Tbilisi Airbnb Market Outlook - April 2019 - galt & taggart
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Tbilisi Airbnb Market Outlook
April 2019Terms and definitions
Rental – property offered for rent via Airbnb
Active rental – property that was available for rent at least for one day in the last month
Booked rental – property that was booked at least once during the last month
Unbooked property – property that was not booked at least once during the last month
Participation rate – share of booked rentals in the active rentals
Average daily rate – average booked nightly rate + cleaning fees
Revenue (monthly) – the total nightly rate + cleaning fees earned during the last month
Occupancy rate – number of booked days divided by number of days available for rent during the last month. Properties with no bookings are excluded
Percentile - value below which a given percentage of observations in a group of observations falls
90th percentile – value below which 90% of observations in a group of observations falls
Median - value below which 50% of observations in a group of observations falls
Source: AirDna
2Airbnb supply increased 2.5x in Tbilisi over 2016-18
On average, more than 10k rentals were Airbnb generated a market worth US$ 23mn in 2018
supplied monthly in 2018
12,000
Average monthly supply 10,289
US$
9,000 US$ 23mn
US$
4mn
12mn
6,319
6,000
4,174
2016 2017 2018
3,000
0
2016 2017 2018
Source: AirDna, G&T Research Source: AirDna, G&T Research
3Supply and demand imbalanced – oversupply evident
Rapid expansion resulted in one of the Moreover, almost 64% of total supplied
lowest median occupancy among peers rentals does not get booked at all
20,000 80% 12,000 35.7% 40%
64% 64% 30.9%
57% 57% 57%
15,000 52% 60% 9,000 25.1% 30%
50% 50% 50% 3,669
39%
10,000 35% 40% 6,000 20%
27% 1,950
1,049 6,620
5,000 20% 3,000 10%
4,370
3,125
0 0%
0 0%
2016 2017 2018
Average monthly unbooked rentals (LHS) Average monthly booked rentals (LHS)
Active Airbnb rentals (LHS) Median occupancy rate (RHS) Participation rate, % (RHS)
Source: AirDna Source: AirDna, G&T Research
Note 1: Properties with no bookings are excluded when calculating median occupancy Note: Participation rate - share of booked rentals in total supply
Note 2: Median occupancy calculation includes only entire home properties
Note 3: Data as of February 2019
Supply Demand
Market is already oversupplied, but still continues growing – classic case of Despite demand growth outpacing supply growth, occupancy rates were up
market overreaction. Notably, 64% of properties does not get booked at all while only slightly due to existing oversupply:
average monthly supplied rentals was up 62.8% y/y in 2018
Total demand nearly doubled in 2018 (+97.3% y/y, 562,320 rental/nights
Oversupply is evident when compared to peers – supplied rentals in Tbilisi (12,403 booked)
rentals in Feb-19) only slightly below Istanbul and way above rest of peers
Demand growth (+97.3% y/y) outpaced supply growth (62.8% y/y) in 2018, but
We expect low performing properties to gradually leave the market and supplied was insufficient to absorb massive offerings on Airbnb
rentals to be concentrated in Old Tbilisi mostly
As a result median occupancy was up slightly - 3.6ppts y/y to 48.4% in 2018
4Oversupply is driven by higher yields of Airbnb
Above median Airbnb properties have higher Airbnb business model in Tbilisi expected to
yields vs. long-term renting match peers, where multiple-listing hosts
absorb higher share of the market
20% Airbnb gross yields Long-term renting gross yields 100%
17.4% Share of multiple-listing hosts in total
16% 80% 70%
14.1% 67% 66%
61% 60% 60% 58%
12% 54% 54%
10.0% 60% 51% 49%
9.5% 9.0% 9.0% 46%
8.5%
8% 40%
4% 20%
0%
0%
Yield of 90th Yield of 75th Yield of Rental yield in Rental yield in Rental yield in Rental yield in
Warsaw
Tbilisi
Baku
Prague
Riga
Istanbul
Kiev
Ljubliana
Talin
Budapest
Yerevan
Athens
percentile percentile median Airbnb Chugureti Mtatsminda Saburtalo Vake
Airbnb rentals Airbnb rentals rentals
Source: G&T Research Source: AirDna
Note: Includes only entire home properties
Airbnb is high-yielding investment for certain properties, incentivizing real estate owners to rent flat on Airbnb instead of long-term renting. However, median Airbnb
yields are similar to long-term renting
Airbnb stock is mostly concentrated in the Old Tbilisi, which never was hotspot for long-term renting. Therefore, there is no sign of long-term rent price spikes in Tbilisi
due to Airbnb
Emergence of multiple listing hosts indicates that buying or renting flats for sub-renting has become successful business model in Tbilisi, as professional management
improves performance of the properties
Survival of the fittest - we believe, share of multiple listing hosts will increase in the future – share of multiple listing hosts in Tbilisi stands at 46% vs 58% peer average
5Top performers absorb biggest share of the pie
Top performers (90th percentile, 319 properties) enjoyed above 92% average monthly occupancy,
while median occupancy stood low at 48% in 2018
120%
Occupancy by category
96% 97% 96% 97% 97% 97%
100% 94% 95%
93% 93% 93% 93% 93% 93%
90% 90% 90% 89%
87% 87% 87%
84% 84% 84%
77% 77% 90%
80% 87% 87%
85% 84%
82% 82% 83%
79% 80%
77% 77% 77% 77% 77%
71%
60% 68% 67% 68%
65% 66% 65%
63%
60% 61%
59% 58% 58% 58%
55% 54% 55%
53% 53%
50% 50% 50% 50%
40% 48% 48% 48%
39% 40% 39%
37% 36%
32%
29% 29%
20% 24%
26%
21%
0%
Jul-17
Jul-18
Jan-17
Jun-17
Aug-17
Sep-17
Mar-17
Nov-17
Dec-17
Jan-18
Jun-18
Aug-18
Sep-18
Dec-18
Jan-19
Apr-17
Oct-17
Mar-18
Apr-18
Oct-18
Nov-18
Feb-17
May-17
Feb-18
May-18
Feb-19
90th percentile 75th percentile Median
Source: AirDna
Note 1: Properties with no bookings are excluded
Note 2: Includes only entire home properties
Demand is mostly absorbed by top performing properties (90th percentile, 319 properties), especially in the offseason (October through March)
High-performing properties will benefit most from increasing demand in the future - occupancy rates for the top performers are expected to oscillate around 100%
during high seasons similar to peer cities.
6Price gap also high
Top performing properties (95th percentile, 159 properties) enjoyed 2.9x more ADR than
median in 2018
140
ADR by category
120
$109 $109 $110 $108 $110
$105 $107 $105 $105
$102 $103 $104 $103 $104
$100 $100 $100 $100 $101 $100 $100
$96 $94 $95
100 $91 $89
80
$60 $60 $58
$55 $55 $57 $56 $55 $57 $55
60 $53 $54 $52 $53 $53 $52
$50 $50 $49 $51 $50 $50 $51
$46 $45
$41
40
$40 $40 $40 $40 $40 $40 $39 $38 $38 $38 $39
$36 $35 $35 $37 $37 $36 $36 $35 $35 $35
$34 $33 $32 $31 $29
20
0
Jul-17
Jul-18
Jan-17
Jun-17
Nov-17
Dec-17
Jan-18
Jun-18
Nov-18
Dec-18
Jan-19
Apr-17
Aug-17
Sep-17
Oct-17
Apr-18
Oct-18
Feb-17
Mar-17
May-17
Feb-18
Mar-18
May-18
Aug-18
Sep-18
Feb-19
95th percentile 75th percentile Median
Source: AirDna
Note 1: Properties with no bookings are excluded
Note 2: Includes only entire home properties
Note 3: 90th percentile for ADR is not available
Average ADR of top-performing properties stood at US$ 101.1 in 2018, 2.9x higher than median ADR of US$ 35.3
Oversupply pressures prices mostly in midmarket properties - ADR of top-performing properties was down 2.4% y/y in 2018, while median ADR was hit even
harder (-7.8% y/y), illustrating that oversupply mostly pressures mid-market properties
7Competition pressures revenues
Average monthly revenues per rental shrank in ...making Tbilisi lowest income Airbnb market
every category… among peers
2,000 Median 75th percentile 90th percentile $1,200 $100
Oversupply pushing prices down – subsequently, average Median monthly revenue (LHS) Median ADR (RHS)
monthly revenues per rental slightly down $80
1,600
$900
60 62
59
52 $60
1,200 1,140 1,130
48 47
$600 45 44 42
33 $40
746 31 29
800 722
$300
$20
430 416
400
$0 $0
0
2017 2018
Source: AirDna, G&T Research Source: AirDna
Note 1: Properties with no bookings are excluded Note 1: Properties with no bookings are excluded
Note 2: Includes only entire home properties Note 2: Includes only entire home properties
Note 3: Data as of February 2019
8Airbnb complementary to hotel industry
Airbnb accounts for 11% of accommodation Airbnb is price competitive with hotel industry in
market in Tbilisi respective segments
Market share of Airbnb
160 152
Paris – 15% ADR in 2018, US$
Airbnb nights sold
11%
Amsterdam – 12%
120 112
Madrid – 10% 101
85
Berlin – 7%
80
London – 7%
51
Tbilisi – 11% 38 35
Rooms sold in other 40
forms of
accommodation
89%
0
International International Airbnb top 5% Local upscale and Airbnb top 25% Economy/budget Airbnb median
upscale midscale (159 properties) midscale class (796 properties) class
Source: G&T Research, AirDna, Colliers International Source: G&T Research
Note: Properties with no bookings are excluded Note: Top 5% is equivalent to 95% percentile. i.e. top 5% (183 properties) have ADR equal or higher than US$ 101.
Same applies for top 25%
Regulations
Airbnb market in Paris, Amsterdam, Madrid, Berlin, London is regulated and
have length of stay limits from 60 to 120 days – owners can rent their home only
for limited number of days
Tbilisi Airbnb market is unregulated, but underperforms above mentioned
regulated cities - Tbilisi Airbnb market accounts for 11% of accommodation
market, similar to regulated cities share, which illustrates growth potential of
Tbilisi in the future
9Key findings and expectations on Airbnb in Tbilisi
Question 1: Is Airbnb profitable for hosts?
It is. Top performing properties enjoy much higher yields compared to long-term renting, while yields of median Airbnb properties tend to be similar to long-
term renting business.
Top performers on Airbnb expected to enjoy higher yields in the future in our view. However, part of median (or below) properties expected to gradually leave
the market, because of similar (or lower) yields compared to long-term renting business.
Question 2: How Airbnb affects long-term rental rates?
There is no sign of long-term rent price spikes in Tbilisi.
Airbnb stock is mostly concentrated in the Old Tbilisi, which never was hotspot for long-term renting business.
Question 3: Is Airbnb price competitive with hotel industry?
Airbnb mostly competes with local midscale/economy/budget class hotels, offering lower prices to tourists.
We believe that Airbnb has largely been complementary to the hotel industry lacking budget accommodation. Airbnb benefits market and adds value to the
tourism industry.
Question 4: Will Airbnb’s market share increase?
It will. Tbilisi Airbnb accounts 11% of market share, similar to peers, which have strict regulations and are more price competitive with hotel industry.
Taking into account tourism boom to continue in Georgia there is room for Airbnb growth in Tbilisi. This segment expected to gain maximum of 20% of the
market size over next 5 years on the back of low yielding visitors.
10Annex 1: Key characteristics of Airbnb rentals in Tbilisi
Rentals by size Top 10 rentals by revenue
Shared room Rental Annual revenue ADR Occupancy Guest capacity
2% Property 1 $79,426 $296 83.0% 14
Property 2 $63,083 $256 69.0% 8
Private room
21% 1 Bedroom Property 3 $57,640 $200 89.0% 8
36%
Property 4 $49,188 $212 66.0% 12
5+ Bedroom
1% Property 5 $47,107 $179 75.0% 6
4 Bedroom Property 6 $40,904 $154 73.0% 8
2% Studio
6%
Property 7 $40,006 $147 75.0% 10
Property 8 $36,920 $125 93.0% 9
3 Bedroom
7% Property 9 $36,720 $360 34.0% 12
2 Bedroom
25% Property 10 $34,471 $145 68.0% 8
Source: AirDna Source: AirDna
Amenities of Airbnb rentals Origins of Airbnb guests
Internet 98%
Kitchen
Moscow
94%
19%
Heating 94%
Other
Washer 84% 31%
Air conditioning 79%
Saint Petersburg
Cable TV 34% 9%
Dryer 24%
Hot tub 8%
Paris Yerevan
Business ready 7% 3% 8%
Baki
Pool 3% 4%
Kiev Berlin
0% 20% 40% 60% 80% 100% 120% 3% 5% Dubai
New York 7%
London
4% 7%
Source: AirDna Source: AirDna
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Eva Bochorishvili
Head of Research │ evabochorishvili@gt.ge │ +995 32 2401 111 ext. 8036
Kakha Samkurashvili
Senior Analyst │ ksamkurashvili@gt.ge │ +995 32 2401 111 ext. 4298
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