Turkish hotel development continues despite sliding revenue from tourism

Burgu Arjaan by Rotana

Turkey's hotel industry hummed along nicely in March, still, revenues are off. 

Hotel performance was buoyed by visitors from Iran celebrating Nevruz, the first day of Spring and an increase in domestic meetings and events.

According to the Hotels Association of Turkey (TUROB), hotel occupancy rates rose to 55.8 percent, up 5.3 percentage points year-on-year from March. Based on the latest STR data, occupancy rates across Turkey increased to 52.3 percent in the first quarter from 50.1 percent in the same period of 2016.  

Hotel revenues, however, continued to decline in March and overall in the first quarter of 2017. According to data from the Turkish Statistics Institute (TUIK), Turkey’s tourism revenue reached $3.4 billion in the first quarter of the year, a 17.1-percent year-on-year decrease, blamed on the continuing decline in the number of foreign arrivals. TUROB noted that the number of foreign visitors in March fell by 3.96 percent on the year, to 1.59 million.

According to the Financial Tribune, while the number of arrivals from Europe continued to decline in March, there was an uptick in the number of arrivals from Russia in March, data showed. A total of 565,643 people from European countries visited Turkey in March, with an almost 25-percent YOY decrease. In the same month, the number of arrivals from Russia to Turkey showed a 145-percent YOY increase, hitting 58,654.

Most tourists arriving in Turkey were from Iran, Georgia, Bulgaria, Germany and Russia in March.

Expansion Plans

President Recep Erdoğan has faced international censure over the recent referendum, but, even in the midst of recent terror attacks, the hotel sector is still expanding, with company's such as Rotana announcing plans to double its portfolio as Paramount Pictures chooses the country for its first-ever hotel.

Despite the mixed message, Rotana is looking to strengthen its presence in Turkey by adding two more hotels in Istanbul. With the opening of sites under Centro by Rotana and Arjaan hotel apartments by Rotana brands in the fourth quarter of this year, the company will add 305 rooms to its inventory doubling its portfolio in the county to four hotels.

The IMF has also stated its support for the country, commenting in April that “after a sharp slowdown in growth in the third quarter of 2016, a modest acceleration in activity is projected, with growth reaching 2.5 percent in 2017 based on stronger net exports and a moderate fiscal stimulus.” 

The forecast was down from an earlier 2.9 percent, while it kept 2018 forecasts unchanged at 3.3 percent. Commenting on the downgrade, Deputy Prime Minister Mehmet Şimşek tweeted that: “The IMF’s forecasts for Turkey’s economy will likely turn out to be wrong again.” 

Paramount's Debut

Paramount Pictures is making its foray into hospitality with the Paramount Hotels & Resorts brand. The first property will open in the Southern Turkey beach resort of Bodrum. The studio is expanding into hotels after signing a licensing agreement with Dubai-based group Alpha.

The company is targeted 40 percent of its visitors from the domestic market and 60 percent from Gulf countries, Russia & the CIS and Europe. 

“We were looking for a place that would match our service culture,” Paramount Hotels & Resorts general manager Alessandro Redaelli said. “We found more than we were looking for when we came to Bodrum. Bodrum is a place that offers unique nature and unique tastes. The hotel also matches our culture. Whatever the significance of Saint-Tropez for France is, Bodrum is that for Turkey.”

Redaelli told the local press that the group was not concerned with the country’s recent issues. “Turkey...is a 360-degree destination. Terrorism is now a global problem and it would be unfair to reconcile it with Turkey. We trust Turkey.”

The group’s pipeline includes properties in Dubai, Doha and Los Angeles, and while its branding includes the line “we create drama,” the company will likely be hoping for not too much drama. 

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.