The Business Of Emotions
What used to be a 10 hectare swamp in Chakvi is now a Dreamland Oasis. The price for every square meter of this land now exceeds $2,000. Over $40 million has already been invested. This year, developers will spend approximately $30 million and by 2023, total investment will reach $94 million.
In today’s world, the value of aesthetics has gained increased importance inmodern business. Even though this trend is relatively new in the marketing sphere, placing a focus on the feelings and emotions of the customer has grown in popularity. This trend goes beyond the traditional approaches to branding and strives to bring brand and identity closer by creating an environment where every detail sells as ‘an unforgettable experience’. This approach has long been employed by the development and hospitality industries. It is believed that a well-planned environment, efficient infrastructure and distinctive aroma and lighting improves the emotional state of the customer, promotes positive feelings and encourages a strong motivation to return.
In the case of Georgia, business and aesthetics are brought together by means of a very sensible and well-planned Dreamland Oasis. It is probably hard to imagine that in modern big cities that mostly resemble concrete jungles, there is still a business that strives to introduce and develop aesthetic approaches in the hospitality and development spheres on its own by attracting investment and long-term investors.
Dreamland Oasis is located in Chakvi. The concept of this place is very unusual on the Georgian market. Space is more respected here than square meters. Awakening feelings and emotions in the comfortable green surroundings is more important here than square meters.
The most important person in Dreamland Oasis is Nikoloz (Koka) Geguchadze. However, he would say that my appraisal is exaggerated, since throughout our interview, he tried to focus on the importance of a well-thought-out idea and working with a highly-skilled team. Money represents the last link in the chain for him. He believes that if these two components are in place, money will follow closely behind.
We met in his office in Chakvi.
Just before our interview, he took a tour of the entire property: he examined the construction site of a new aqua park, which combines water entertainment infrastructure with the concept of a spa. From the outside, it is shaped like a tower with a specific texture, waterfall and spaces for various age groups.
There is another ongoing construction project on the Dreamland Oasis property. The building that is under construction is twenty-stories high and is so far the tallest building within the compound. Part of the building will be a hotel and the rest will be sold as condos. You will also see aparthotels on the territory of Dreamland Oasis – four-story similarly-styled buildings that don’t upset the harmony of the green cover and perfectly fit into the surroundings.
Green cover is a separate topic for Dreamland Oasis. There are a lot of unique tree species that you cannot find anywhere else. These trees are meticulously selectedand then planted only in places that are specially designated.Geguchadze personally oversees this process. For instance, he carefully selects the angles in which the trees and bushes are planted in order not to upset the aesthetics of the Dreamland and to make sure that holidaymakers perceive these plants exactly the way it was intended by the business. He wants to make sure that these plants reawaken the kind of feelings and emotions that the holidaymakers will strive to experience again.
Despite the ongoing large-scale construction, Dreamland Oasis is not polluted with exhaust from machinery. In fact, there is no traffic here except for electric cars.
Notwithstanding his busy and tense schedule, which requires a lot of mobility and doing many different things at the same time, observing the results of the hard work fillsGeguchadze with new energy and encourages him to continue his quest for new novelties.
What is in the concept of Dreamland Oasis?
This is a territory with a green concept; it has its own coastline. Our customers are the partners of this entire space: they live here, they do their businesses here, and at the same time, they stay at the hotel. The efficient and well-planned infrastructure ensures the harmonious cohabitation of the owners of the apart hotels and the hotel guests. Everyone abides by the general rules, the so-called Dreamland Oasis constitution: music is not allowed after 00:00 and security norms are strictly observed. Therefore, trespassing on the territory is made very difficult – these rules apply to vacationers and apart hotel owners equally.
Why did you name this place ‘Dreamland’?
We wanted to create a wonderland that would not be boring and monotonous, because monotony is tiring. People come here to rest. That’s why the whole idea of this place is to create an environment where people are filled with new emotions on a daily basis. Take for example the fact that there are about 18 outlets on the Dreamland Oasis premises and their number is increasing by day; we have a half-kilometer boulevard that is filled with various infrastructure for relaxation – all of this is designed to make sure that people that escape the urban surroundings and come here to rest will not find themselves back in the same environment that they just came from. On the contrary, we strive to ensure that our customers have everything in order to rest and take pleasure. These infrastructural details create an environment that is designed for very small children, as well as their grandparents.
Who are your customers?
The complex is in the premium category, therefore all our customers are successful people. Family plays a major role in the success of a person. A married person always strives to satisfy the requirements of his family. Hence, our priority is to ensure a family-friendly environment and an opportunity to rest. That is why we focus our efforts on creating a well-developed infrastructure to fit the needs of customers of all ages. For instance, we have a game zone for teenagers; we have playgrounds and swings for smaller children; we have night clubs for adults and so on. In fact, this is a mini town, where everyone can find their place. We have entertainers, which makes recreation and pastime very amusing.
Who are these successful people, are they mostly citizens of Georgia?
No, not only Georgians. They are successful Ukrainians, Russians, Kazakhs. Mostly from the post-soviet countries: they live closer to Georgia and are more familiar with the local environment.They love our country and we try to offer them adequate services. Among our guests, there is a growing number of holidaymakers from Eastern Europe.
Would it be safe to say that your concept is also your main competitive advantage on the market nowadays?
Before building Dreamland Oasis, people used to travel to Turkey to enjoy these types of services. We are obviously the pioneers on the market. We are the first to create such an environment and take this tremendous responsibility. We offer our customers finished apartments. These apartments have everything – you can just step in there and drink some tea. 80% of the apartments have already been sold. The fact that none of the customers have so far attempted to redesign their apartments confirms that the quality of customer satisfaction is high. This is a very important trend for us; it indicates that we have managed to create a good environment for our customers.
What is the most frequently asked question?
Everyone wants to know when all the infrastructural projects that we have planned will be completed.
Do you have an answer to this question?
Of course, I do. Everything is planned in detail. These projects either go as planned or sometimes we are ahead of schedule.
How many years will it take until there are no such questions asked?
After 2023, there will be nothing left to do on these 10 hectares of land. This is the ultimate deadline, because by 2023, the only work that will be left to do will be located outside the premises of this property and will not interfere with the rest of the surroundings here. It should also be noted that as a rule, we discontinue all construction work during the holiday season. We do not want to disturb our guests. However, they are just as excited to see all the novelties here every year as we are.
What is the cost of this project?
We started investing in 2014. We have already invested approximately $41.5 million in building the hotel and apartment hotels. There is another ongoing project that cost about $18 million. At the same time, we are waiting for a construction permit for yet another project that will probably be launched this year and will cost $12 million. By 2023, the total value of investment will be in the region of $94-118 million. And all of this will be done here – in Chakvi. However, we also have other assets that we plan to develop in the future. Let’s say that Dreamland Oasis is a pilot project and the contents and results of our future projects will be determined by the success of Dreamland Oasis. When we feel ready to develop similar models in other location where we own land, we will certainly do that.
Are these other lands also located in Adjara?
Some are located in Adjara and others are situated in Tbilisi.
Are you planning to choose the same concept and approach in all other locations as well?
Yes, all other projects will be developed based on a similar concept.
Under the same branding umbrella?
The brand will be ‘Dreamland’. If Dreamland Oasis is currently only located in Chakvi, there will be Dreamland Oasis in Shekvetili, Dreamland Oasis at Tbilisi Sea, Dreamland Oasis in Tabakhmela and so on. This will be a Georgian network brand.
Has the pilot project been successful so far?
It is not just successful; this project has exceeded all of our expectations. Customers paid over $3,150 for one m² of space in the last remaining apartments, which means that the demand is very high. You know what has worked well for us? We don’t sell m² as it is. Only 17% of the entire territory is occupied with buildings, the rest is marine infrastructure and green cover. Besides, there is plenty of eucalyptus, a botanical garden, the Mtirala National Park, mountains and the sea, which all create a unique micro-climate. And all of these are just close at hand from us. Plus, there is well-developed infrastructure and that is why we say that we don’t just sell m², we sell emotions that you get from the aesthetic beauty and comfort of Dreamland Oasis. You can safely spend your holiday with your kids or parents and rest assured that everyone feels safe and happy here.
How did you guess that there would be a demand for such a premium-quality service in Georgia? Because if we take a look at the general micro-economic statistics, it does not indicate the presence of such a demand…
Every business starts with a market study and then it moves towards creating a better product. We could not find the required experience in Georgia, so we had to receive that experience in Bulgaria, Spain, Croatia and needless to say – Turkey. The fact that there has always been a demand for family vacationing is obvious. It is important to offer your customers the kind of services that will meet all these requirements. We conducted a survey and found out that this niche was not filled – neither at the time of the survey, nor now.
In other words, there is no competition …
We are the pioneers, but we welcome competition. For instance, if there was only one hotel in Antalya, no one would have known about that place on the map. Tourism is very important for the economy of our country. That’s why, the more we have such places, the better for the economy of the country. Domestic competition is of less importance to us. Let’s say that for a moment one resort is 2-3% busier than the other ones, tomorrow the other resort will have more guests, eventually a hospitality sector that is developed based on this concept will attract tourists in the quantities that will be enough for all resorts. We constantly strive to make our services more social: we want to attract more holidaymakers. We want our prices to be reasonable and reflect the real state of affairs – tourists from abroad start their vacation the moment they step over the threshold and head for the airport. Traveling to Georgia is not particularly inexpensive for foreigners. Especially given the fact that they come across all sorts of travel advertisements that offer tours to various destinations for half the price. That is where we want to become competitive.
You are lucky in this regard, Batumi International Airport is quite close and the railway is just outside the gates …
You are right. We are really lucky in that regard. This place has one of the best locations in terms of accessibility. It is only 12 km to Batumi and 24 km to Batumi airport.
Are you planning to negotiate with the railway administration and the local government to add a railroad station here, so that the guests can get off the train right at Dreamland Oasis?
We have started the process and we believe that already this coming season we will have a new railroad station called Dreamland. The station will have a track-side platform equipped in accordance to European standards, that people with disabilities will be able to navigate in their wheelchairs. The government is building a tunnel, which will enable the guests to take a direct road to the compound. The tunnel is very important for future development, as well as from a security standpoint. The railroad will first enter Kutaisi Airport and then come directly to Dreamland – this will create ultimate comfort for travellers, what else can one dream of? The flights to and from Kutaisi are less expensive, which makes travel cheaper. We, on our part, will try to lower prices for our services, as this is the right formula for doing business. The most important thing for us is to ensure that our guests keep coming back. This is what we strive for.
Is that going to be an easily achievable goal? The reason I am asking this question is that the quality of service is a decisive factor here. We constantly hear that there is an imbalance between the employment market and the requirements and needs of the private sector. Is most of the personnel local and do they meet your expectations?
Unfortunately, this industry is not developed to the level where people can gain a lot of experience by working in this sphere any time of the year and in every season. Consequently, the staff pool is not really prepared to offer customers premium-service. For me personally, service represents a product; I can bring an excellent chef from the Ritz Carlton that will prepare the most delicious desserts, but somebody will have to pay for this. Even though I say that I am prepared to pay extra for better services, this is not as easy as it sounds: no matter how much I pay, I still cannot get the required quality of service locally. The problem is the lack of experience and the lack of adequate staff. When the season is at the height of activities, the managers have to act as trainers as well: in other words, they manage things and coach the staff at the same time. Obviously, this leads to certain disappointments. People that come here for premium-quality service pay attention to every detail and are very critical. As a result, there is a general perception that there is no service in our country. As a matter of fact, we do have service, but it is not premium-quality. This takes time, the correct prioritizing and further development of the sector. I don’t see how this problem can be solved by vocational colleges. This only comes with experience.
Your business is a long-term project, hence, investors believe that the country is developing in the right direction, is that right?
That is a very good and important observation: our country should no longer be regarded as a short-term investment environment. It was a big challenge for us to persuade the investors to consider doing long-term business in Georgia. No one in Austria has any idea where Chakvi is located. I am talking about the financial managers that have to persuade investors to invest money here. The process developed like a Lego construction: we showed one result after another. What was initially a $300,000investment, increased to one million, then to three million and so on. We can say that now we have a 100 million ready for investment: the plan that we have developed up through 2023 is clear proof of this. We have a very effective concept with the correct zoning and proper space planning, which allows you to enjoy the space from every angle. No one would enjoy it here if this were a closed space with massive urban infrastructure. And besides, that would have probably hindered development of this business. This type of development is already a long-term prospect in its essence. We have very good partners and investors, mostly from Austria. They are great aestheticians themselves and know the importance of aesthetics. As a general rule, all businesses fall within some frames. That is why it’s important to plan carefully every single detail and figure in advance. Every penny needs to be planned in order to come up with a well-thought-out model that will help you to convince investors that even though some things may be costly now, they will payoff in the future and create additional value. This is a long and complicated process. In the case of Dreamland Oasis, the important thing is that the price for the assets that our clients paid for initially, before we started the construction, has already increased by 30%. We strive to create infrastructure and an environment that will stand the test of time and the value will continue going up. That is the kind of vision that attracts investors and promotes future development. If what we have today is only Dreamland, we will have more of these or even better Dreamlands in the future. This type of approach ensures the accumulation of capital and the development of assets.
Is the profit tax reform helping you in any way?
Yes, it is very helpful. As I have already mentioned, investors care about every penny they spend. When a company starts making a profit, all the money that is saved as a result of this new tax reform is reinvested into the business. This encourages investors to keep their money here, since money has already been generated and by leaving their money here, they can make even more money.
It is interesting to know how the Austrian investors view the commitments our country took within the framework of the EU Association Agreement. For instance, commitments in the sphere of construction. Does this increase or decrease the attractiveness of Georgia in terms of operating a business here?
We had self-imposed regulations even before that: we have arranged special protective rails for the workers; they wear special protective uniforms and belts. None of these have interfered with our business operations. We don’t build ourselves; we have hired contractors for that. We tell them our terms and requirements and they do what we tell them to do. This does not make the project a lot more expensive. This is just a drop in the ocean compared to the scope of the project. One of our self-imposed regulations was that the apartment hotels should not be higher than a four-stories. Did you know that each story of the apartment house cost me a million? But we made it very clear that we could not build more stories and no one forced us to do otherwise. The smart regulations are very effective. Let’s take for example the fire alarm system that we have in place. This system not only sends the fire alarm, but it also sends all the collected information to the reception, the security office and cell phones. In other words, we are not dependent only on the human factor. These are all our own self-imposed regulations. This is our approach to business.
You make a very clear distinction between development and construction …
You can ask anyone in the streets and they will tell you that a developer is a builder. Developers are not builders. Development is a process, which involves working on a concept, the correct planning and only after that can you start building. And yes, that last process is done by builders.
Which of the two is ‘Dreamland Oasis’?
We are developers: we choose topics, give shape to the ideas, implement these ideas and then sell them. This is the process of development and not simply construction.
Since you mentioned selling, I would like to ask you what types of apartments are in highest demand?
You have touched on a very important topic. It is hard to predict what will be in highest demand. When we acquainted ourselves with the experiences of Bulgaria, Croatia and Spain, we saw that there was a big demand – approximately 80% –for studio-type apartments. We apportioned only 12% to studio-type apartment in our project. This triggered a lot of skepticism on the part of our investors. As I mentioned before, our main shareholders are Austrian and therefore they are very familiar with the global industry. Based on the study that we conducted, we were able to convince the investors that in the case of Georgia – holidaymaking is a family event, which means that we rarely get just two people coming to the resort and therefore this studio space would be too small for a family. Hence, 82% of the apartments are so-called one-bedroom condos: one bedroom and one living room. The total space is approximately 40-50 m². We tell all our clients that there is no need for extra m² of space. They only need apartments to relax and sleep, the rest is done outside in the green surrounding which provides all the necessary infrastructure. Let’s take this 20-story building that we are constructing now. It was supposed to be all apartments, but we decided to hold on to half of the building and to leave it as a hotel. Hotels always stimulate the economy; they ensure permanent income, VAT and employment. For us, this is a very efficient business. But this is even more interesting from the perspective of the investors. Our investors were convinced that the money generated from the project can safely be reinvested into the economy of our country. That is the kind of approach that I am talking about when I say that investors must regard Georgia as a long-term investment destination. This is very important for us. It can safeguard our tomorrow.
The tourism sector is also obviously growing …
We can feel this trend from the way our business is going. Initially we had 200 hotel rooms and then we added apartments. The occupancy rate of the hotel is steadily following our development. In the third year of the project, we plan to add another hotel with 200 rooms and certainly we won’t be able to avoid more apartments, since this is the development path that all similar markets had to go through – including Bulgaria and Croatia. Spain is still in the process. Interestingly enough, the price per square meter here is higher than say in Marbella. We have demonstrated to our investors that if we develop this land and surroundings in the right way and if we have the adequate coefficient, we can practically own a gold mine. We are using only our funds. We don’t have any liabilities, like bank credits or loans. When we sell a newly-built apartment, the price is much higher. However, we have loyal clients that are willing to share risks with us and obviously we have special offers for them. We have seen an interesting trend lately. There is a growing demand for one-room apartments. These apartments are mostly purchased for business purposes. The owners let these apartments themselves and sometimes we help them find renters. This is also very important when you aspire to attract capital.
In other words, when customers turn into investors themselves.
Yes, it is very important that customers see the potential for having extra income if they invest in an apartment. In order to meet these investment goals, we have started offering standard hotel rooms. We have arrived at the point when we can directly satisfy the wishes that our customers may have in our regard.
Based on the information available on your company’s website, the only business partner that Dreamland Oasis has is Kartu Bank, can you explain why?
Business is generally comprised of three components – the right idea, the right people that will implement the idea and the last component is money. If the first two components are in place, there is always a financial institution that will be willing to sell you its money. As soon as we had the other components, we sat down with investors and decided to test how realistic and achievable our project was and if any bank would be willing to share the risks with us …
And you did that despite the fact that you had no need for a loan?
No, we did not need a loan, but when a bank is willing to participate, it means that the risks are calculated not just by me and my management, but also by a big financial institution. This was a big challenge for us. We started working with several banks and still continue to work with them. It’s not like we are entirely linked to a single bank. But when we first started negotiating with banks, we came across a very incorrect approach in the banking sphere: they wanted a 110% insurance for the risks, which is obviously not a process that is linked to the economy. Our vision was that this is not just a game for one player – there is a client, there is us and there is a bank. That is why we had to find a model that would make the client, bank and developer equally happy. These three players ensure proportional distribution of risks and compromises. It was quite hard to find such bank. Kartu Bank turned out to be the only bank willing to accept our terms. Despite the fact that this is a very conservative bank and they did not have any mortgage products at the time, they still decided to partner with us and created a mortgage scheme specially for this project. They had a very progressive approach to this issue. I was really surprised. That is definitely not what I expected. The president of the bank and experts arrived to Chakvi to see everything firsthand, since seeing it on paper was not sufficient for making important decisions like this. We had complete confidence in the bank for this project. Kartu Bank even offered us a credit line that we have not used to date. There simply was no need for that. Kartu Bank trusts our clients and gives them mortgage loans for apartments in Dreamland, since it can see that a 30% down payment is definitely worth it. These apartments sell for much more once they are finished. These mortgage loans are practically risk-free. Kartu Bank provides mortgage loans to our foreign clients as well. There are also some clients that come with mortgage loans from their own banks. This is not crucial for us. This is business, Kartu Bank is our partner today, but tomorrow we may have another partner. However, I need to note that Kartu was the first bank that trusted us and that is a fact you cannot escape.
Let’s try to sum up some of the things we mentioned in the beginning: you said that one of the main challenges is to make sure that your customers keep returning. Do you think they will return?
Those that live here, will certainly return. Those who came here only once, they try to come back. We have clients that keep returning every year. It is our goal to make sure that the emotions that our customers experience here will keep them thinking of Dreamland Oasis every holiday season, so that they stop considering any alternative options.
I am listening to you and I was thinking that the possibility of an 80 million euro investment in Georgia with your own funds and a well-thought-out concept definitely deserved a special mention on the pages of Forbes magazine. Why did you agree to give this interview anyway?
There was a time that all I could manage was four-hours of sleep every day. Forbes is one of the most influential magazines directly linked to business. If I am on the pages of Forbes, it means that I have made some contribution to the development of business. You cannot get all the money, but you can surely achieve all your goals. This is what Forbes magazine represents for me. It is an opportunity to share success with others. Can you imagine that this place was once a swamp? Massive bulldozers used to get stuck in the mud and it usually took us a day to get them out! When you plant 1,200 trees, grow a forest and turn a swamp into an Oasis – doesn’t that mean that you are on your way to achieve the ultimate goal?
ARTICLE IN GEORGIAN