The Impact of Foreign Direct Investments on the Development of Tourism in Georgia and Its Relationship with the Real Estate Market

Abstract

In the context of the globalization process in the modern world, foreign direct investments (FDI) play a significant role in transforming a country’s economic structure and promoting the development of strategic sectors. One such strategic direction in Georgia is the tourism sector, which has become a key source of the country's economic sustainable development and employment over the last decade. In this context, it becomes crucial to analyze the impact of FDI not only on the growth of the tourism industry but also on its systemic link with other sectors of the economy, primarily the real estate market. Although various authors' research addresses investments, tourism development, and the real estate market individually, a comprehensive study of this issue in Georgia is limited, which defines the novelty of our research.

The aim of the study is to assess the impact of foreign direct investments on the tourism sector and analyze this influence in relation to the real estate market. Methodologically, the study uses quantitative analysis with a time interval from 2016 to 2025. Statistical data are obtained from both state institutions (Geostat, NBG, GNTA, etc.) as well as from the public and private research organizations.

The research found that foreign direct investments significantly affect the development of tourism infrastructure (hotels, apart-hotels, recreational facilities), which, in turn, creates the potential for further growth in tourist flows. Along with the increase in tourist flows, the real estate market strengthens significantly, especially in the rental and sale segments of residential properties. By 2024, the number of international tourist visits exceeded 5 million (GNTA, 2024), while the Residential Property Price Index (RPPI) increased by an average of 48% in 2020-2024. Moreover, the high share of investments in real estate increases the risks of market concentration and overheating.

The article posits that in Georgia, foreign direct investment, tourism development, and the real estate market are closely interrelated, creating a mutually reinforcing dynamic: the growth of tourism enhances the investment attractiveness of the real estate market, while the expansion of the real estate sector, in turn, stimulates the attraction of foreign investment and generates additional economic opportunities within the residential rental and aparthotel segments. The findings of the study may serve both as a basis for planning and implementing economic and tourism development policies and as an analytical foundation for investment decisions by private investors. The recommendations presented focus on sectoral diversification of investments, promotion of regional equality, and regulatory policies aimed at sustainable market development.