Limited demand drives slow Turkish development

Burgu Arjaan by Rotana
Burgu Arjaan by Rotana

The Hoteliers Association of Turkey has called for restraint in hotel development along the Black Sea as supply threatens to outstrip demand, driven by a growing number of visitors from the Middle East.

As interest in the region increases, the country has reported a recovery in visitors following a series of terrorist attacks.

TÜROB said that June had seen applications to build 13 hotels, at a total cost of $77 million, up 190 percent year-over-year. “In the upcoming period, the region’s hotel supply may exceed demand,” TÜROB president Timur Bayındır said. “New development should therefore be in a controlled manner.”

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Mehmet Önkal managing partner, BDO Hospitality Consulting, told HOTEL MANAGEMENT that the region was not without its issues for developers. “The Black Sea season is very short, it is around two-and-a-half months to three months only,” Önkal said. “It’s enough to make a profit, but the profit margin is very low.”

Most of the region’s tourists are from the Middle East because of the very mild climate, Önkal said. “During the peak season occupancy is at 100 percent in all hotels—local hotels, B&Bs, all hotels— and the room rate is between TL800 ($231) to TL1,000, whereas in the off season it is around TL100 to TL200. There is very little income from F&B—the tourists go out on tours in the morning and eat lunch out and often dinner, just coming back to sleep.”

Önkal described the development process as “very slow” with land secured for projects including a new Sheraton, but facing delays in construction. Development has remained focused on local investors. “We have very little foreign investment in tourism,” Önkal said. “There are some Qataris but they mostly prefer to do operations, not invest.

“The good news is that demand is increasing, but there is a limit to it,” he continued. “In the winter the only demand is from conferences, and why would you go to the Black Sea in the winter when the weather is much better in the Mediterranean?"

The Game Plan

The comments came as the country’s new Minister of Culture and Tourism, Dr. Numan Kurtulmus, laid out his strategy to increase travel and tourism.

Kurtulmus has set a target of 50 million international visitors to Turkey by 2023, up from 31 million in 2016. The country has seen a recovery in visitor numbers in recent months, with a 10 percent increase in the second quarter. In 2015 the country recorded guests of 41 million, prior to a series of terrorist attacks, including one in 2016 in Istanbul in which eight German tourists were killed.

“Few countries have as wide a variety of tourism and cultural attractions as Turkey, including—and, perhaps most importantly—its figurative and physical position as a bridge between East and West that embraces visitors from across the globe,” Kurtulmus said. “We see this strength as vital to our vision for bringing communities together, and we will invest heavily in public and private partnerships to ensure we are developing these tourism products to diversify our markets and audiences.”

After a weak start to the year, April, May and June were all in positive territory, with June reporting a 43 percent increase on the year. Visitors from the Russian Federation led the way, with 15.83 percent of total foreign arrivals, followed by Germany, with 13.50 percent.

Tourist traffic to Turkey from the GCC resident and nationals GCC continued to show strength, rising 26.29 percent compared to 2016. “We expect GCC traveler traffic to Turkey to continue its strong growth over the coming six months,” Salih Ozer, Attaché of Culture and Information, Turkey to the UAE, said. “Turkey continues to be a leading destination for GCC travelers due to our close cultural, religious and diplomatic ties with the region.”

The Black Sea is not the only region to attract development. The Turkish Riviera is due to add a hotel under the DoubleTree by Hilton brand in 2018 in Antalya after Hilton signed a franchise agreement with hoteliers Hasançebi İnşaat Turizm Yatırımları ve Ticaret Anonim Şirketi.

While more established regions attract interest, Turkey’s recovery is likely to pull the whole country, including the Black Sea, up.

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

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