Turkey's tourism industry is suffering after the fallout from growing domestic instability. According to Nikkei Asian Review, the country is losing its popularity as the recent terrorist attacks, last year's attempted coup and other political challenges have kept travelers away. Foreign visitor numbers have declined year-on-year for 20 consecutive months since August 2015. In 2016, only 25 million people visited the country, 30 percent less than in 2014.
The struggles have spread to the country's hotel scene. German hotel chain Steigenberger's Istanbul location, once frequented by foreign visitors, closed in March. "The room occupancy rate wasn't that bad," a cafe employee said. "But falling room rates probably pushed down earnings." Local media reports stated that a court ordered bankruptcy for the Turkish operator over alleged unpaid rents worth millions of dollars.
Many hotels struggling to regain occupancy are drastically discounting room rates. According to STR, the average room rate in Istanbul dropped to $78.40 in March, a 40-percent decrease from room rates in 2014.
Turkey expects more Russian tourists now that relations with the country are restored. The Turkish President Recep Tayyip Erdogan apologized to President Vladimir Putin for downing a Russian warplane in 2015—but the increased numbers of Russian tourists will not compensate for those lost from other Western countries and Asia.
Meanwhile, further blows to Turkey's tourism are attributed to a Turkish government ruling in March to block access to Booking.com. The Turkish Association of Travel Agents (TÜRSAB) claimed the Netherlands-based company incited unfair competition against Turkish-based hotel and flight booking platforms. “It is important for Turkish [hotelier] representatives and businessmen to present a moderate, re-conciliatory and inclusive attitude in talks with Booking.com, which is a global player in the [tourism] sector, and opposing reactions may have negative effects on our country’s tourism, which is already facing difficulties,” the association said at the time.
However, the ruling seemed to be causing more harm for domestic travel because it prevents anyone in Turkey from gaining information on domestic tours. The chief of the country's hotel industry association criticized the claim, saying the ruling could impede Turkey's goal of achieving 10 million domestic tourists a year, compared to last year's 6 million. About 13,000 Turkish hotels and other accommodations have received reservations through Booking.com. Blocking access especially hurts small to midsize hotels with limited marketing budgets that depend on the website for tourists to find them.
Although the OTA has asked the court to appeal the ruling, nothing has happened, leaving the industry very uncertain. The government has been offering incentives to developers in recent years by reducing utility prices and tax rates and "decisively eliminating any bureaucratic barriers that may hinder growth in the tourism sector." The urge to invest in Turkey is now facing decreased demand. In late March, TUI Group reported that it had seen "continued lower demand for Turkey" in summer 2017, "offset by higher demand for other destinations, such as the Western Mediterranean and Caribbean."
Reasons for Hope
In contrast, travel agencies and global operators are continuing to back the region. Package travel agency Thomas Cook has remained confident because data showed that "after a slow start to the season and a tough year in 2016, we're seeing early signs that customers are beginning to go back to Turkey and Egypt," CEO Peter Frankhauser said. Rezidor Hotel Group continued expanding in Turkey as it opened a Radisson Blu near the Diyarbakir, Turkey's airport in early April. Plans are also set to develop a complex of hotels on boats anchored in the Euphrates. In May, Rotana has planned to open two more hotels in Istanbul under the Centro by Rotana and Arjaan hotel apartments brands in the fourth quarter of this year, doubling its current hotel inventory in Turkey. Paramount Picture's Paramount Hotels & Resorts has chosen to debut its new hotel chain in southern Turkey at the Bodrum beach resort.