Tbilisi Airbnb Market Outlook

April 2019

Terms and definitions

2

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

Airbnb supply increased 2.5x in Tbilisi over 2016-18

3

On average, more than 10k rentals were

supplied monthly in 2018

Source: AirDna, G&T Research Source: AirDna, G&T Research

Airbnb generated a market worth US$ 23mn in 2018

US$

12mn

US$

23mn

2017 2018

US$

4mn

20164,174

6,319

10,289

0

3,000

6,000

9,000

12,000

2016 2017 2018

Average monthly supply

3,125 4,370

6,620 1,049

1,950

3,669 25.1%

30.9%

35.7%

0%

10%

20%

30%

40%

0

3,000

6,000

9,000

12,000

2016 2017 2018

Average monthly unbooked rentals (LHS) Average monthly booked rentals (LHS)

Participation rate, % (RHS)

Market is already oversupplied, but still continues growing – classic case of

market overreaction. Notably, 64% of properties does not get booked at all while

average monthly supplied rentals was up 62.8% y/y in 2018

Oversupply is evident when compared to peers – supplied rentals in Tbilisi (12,403

rentals in Feb-19) only slightly below Istanbul and way above rest of peers

We expect low performing properties to gradually leave the market and supplied

rentals to be concentrated in Old Tbilisi mostly

Supply and demand imbalanced – oversupply evident

4

Moreover, almost 64% of total supplied

rentals does not get booked at all

Rapid expansion resulted in one of the

lowest median occupancy among peers

Source: AirDna, G&T Research

Note: Participation rate - share of booked rentals in total supply

Source: AirDna

Note 1: Properties with no bookings are excluded when calculating median occupancy

Note 2: Median occupancy calculation includes only entire home properties

Note 3: Data as of February 2019

50%

39%

64% 64%

57%52%

57%

35%

27%

57%

50% 50%

0%

20%

40%

60%

80%

0

5,000

10,000

15,000

20,000

Active Airbnb rentals (LHS) Median occupancy rate (RHS)

Despite demand growth outpacing supply growth, occupancy rates were up

only slightly due to existing oversupply:

Total demand nearly doubled in 2018 (+97.3% y/y, 562,320 rental/nights

booked)

Demand growth (+97.3% y/y) outpaced supply growth (62.8% y/y) in 2018, but

was insufficient to absorb massive offerings on Airbnb

As a result median occupancy was up slightly - 3.6ppts y/y to 48.4% in 2018

DemandSupply

Oversupply is driven by higher yields of Airbnb

5

Airbnb business model in Tbilisi expected to

match peers, where multiple-listing hosts

absorb higher share of the market

Source: AirDna

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

70%67% 66%

61% 60% 60% 58%54% 54%

51% 49%46%

0%

20%

40%

60%

80%

100%

Pra

gue

Kie

v

Wars

aw

Bu

dapest

Ye

revan

Lju

blia

na

Ba

ku

Ath

ens

Rig

a

Ta

lin

Ista

nbul

Tb

ilisi

Share of multiple-listing hosts in total

Above median Airbnb properties have higher

yields vs. long-term renting

Source: G&T Research

Note: Includes only entire home properties

17.4%

14.1%

9.5% 10.0%9.0% 9.0% 8.5%

0%

4%

8%

12%

16%

20%

Yield of 90thpercentile

Airbnb rentals

Yield of 75thpercentile

Airbnb rentals

Yield ofmedian Airbnb

rentals

Rental yield inChugureti

Rental yield inMtatsminda

Rental yield inSaburtalo

Rental yield inVake

Long-term renting gross yieldsAirbnb gross yields

77%

84% 84%

93%90%

93% 94%96% 97%

93%

87%

77%

87%90%

93%95%

93% 93%96% 97% 97% 97%

90%

84%87%

89%

50%

59%

65%

79%77% 77%

82%85%

87%

77%

63%

48%

55%

68%

77%

82%

77%80%

84%87%

90%

83%

68%

58%61%

71%

24%

32%

39%

50% 50% 50%

55%

60%

66%

54%

37%

21%

26%

36%

48%

53%

48%

53%

58%

65%67%

58%

40%

29% 29%

39%

0%

20%

40%

60%

80%

100%

120%

Jan

-17

Fe

b-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Fe

b-1

8

Ma

r-18

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

Nov-1

8

Dec-1

8

Jan

-19

Fe

b-1

9

90th percentile 75th percentile Median

Occupancy by category

Top performers absorb biggest share of the pie

6

Top performers (90th percentile, 319 properties) enjoyed above 92% average monthly occupancy,

while median occupancy stood low at 48% in 2018

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.

Source: AirDna

Note 1: Properties with no bookings are excluded

Note 2: Includes only entire home properties

Price gap also high

7

Top performing properties (95th percentile, 159 properties) enjoyed 2.9x more ADR than

median in 2018

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

$109

$100 $102 $103

$109$105

$110 $108

$100$96 $94

$107$110

$100 $100$105 $104

$101 $103 $104$100

$95$91

$100$105

$89

$60

$53 $55 $55$60

$57 $56 $55 $54$50 $50

$57 $58

$49$52 $53 $55 $53 $52 $51 $50

$46 $45$50 $51

$41

$40$36

$40 $40 $40 $40 $40 $39 $38$35 $34

$38 $38$33 $35 $37 $39 $37 $36 $36 $35

$32 $31$35 $35

$29

0

20

40

60

80

100

120

140

Jan

-17

Fe

b-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Fe

b-1

8

Ma

r-18

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

Nov-1

8

Dec-1

8

Jan

-19

Fe

b-1

9

95th percentile 75th percentile Median

ADR by category

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

Competition pressures revenues

8

Average monthly revenues per rental shrank in

every category…

...making Tbilisi lowest income Airbnb market

among peers

Source: AirDna, G&T Research

Note 1: Properties with no bookings are excluded

Note 2: Includes only entire home properties

Source: AirDna

Note 1: Properties with no bookings are excluded

Note 2: Includes only entire home properties

Note 3: Data as of February 2019

430 416

746 722

1,140 1,130

0

400

800

1,200

1,600

2,000

2017 2018

Median 75th percentile 90th percentile

Oversupply pushing prices down – subsequently, average

monthly revenues per rental slightly down

59 60

45

62

5248 47

44 42

31 2933

$0

$20

$40

$60

$80

$100

$0

$300

$600

$900

$1,200

Median monthly revenue (LHS) Median ADR (RHS)

Airbnb complementary to hotel industry

9

Airbnb accounts for 11% of accommodation

market in Tbilisi

Source: G&T Research, AirDna, Colliers International

Note: Properties with no bookings are excluded

Airbnb is price competitive with hotel industry in

respective segments

Source: G&T Research

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%

Rooms sold in other forms of

accommodation89%

Airbnb nights sold11%

Market share of Airbnb

Paris – 15%

Amsterdam – 12%

Madrid – 10%

Berlin – 7%

London – 7%

Tbilisi – 11%

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

152

112

101

85

51

38 35

0

40

80

120

160

Internationalupscale

Internationalmidscale

Airbnb top 5%(159 properties)

Local upscale andmidscale class

Airbnb top 25%(796 properties)

Economy/budgetclass

Airbnb median

ADR in 2018, US$

Key findings and expectations on Airbnb in Tbilisi

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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.

Annex 1: Key characteristics of Airbnb rentals in Tbilisi

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Rentals by size Top 10 rentals by revenue

Rental Annual revenue ADR Occupancy Guest capacity

Property 1 $79,426 $296 83.0% 14

Property 2 $63,083 $256 69.0% 8

Property 3 $57,640 $200 89.0% 8

Property 4 $49,188 $212 66.0% 12

Property 5 $47,107 $179 75.0% 6

Property 6 $40,904 $154 73.0% 8

Property 7 $40,006 $147 75.0% 10

Property 8 $36,920 $125 93.0% 9

Property 9 $36,720 $360 34.0% 12

Property 10 $34,471 $145 68.0% 8

Amenities of Airbnb rentals

Source: AirDnaSource: AirDna

Source: AirDna

Origins of Airbnb guests

1 Bedroom36%

2 Bedroom25%

3 Bedroom7%

Studio 6%

4 Bedroom2%

5+ Bedroom1%

Private room21%

Shared room2%

3%

7%

8%

24%

34%

79%

84%

94%

94%

98%

0% 20% 40% 60% 80% 100% 120%

Pool

Business ready

Hot tub

Dryer

Cable TV

Air conditioning

Washer

Heating

Kitchen

Internet

Moscow19%

Saint Petersburg9%

Yerevan8%

Dubai7%

London7%

Berlin5%

New York4%

Baki4%

Kiev3%

Paris3%

Other31%

Source: AirDna

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12

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