Just a little more than a month ago, we noted a significant investment shortfall in Turkey that had been ongoing for some time. Hotel investments in Turkey fell 42 percent for the first quarter of 2016 compared to the same period in 2015, according to the Hotel Association of Turkey—and that followed a previous 42-percent drop in investments in the first five months of 2015 year-on-year. Hotel occupancy rates are also on the decline: In April alone, occupancy rates in Istanbul dropped 32 percent compared to the same month in 2015, outpacing the average nationwide drop of 22 percent.
Occupancy rates dropped by over 30 percent to 50.3 percent in Istanbul, according to a report from the Hotel Association of Turkey, based on data from STR Global. This is the worst decline for Istanbul in the last decade, according to the report.
Challenges and Incentives
The downturn in both investment and occupancy can easily be credited to recent terrorist activity. Last week alone, bombs in Istanbul and Midyat killed at least 14 people. A bombing in Ankara claimed by a Kurdish splinter group in March targeted civilians and killed 37 people. It was the second attack in the Turkish capital within the course of a month.
Hotel Association of Turkey President Timur Bayındır said that the association did not expect any increase in hotel occupancy rates unless security concerns about Turkey are addressed. “As long as people continue to see Turkey as a risky country and countries continue to issue security warnings for Turkey, we cannot expect any rise in foreign arrivals in our country. The recent problems in the sector are mainly over security concerns. There will be double-digit declines in foreign arrivals over this year, although we cannot make any forecast about the exact rate,” he said.
But in spite of these challenges, Turkey is still attracting branded hotel development. PWC claims that Istanbul is one of the 20 European cities preferred for real estate development, citing the city's "strategic location between Europe and Asia, strong economic growth prospects and young population" as valuable factors for investment. The Turkish government has also increased its spending for several large-scale construction projects in Istanbul that can facilitate travel—including a third international airport, an extension of the road system and a third Bosphorus bridge.
It is worth noting that, according to STR, Turkey has 8,245 rooms set to open across 54 hotels under construction.
Three New Hiltons
Earlier this week, Hilton Worldwide signed franchise agreements to bring new DoubleTree by Hilton properties to Elazig and Izmir Airport, and a new Hampton by Hilton hotel to Bolu. The hotels are expected to open later this year. When they do, they will join 74 Hilton properties open or under development across Turkey, where the company has had an ongoing presence for 60 years.
“In just five years since we introduced DoubleTree by Hilton to Turkey, our full-service brand has proved to be a popular addition to the market—with hotels either open or under construction in more than 17 locations across the country," Jim Holthouser, EVP, global brands, Hilton Worldwide said in a statement.
Under a franchise agreement with Tahabey Otelcilik Otomotiv Inşaat Emlakçilik Sanayi Ticaret, the 110-room DoubleTree by Hilton Elazig is expected to in the third quarter of this year after a $16-million renovation. The hotel will be Hilton Worldwide’s first in Elazig.
The 90-room DoubleTree by Hilton Izmir Airport is set to open in mid-2016 following a franchise agreement with Kepi Group. Currently ranked as Turkey’s fourth-largest airport in terms of passenger traffic with 11 million passengers in 2015, Izmir Airport serves as a transport hub for the province, and plans are in place to expand its capacity with a new domestic terminal.
The 149-room Hampton by Hilton Bolu marks Hilton Worldwide’s debut in the northern Turkish region of Bolu and will be the first internationally branded hotel in the rapidly growing city. The new hotel is owned by Carikci Trans and is expected to open before the end of the year, joining 15 Hampton by Hilton properties open or under development in Turkey.
Park Inn in Istanbul
Rezidor, part of the Carlson Rezidor Hotel Group, announced plans recently to open the Park Inn Apartment Hotel Istanbul Esenyurt in late 2017 or early 2018. The 484-room property will be Rezidor’s largest hotel in Turkey, and increases the group’s portfolio in the country to 22 hotels with almost 4,000 rooms in operation or in development. The group now operates eight hotels in Istanbul alone and has four additional properties under development in the city.
“Turkey is a focus country for us,” Wolfgang Neumann, president & CEO of Rezidor, said in a statement when the hotel was announced. “We carefully monitor the current turbulence, but believe in its long-term potential.”