Experience in the Batumi real estate market has caused us to shift our focus from apartments to investing in hotel rooms. Ruebush Hospitality Group started its business by investing in apartments in Batumi during the peak of the real estate boom in Batumi. We advised our clients in selecting optimal properties to invest in, we carried out all finishing construction works, and provided a full rental management service. Well into our third year of operations we started to observe several factors that encouraged us to change strategy for future development and shift our focus from daily rental apartments to developing boutique hotels.
The first pressing concern is the increasing rate of the rental units available on the market. In 2019, TBC Capital Research reported that the construction sector was outpacing total output growth. The sector’s value added had grown at a 21.6% CAGR over the previous 6 years to GEL 461.9mln in 2017. Construction’s share of regional GDP reached 13.7% in 2017, up from 7.6% in 2011. According to Adjara’s Ministry of Finance and Economy, residential real estate accounts for 80% of all construction in the region, followed by hotel construction with 15%. The bulk of these buildings are concentrated in Batumi.
Why Are We Investing In Hotel Rooms and Not Apartments?
With supply steadily on the rise, rental yields are decreasing. Average rental yields in Batumi have decreased over the last five years. The decrease can be attributed to high supply of rentals and a slowdown in the growth rate in tourist visits. Taking recent prohibitions into account, TBC Capital Research expects the yields to continue decreasing. As profits from apartment rentals decrease, investing in hotel rooms looks better and better.
Another motivation for our focus to shift toward hotel rooms was the average cost of servicing individual apartments vs hotel rooms, and the average rental yield per night. For example, with our current hospitality team of housekeeping and guest services professionals dedicated to servicing our individual rental properties, we could service 50% more units, provided that they’re a part of a hotel.
According to data published by PMCG Research in 2019, the average nightly rate for apartments in the region were 50-150 GEL, while hotels ranged from 137-384 GEL. In June 2019, in Georgia the hotel price index increased by 1.5% compared to May 2019. The 3-star, 4-star and 5-star hotel price index increased by 3.6%, while for vacation rental apartments, the price index decreased by 0.1%. Again, this makes investing in hotel rooms more attractive than apartments.
Despite the change in our strategy, we remain committed to caring for the investments in rental apartments made by some of our first clients. The following is the data generated by rental apartments currently under our management. It is important to note that the bulk of them became available for rent several months into 2019. As a rule, new listings need several months to garner views and reviews to appear at the top of online searches, and start generating optimal income. The occupancy data and nightly rates in the tables are generated based on nights booked out of 365.
We’re showcasing this data not despite, but because of this. To demonstrate how quickly our listings gain momentum in a short period of time, due to our dedication to providing outstanding service. And, we believe as we shift our focus to investing in hotel rooms and operating these rooms more efficiently than our current apartments, we can provide even better results for our investors.
NOTE: Data on this page was updated in April 2022. Charts and tables on this page represent all the apartment managed by Ruebush Hospitality Group in Batumi against all the apartments in Batumi managed by other companies. This data is not our own data but is taken from 3rd party data sites such as AirDNA, AllTheRooms, AirBNB, and Booking.
Average Nightly Occupancy of Our Apartments in Batumi vs Apartments Managed by Other Companies
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Average Nightly Rate of Our Apartments in Batumi vs Apartments Managed by Other Companies
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Buy a Boutique Hotel Room in Batumi
We are currently developing boutique and lifestyle projects in this extremely profitable market. If you are interested in investing in hotel rooms, we have many options for you.
Different as they are, our projects have all been created with the big picture in mind. Their facilities support each other, and create a network of lodging, dining, culture and entertainment that can keep visitors engaged and entertained for a longer stay.
Our boutique properties vary in style to cater to specific demographics, and all of them are contained to a small number of rooms to ensure the highest possible yields for our hotel room investors.
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