Posted: 1 year ago

Reimagining Tourism Regulations: Implications and Prospects of the New Tourism Law

The tourism industry plays a vital role in our country's economic framework, given its significant contributions to the economy. The introduction of new regulatory policies in this sector carries considerable implications for its future dynamics and trajectory. Hence, it's intriguing to understand the prospects of the latest tourism regulatory reform, the challenges it might pose, and its regulatory role.

Irakli Gelovani, Advisor for Policy and Legal Issues at USAID's Economic Governance Program, states on the "BusinessPartner" podcast that the tourism industry's indicators show a steady upswing, gradually surpassing pre-pandemic levels—an important milestone for our country's economic stability.

The draft for the new tourism law, the product of a concerted effort involving the Parliamentary Committee on Sectoral Economy and Economic Policy, and the Tourism Administration, is ready for introduction in Parliament in the forthcoming week.

"We engaged an international expert during the formulation of this legislation who examined best practices from around the globe, including those with minimal regulatory interventions. We conducted a Regulatory Impact Assessment to gauge possible preliminary outcomes," Gelovani shares. The law encompasses three primary aspects: guide regulations, the duty of care relating to tour operators, and accommodation sector regulations. Private sector involvement was critical throughout this process.

Gelovani notes that the projected Net Present Value (NPV) over a decade, based on preliminary data, is over 2 billion GEL. This figure could significantly impact our country, directly or indirectly.

A critical aspect of the proposed law is its alignment with European directives, which is stipulated by the association agreement. Georgia has committed to converging with two specific directives. The first directive pertains to tourist packages, ensuring that creators and sellers of these products owe certain responsibilities to consumers.

"The second directive deals with the financial stability of tour operators, aiming to solve the issue of insolvency which left many tourists stranded. The key here is aligning financial security with turnover and service. The National Tourism Administration will oversee the implementation of this directive," Gelovani elaborates.

Drawing on other nations' practices, the guarantee percentage, reflecting a specific portion of the revenue earned from the previous year's tourist packages, should be in place. Minimum values are set based on economic indicators.

While the directive doesn't specifically mention how countries should request financial security, the most commonly employed methods are through insurance and bank guarantees. Although no such insurance product exists currently in the market, consultations with insurance companies indicate the potential for developing a suitable product.

Gelovani emphasizes the importance of transparency and proper regulation understanding. A transition period of around two years will allow the interested parties and tour operators to adapt to these new provisions.

"It's a complex issue, but it's gradually becoming evident that it's not as daunting as initially perceived. Consequently, conscientious tour operators who abide by the rules won't face any substantial changes," concludes Irakli Gelovani.