buildings, including an

old winery and marani or storehouse for harvested grapes, abandoned but interesting grappa distillery complex, owned by the former

President of Georgia, a small winery that offer lunch to tour groups, a winemaker that is renovating an old house for adaptive reuse as a guest house

and boutique winery in a charming setting,

Alaverdi Cathedral, well conserved, Ikalto Monastery, somewhat conserved, the ancient church site in Gremi, somewhat conserved, and, en route between Telavi and Tbilisi, the hilltop village of Sikanaki with its

interesting old streets and buildings.

In other regions near Kakheti, the cultural heritage includes: museum villages and Keselo fortress in Tusheti National Park, just north of

Telavi, Inner Kartli region with the birthplace of Stalin at Gori and the extraordinary rock

cut, ancient city of Uplistsikhe (6th C BC to 6th C AD).

Imereti region with its important wine production including the city of Kutaisi,the ancient capital of West Georgia until King David the Builder liberated Tbilisi,and like Tbilisi, a town founded in the Middle Ages with its 11th C. BagratiCathedral

The World Heritage site of the Virgin at Gelati, about a 20 minutes drive fromKutaisi, with its extraordinary frescoes and mosaics. The church was begun byKing David the Builder in the 12th C. and completed in the 18th C. King Davidis buried at the site.

Motsameta Monastery, an earlier 8th 11th C. small church about six kmnortheast of Kutasi and a 10 minutes drive from Gelati.

Tourists could continue north to the other important grape producing region in Georgia -

Racha. Unfortunately due to time constraints and flooding, the Consultant was not able tovisit this isolated, mountainous area where the population has declined in the past decade


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from 55,000 to about 37,000 residents, or its regional center of Ambrolauri, with apopulation of 3,000 people. Racha with its unique flora and fauna, mountainous villages,and historic monuments (including numerous churches such as those in Nikortsminda,Barakoni, Khonchiori, Mravaldzali, and Minda-Tsikhe), and its well known khvanchkarared wine, offers opportunity for nature based tourism and wine tourism. This combined

force has the potential to build a community/rural tourism of small and medium basedenterprises, and it should be supported as a way to diversify the economy and as a povertyreduction measure. Mountain villages in the area are being abandoned due to a lack of

jobs, poor roads, limited public transportation, and few educational opportunities.

Regionally, it is important to note that Georgia is part of WTOs established Silk Roadprogram, and this offers significant regional tourism opportunities in the future, linkingGeorgia to Azerbaijans Caucasus Heritage Trail from Baku to Sheki and Zagatala andcrossing into Georgia, and also to Armenia and Turkey.

Agro or Rural Tourism (Bread, Cheese and a Kind Heart What Else Do We Need)Agro-tourism involves tourist visitation to farms and/or rural villages to experience

farming and the rural landscape and traditions. At the same time, visitation and relatedpayments to local communities can improve the life of farmers and promote theproduction of agro products and handicrafts, and preservation of the rural heritage. It canalso serve as a communications link between rural regions and the broader world.

Wine regions are agricultural by definition, and Georgia has strong potential for agrotourism, as it is primarily an agricultural economy in a charming rural environment. Oneof the main challenges facing wine tourism and its association with agriculture is thepreservation of viti-cultural resources and the rural character and way of life.

Agro-tourists are important in the early days of tourism development, as they are lessfussy and interested in a positive interaction with rural communities and the traditional

life style (lodging with families, bread baking, mushroom and grape picking, woolcombing, cooking lessons, etc.). Agro tourism can boost the use of organic farming asvalue added production, and it also offers farm communities opportunities for adaptivereuse of farm structures, and the French are very interested in this concept of rural gatetourism.

Agro tourism can be aligned with wine tourism, particularly as it regards family wineproduction. Agro tourists are looking for educational tours, and it would be relativelyeasy for farmers to illustrate how they use nearly all parts of the grape, leaving little towaste. They could show how the skins are used for raja or vodka production, the fresh

juice of unripe grapes to add tartness to cooking, drying for raisins, preserving the leavesfor dolmas, and using dried vines as skewers. They could serve their family wine intraditional vessels such as horns, or tasi (bowls), or chapi (two handled jug), or khelada(single handled pitcher). This could all be part of an educational dinner. In addition,tourists are often looking to be volunteers and they could provide assistance during thegrape harvest as a visitor activity.

At one of the wineries, local women were grafting, and this could be part of a livingheritage tour. Local farmers were driving horse drawn wagons, and these could beincorporated into the experience of moving through the communities and the MorelliMountains or foothills of the Caucasus to Gremi (Gremi Grape Route). In coolerweather, the wagons could have blankets for visitors. The farmers could take visitors to avery nice flat area along the river between Telavi and Gremi where a traditional tent camp

(panchaturi) could be organized as a picturesque picnic or lodging area with a viewoverlooking the river, built of traditional twig fencing and twig roofs, featuring local


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people baking break and cooking barbecues (shashlik mtsvadi) with local fresh fruits(cherries, strawberries) , walnuts, and cheese. In nearby Kvareli there is a wine tunnelthat could be renovated and visited.

In addition to wine, traditional Georgian cuisine is an important resource, including the

ubiquitous khachapuri and churchkhela (tourisms sophisticated fast food), chakhokhbili,satsivi, and khinkali. Caucasus Travel also offersThe Route of Flavors targetingtraditional cuisine that includes Tbilisi, Kutaisi, Mestia in Svaneti, Zugdidi, Batumi. Acombined wine and cuisine route, closely aligning wine tourism with agro or ruralcommunity tourism, would strengthen both segments..

Outside Kakheti but on a regional wine trail is the historic city of Kutaisi, and here arefound greenhouses of Georgias fabulous calla lilies, which could also be tied to agro-tourism and a special spring agro festival.

However, agro tourism is a much smaller and lower spending market than either culturaltourism or nature tourism. Wine tourism at a more commercial scale involving

commercial wineries is normally associated with cultural tourism.

Community Tourism and Pro-Poor MovementTourism in the worlds poorer countries is growing faster than elsewhere in the world,according to a 2001 WTO report. International tourists are looking for a unique andauthentic destination, and community tourism leads them directly to authentic traditionalways (which can be urban or rural based). However, much of the tourists investments donot go to the country but rather to international tour operators. Once considered a verylow-budget way of traveling, community tourism trips that bring tourists into contact withlocal communities through homestays, eating, local cultural activities, etc. are found inmore than 50 countries. The goal is to prevent leakage or loss of revenue outside thecountry, and rather to direct revenue to benefit the local communities.

The most successful programs appear to be those that partner with a commercial touroperator or with a nonprofit organization. Kakheti in its current condition has a partiallyorganized community tourism base, and with very little change could be linked to anorganization called Tourism Concern, which publishes a guide to community tourismcalled The Good Alternative Travel Guide. Like wine tourism, community stays areoften seen as value added to other types of trips, but they could also partner with winetourism to directly benefit communities, particularly unemployed youth and women.

A Kakheti wine tourism organization could also partner with tour operators and localschools and involve them in responsible wine tourism educational programs to controldrinking and driving after tastings.

Nature Tourism The Pristine CaucasusIn addition to cultural heritage tourism, Georgia has a strong potential for nature basedtourism, featuring the extraordinary Caucasus Mountains, rivers, and lakes. In France, asurvey in the 1990s indicated that 40% of wine tourists were nature based tourists.

Though not an essential component of a nature tour, wine tourism can attach itself as avalue added half to full day experience on a nature based route.

Under the MoEs Protected Areas Development Project, a partnership of communities inthe parks, the Georgian private sector, and the national park administration will worktogether to promote nature based tourism and assist with the development of a system of

folk hotels. Project staff are anticipating training through a park-to-park superintendentexchange program with the US National Park Service (NPS) for management and rangers.


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Park fees will include entrance, camping, concession, limited retail and lodging, rafting,and non-extractive research. No hunting will be allowed. Tour operators will bringvisitors to the entrance for visitor information, and then park rangers (guides) will takethem through the park. This is a very beneficial system for nature based tourism, and itwill be important for the wineries to figure out a way to interact with this major resource

base, particularly through featuring winery tour information in the visitors center, andwines at the park lodges and in retail shops. The parks are coordinating with the DoT,with whom they participated in the ITB/Berlin fair last March.

Georgias important nature sites with hiking trails include: Borjomi-Kharagauli, the first National Park in the Caucasus launched in 1995 by

the World Wildlife Fund (WWF) Georgia with support of the Georgian andGerman governments,

Lagodekhi Nature Reserve and planned National Park with its forests, lakes,waterfalls,

Vashlovani Nature Preserve and planned National Park, the management plan forwhich is now being developed by a consultant with its knurled geology and

Alazani River, Tusheti Nature Preserve and planned National Park including Oreti Lake, Babaneuri Nature Reserve with its unusual endangered Zelkova or stone tree

forests; and Batsara Nature Reserve with ancient yew trees.

Nature based tourism also includes biking, and there is a strong opportunity to create a 3km bike route (the Kvarelli Mountains Trail) on a flat section in Kakheti between Gremiand Kvareli, through an alee of chestnut and walnut forests, past green fields andfoothills, ending at the Kvareli wine tunnel. This could be linked to picnicking, camping,and nut picking, and there are linkages to agro tourism, as previously discussed.

Georgia has numerous fast flowing rivers, and there is great potential for whitewaterrafting. Local tour operators are running trips primarily on rivers graded II-I II, but therehave been trips taken by Israelis on River Rioni in West Georgia which is graded IV-V.

The Alazani River, a II-III, is in Kakheti. Tours to rivers in the east and the west couldeasily be linked to a regional wine trail. In Svaneti which is adjacent to the wine region ofRacha, with its interesting heritage and mountains, there is strong opportunity for naturebased tourism.

Adventure Tourism The Wild CaucasusAdventure tourists are a rough and ready group of youth on low budgets who travel theworld in search of adventure, requiring little infrastructure and paying little attention to

security warnings. They are an important tourism segment for bringing money to localcommunities early in their tourism development, and promoting unknown regions byword-of-mouth, a powerful marketing tool. There is significant potential for regionaladventure tourism in the Caucasus, particularly with links to the Silk Road to the east andEastern Europe and Turkey to the west..

Although a small fraction of wine tourism, they have contributed to its growth in newworld markets like Australia and New Zealand. In NZ, the government assisted indeveloping a system of backpacker lodges, similar to the International Youth Hostelsystem, which have drawn thousands of adventure tourists, as well as cultural and naturebased tourists. The Department of Tourism might consider participating in aninternational adventure tourism trade fair, to build on this small but important short-term

segment.


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Ski TourismIt is very common in the US to link wine tourism to ski tourism, as a way of relaxing aftera day on the slopes. There is tremendous opportunity for the wineries in Georgia to linkto the ski areas of the Caucasus through tastings and wine festivals.

There are only two countries in the world that offer heli skiing Canada and Georgia.Although the sport is dangerous, it does have a following. Georgias Caucasus rangeoffers two international ski competition areas with skiing (downhill and cross country)and snowboarding: Gudauri and Bakuriani. Existing ski resorts in Gudauri includePerebi Hotel/10 rooms and the Sporthotel Gudauri/121 rooms, and two cottages calledSnow Inn. The Sporthotel offers restaurants, bars, conference facilities and year-roundrecreation. Bakuriani village has hosted skiers since the 1930s, and features an oldfashioned ambience including forests of fir, a mountain train, and a market with freshfood, home baked bread, wild mushrooms and berries, and handmade wooly hats andscarves. The facilities are popular with locals, regional skiers and some European skiers,such as the Irish. In addition, during the summer months winter ski facilities shouldsupport an array of activities including hiking, climbing, horseback riding, hang-gliding,

mountain biking, and swimming, making it a year round destination linked to warmerweather wine tourism..

Sun and Sea TourismAlthough Georgia has the Black Sea coastline, it competes with nearby Turkish beaches,and sun and sea tourism is not as popular as it once was for health reasons. However, it isa valuable resource for tourism as has been proven in neighboring countries, andimproved planning and tourism development could grow this market. For now, thesegment will probably remain a local leisure based market, although there might be someopportunity for targeting Europeans with their long vacations (Italians, Brits, Germans)and regional tourists. Regardless of the size of the segment, the wine industry shouldtarget this market, and recognize that it might present a small but important opportunity to

promote and sell refreshing summer white wines to combat the over-production of whitegrapes in Kakheti, and to increase length-of-stay for cultural heritage/wine tourists ornature based tourists to Georgia..

Health/Spa TourismMany local Georgians are hopeful that Soviet era health and thermal resorts can beresurrected. However, in most cases the amount of investment necessary to bring rustingspas up to an international standard and compete with state-of-the-art spas that aresprouting up around the world and in neighboring central European countries wouldprobably be excessive. For those that are resurrectable, there could be a link to winetourism, particularly with the recent medical findings on the benefits of red wine such asSaperavi.

3.4 Human Resources The Legendary Hospitable Locals

Human resources for tourism include the following: Department of Tourism and Resorts, a slimmed down bureaucracy with budget

constraints but under active new management, led by a former international touroperator. DoTR has taken a number of positive steps including canceling visasfor high spending countries, participating in targeted international trade fairs,linking itself to the Ministry of Culture, and developing a web site,

a small but active local government with a tourism staff of 1, soon to be two, inTelavi, Kakheti region,


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no local tour operators in Kakheti but four to six strong inbound tour operators inTbilisi, with regional and international ties,

no licensed local guides, four to six sophisticated winery management teams in Kakheti and Tbilisi with

investment and technical capability to produce high quality wines and associated

wine tourism, up to a dozen or so high quality, somewhat organized guest house owners in

Kakheti and sophisticated hotel management and sommeliers in Tbilisi., limited but sophisticated commercial handicraft and art gallery managers in

Tbilisi.

3.5 Infrastructure

TransportationIn Tbilisi, public transportation system including a subway, buses, marshrutkas or mini

buses, trolleys, and taxis. Although taxis are prevalent, very few drivers speak English orother foreign languages other than Russian, and this will be a problem for tourism.Although there was a bus at the airport, there was no information on how a tourist wouldtake it into the city.

Local transportation from Tbilisi to Kakheti and beyond includes paved but somewhatbumpy roads with very limited signage. In Kakheti region although there are communitybased buses, there do not appear to be any formal tour buses operating from Tbilisi toKakheti. In Kakheti, there are only informal hiking trails and no organized biking trails.

Regional transportation includes a regional train, a better but not international standardSilk Road Train, and boats across the Black Sea to the West and the Caspian to the East.International transportation includes an international airport, improvements for which arepending, with numerous weekly flights to Europe and the region. European carriersoffering service include British Air with three flights weekly to London, Austrian Airwith five flights weekly to Vienna, KLM with three flights weekly to Amsterdam, andLufthansa with weekly flights to Frankfurt. All carriers connect to the Americas and Asiavia those hub cities. In addition, Turkish Air offers good service to Istanbul, and Aeroflotflies to Moscow on a daily basis. Airzena Georgian Airlines flies to Europe and Israel.Caucasus Air flies to Armenia and AZAL flies to Azerbaijan and the Stans.

A major amenity is the fast flowing river that runs through Tbilisi, but it is not used aseither a scenic amenity with an interpreted river walk trail with benches, or for recreation

or transport.

Other InfrastructureElectricity is still somewhat sporadic, and telecom is decent in Tbilisi but there were notourist internet cafes in the Kakheti region. One is supposedly being developed in Racha.Sewer and water lines are infrequent in villages. Kakhetis sewer and water capacity wasunclear.

3.6 Visitor Information and Guides

Visitor information is almost non-existent outside Tbilisi. The DoT is working with

Kakheti to develop a Tourism Information Center. There are no visitor information


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centers or rest stops along the road, and identificational, directional, and interpretivesignage is limited. Few signs are in English.

Very few cultural heritage sites are interpreted, and nearly all museums have poorexhibition design with low lighting and very limited interpretive panels. There are no

formally designated wine trails with maps or brochures.

There appear to be no formally trained local guides in Kakheti, although some of thechurches have guides available. However, the castle guide in Telavi was moreprofessional than the museum guides in Tbilisi. In the mountains north of Kakheti andRacha, there are well established Georgian mountain guides. The Geographical Societyof Georgia issued a Mountain Guide Diploma in 1925, and mountain climbing withassistance from local village guides became very popular during the Soviet era. From1991 - 1993, the Georgian Guide Service, a private company, trained under the SwissMountain Guide School. In 1993, the Georgian Mountain Guide School was established.

This could be a vital basis for a more generalized Georgian Guides Training Institute,which could be affiliated with training at DoT for all types of guides including wine

tourism..

3.7 Marketing, Promotions, and Public Relations

Marketing and promotion is limited although quickly improving on a national basis.Expatriates from Tbilisi and Baku are traveling into Kakheti. There appears to be nolocal marketing and only limited promotion through special events. Kakheti issponsoring a wine festival in the fall of 2005. For wine tourism, major marketing issuesare consistent wine quality and developed wine trails. This is important to all segments ofinternational tourism.

For the Caucasus region as a whole, a major marketing and public relations challenge isinternational perception. International tourists are not very aware of Georgia and itsmany assets, and they perceive the region as one of instability and political unrest. It willbe important to distinguish Georgia from the other CIS countries, and wine tourism couldbe a major factor in developing this unique identity in the West

3.8 Visitor Planning

Tbilisis lack of urban planning, safe pedestrian crosswalks, and fast traffic is a major

issue for tourism and the perception of hospitality, particularly when tours start coming inlarger numbers and crossing in groups. It is important that Tbilisi address this issue nowthrough stop lights with timed crosswalks, pedestrian islands, and traffic calmingmeasures such as speed bumps to change drivers behavior and protect tourists as well aslocal people.

3.9 Industry Organization and Leadership

As is true with most former Soviet republics, the concept of associations and cooperativesis not popular with local people. They do not see or trust the benefits to be derived from

such structures. Inter-tourism industry cooperation is lacking in all areas. Although oftendiscussed, all of the following associations which could push tourism forward and lobby


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for necessary structural support appear to be either non-existent or dormant: Associationof Tour Operators and Travel Agents, Association of Bed and Breakfasts, Association ofHotels and Guest Houses, Association of Guides, and Association of Wineries. TheKakheti Wine Growers Association exists primarily on paper, but all wine growers agreedthat they need a revitalized association to move the industry forward.

3.10 Investment in Wine Tourism

If Georgia becomes serious about tourism as a sector, and wine tourism specifically, thereshould be an organizational framework for assisting investors. This was one of the keysto Turkeys success in tourism development. The Turkish Government decreed theimportance of tourism to the national economy, reviewed and approved taxation, loanguarantees, and other policies to facilitate tourism investment, and established a specialoffice under the State Planning Organization of the Prime Ministers office to guideinvestors in exploring opportunities, processing applications, approving licenses andmanagement agreements, approving credits for joint venture companies, approving work

permits for expatriates, and negotiating bilateral investment protection agreements.

SECTION 4. WINE TOURISM CLUSTER/COMPETITIVE ASSESSMENT

Getting the Communities and Wineries Ready

Producers in S. Africa, where wine tourism is extremely well developed, are of threetypes: estate wineries growing their own grapes, small farmer coops, or independentcellars buying grapes and bottling under their own labels. Georgia has a differentstructure, and one that probably needs to change in the future, for the benefit of smallfarmers and larger wineries. Large wineries in Georgia are already moving towardsgrowing their own grapes to produce a higher level of product quality. Small farmers arestruggling, and need to form associations or cooperatives to share the burden and expandon the opportunity some need to form boutique vineyards.

With regard to wine tourism, the following is a cluster development strategy thatillustrates how the industry needs to move forward in a cooperative organized fashion,between the Department of Tourism in Tbilisi and the wine rayons. Obviously, there arelarger national tourism issues that should be addressed, such as the formation of a publicprivate partnership at national marketing levels such as a Georgia Tourism Board, whichare not part of this assignment.

Wine TourismCluster Development Steps

4.1 Strategic Planning A Tangible Framework for Decision making

(e.g., Virginias Vision 2015)

4.1.1 Vision Wine tourism is an important component of Georgias tourism sectorand should be supported to diversify the local agricultural economy.

4.1.2 Mission Georgia will develop a sustainable wine tourism economy through a

public-private partnership.


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4.1.3 Goal To expand jobs, entrepreneurial opportunities, community benefits,and state revenue through wine tourism, and help to increase the number of touriststo Georgia from 25,000 to 250,000 by 2010.

4.1.4 Objectives

* Market Research (demand forecasting and segmentation) Collect/Track Data,* Control Quality,* Market and Promote (Kakheti regional brochure),* Develop Operational and Management Systems,* Develop Monitoring System with indicators such as number of local peopletrained, jobs created, sites conserved or presented and managed, promotionalactivities developed, and enhanced institutions.

4.2 Training and Public Awareness (trained managers are critical to success)

* Rayon tourism staff,

* guest house owners,* caf entrepreneurs,* guides,* sommeliers for wine tastings romance of the bouquet, color, taste, foodpairings

4.3 Destination Management

* Wine and tourism association development for organization and leadership(e.g., Georgia or Kakheti Wineries Association(s), Young Wine GrowersAssociation, Association of Wine Related Handicrafts, etc.

4.4 Infrastructure and Facilities Development (private and public investment)

* Limited road improvements/repaving,* Tourism Information Centers with Restrooms (Kakheti Visitors Center forWine, Food and the Arts)* Winery visitor facilities* Guest House and Heritage B&B Prototypes* Investment Planning and Design Guidelines (identify investment opportunitieslinked to wine tourism and establish design guidance principles for investors).

4.5 Product Development and Visitor Activities

* Wine route/trail* Wine souvenirs/handicrafts* Wine festivals (Rtveli grape harvest when most local people spend their daysin the fields harvesting, while the grandmothers cook churchkhela, the danglingsweet)* Adaptive re-use of heritage buildings for cultural preservation


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4.6 Marketing, Promotion and Branding

* Rayons jointly develop and implement marketing activities with theDepartment of Tourism and Resorts* internet marketing/web site* regional wine logo* brochures* wine tourism trade fairs

4.7 Competitive Assessment

Georgia can not currently compete with either Old World or most New World winecountries for wine tourists, as they are just beginning to develop wine tourism. However,it already competes with secondary wine locations, some of which are regional such asMoldova and Bulgaria. Although it is behind them in terms of wine tourismdevelopment, it has an established trade opinion in the former Soviet states as the cradle

of wine, and this gives it strong positioning as it begins to develop wine tourism.

Georgias core competencies include not only the quality of some of its wines and wellestablished vineyards, but also its strong cultural and natural heritage, its strong in-boundtour operators, and the positive direction its Department of Tourism and KakhetiGovernors office is moving.

The key to successful wine tourism, like all forms of tourism, is strategic planning,training of the local community, public and private investment in staffing and marketing,attractive product development, an effective regulatory framework and enablingenvironment to ensure private sector competitiveness and growth, attention to qualitystandards, and a strong public private partnership to execute strategies. It takes time to

build this framework, but a stronger economy with job formation based on culturaltraditions would result.

Tourism growth forecasts, exact number of visitors, and other data are impossible toaccurately predict without statistical information. However, Georgias tourism iscurrently very low compared with historical numbers and the region, and with increasedstability it will dramatically increase. The next section details phased within this strategicframework that could move Georgian wine tourism forward into a sustainable future.Short-term activities are those that are accomplished while the private sector/wineries areimproving their products and f

assessment of wine tourism in georgia

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