Is This Europe’s Next Boomtown?

The towering five-star hotels that newly adorn the skyline of Batumi, a Georgian trading hub linking Europe and Asia, are testament to a surge in tourism and construction that is driving economic growth and attracting international investment in this 2,000-year-old city.

“You look around and everywhere you see construction going on,” says Tornike Rijvadze, Chairman of the Government of Adjara, the autonomous Georgian state rich with natural beauty and Batumi as its capital.

Batumi’s economy grew at an average rate of 11.5% over the decade to 2020, as the arrival of a succession of global hotel brands and a rise in the value of real estate brought new energy to the regional market. Rijvadze notes that Adjara’s state-wide growth of 15% makes the Black Sea region a “frontrunner in terms of economic outlook” even within expanding Georgia, which enjoyed a 10.4% uptick in GDP in 2021.

The Europe-facing nation benefits from a liberal tax system and labor code. Its total business tax and contribution rate is 9.9% of profits, the third-lowest globally, according to World Bank data. Positioned in the South Caucasus, Georgia has free trade agreements that mean it sits at the heart of a market of 2.3 billion consumers, stretching from the European Union to China.

Nowhere is set to benefit from this business-friendly regime more than Batumi, which for centuries has been a trading link between Europe and the lands beyond the Caspian Sea. Batumi was once known as Porto Franco (Free Port). “The mission for the government is to reposition Batumi as a center for trade and industry,” says Rijvadze.

That goal is becoming a reality thanks to a surge in tourism, which has enjoyed a record-breaking year in 2022 so far, an 11% increase on its 2019, pre-pandemic visitor numbers according to Rijvadze. Known as “The Pearl of the Black Sea”, Batumi has a seven-kilometer-long beachside boulevard and enjoys a subtropical climate that makes it a year-round tourist destination. It was named by the World Travel Awards as “Europe’s Leading Emerging Tourism Destination” for 2022. Nearby, three of Adjara’s National Parks—Mtirala, Kobuleti and Kintrishi—were recently recognized by UNESCO as World Heritage Sites.

Tourism: the build block for construction

Tourist demand for accommodation has fueled growth in construction. “Because of the geographical location, the climate and lots of others factors, Batumi has drawn the attention of travelers from around the world,” says Temur Bitsadze, Chief Business Development Officer at Georgian construction and development company Alliance Group. Alliance has worked with a host of five-star hotel brands in Batumi, including Sheraton, Hilton, Radisson, Le Méridien, Courtyard by Marriott and Wyndham. Hyatt has announced plans to open a spectacular hotel on the Batumi Boulevard in 2025.

All this activity has drawn new residents to the city and attracted the interest of investors. “Since 2004, the population of Batumi has increased at least 50%,” says Bitsadze. “Batumi is developing very fast at the moment.”

Breaking ground on Batumi’s island project

Like fronds of a palm tree reaching out over the blue waters of the Black Sea, the twin peninsulas of Batumi’s Ambassadori Island project offer a striking symbol of this historic city’s new building boom, and its rebirth as an international business hub.

Construction work began in September on this landmark government-supported project that will enhance the reputation of Georgia’s second city as a global destination for business travelers and tourists. Built sustainably on more than 80 hectares of land off Batumi’s coast, the island will bring advanced technologies and construction expertise, generating 2,000 jobs and a rich mix of commercial, recreational and residential infrastructure.

“This project is going to be iconic for the city and for the country,” says Rijvadze. “There will be intense construction of new skyscrapers and new leisure facilities. After completing this project, Batumi will outcompete many other popular travel destinations.”

As a consequence of the expansion in tourism, the city’s real estate market is seeing high growth, with more than 7,000 transactions in the first six months of 2022, a year-on-year increase of 36%, according to Georgian investment consultants TBC Capital. The selling price of 1 square meter of land on the periphery of Batumi has increased by 15% and the rental price by 123% since last year.

Bitsadze credits government support for its role in this growth, pointing out that “They are creating the highways, they are building the airports, they are adding the new terminals to the airports.” New flight destinations continue to be added at Batumi Airport, which had 370 international flights connecting to 12 countries during July. The city is also accessible from Georgia’s international airports at Kutaisi and Tbilisi.

Alliance Group expects that Batumi’s world-class hotels and good connectivity will create high demand from the global business community. “We’ve seen the potential of the city as a business destination hosting meetings, conferences and exhibitions,” Bitsadze says.

A destination for investors and visitors

The proposition is enhanced by the attractions of Adjara’s natural landscape, with convenient opportunities for hiking, birdwatching, rafting and “waterfall canyoning”. Two hours’ drive from Batumi is Goderdzi, a ski resort covered in snow from November to April. A premium resort is being built just to the south of Batumi at Gonio, which has an eighth-century fortress and will soon have a lagoon and a yacht club. And a new coastal health resort is being built at Kobuleti, 25 kilometers north of Batumi. All these projects are open to foreign investors.

During the first quarter of 2022, foreign direct investment (FDI) into Georgia rose to nearly three times the pre-pandemic levels of 2019 Q1. According to a recent Bloomberg Media survey, Georgia ranks 13th for FDI among major global economies, including the US, China and the UK.

Rijvadze says Adjara has “specially tailored programs” for investors. “Our portfolio is more than $4 billion and this is in areas such as tourism, of course, but also construction, manufacturing and energy,” he says, pointing out that Batumi could also become a “global hub for logistics and commerce.” The government is working on plans that will enable Batumi to embrace blockchain and other new finance technologies. “Our idea is to create an ecosystem where global fintechs will be welcomed,” he says.