Turkey's tourism boom puts pressure on hotel pipeline

Istanbul
Photo of Istanbul courtesy iStock | Getty Images Plus | Nick_Thompson

Improvements to Turkey’s tourism sector could result in the country's current room stock not being able to keep up with demand.

This probably won't happen immediately, however: According to the latest numbers from STR, Istanbul has the third-largest construction pipeline in Europe, but as tourists continue to flock to the city, that pipeline may prove insufficient.

“We see improvements, strong improvements in Turkey,” Friedrich Joussen, chairman & CEO, TUI Group, told analysts during the company’s Q4 results call. “Our trading into Turkey next summer is up 70 percent. We have decided to prolong our contracts with local hoteliers and we had a long discussion, would it be picking up or not?

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“We think that we will, over some time, see again, a scarcity of supply in Turkey.”

Turkey's Resurgence

Bedbank Hotelbeds also hailed the resurgence of Turkey, reporting that the Total Transaction Value of reservations of Turkish hotel accommodation had increased by 40 percent since October 1, while the country had risen from 11th to 9th position in the ranks of most-booked destinations in the EMEA region.

Hotelbeds said that the recovery had been led by a return in the number of British travelers, who had become the single largest source of bookings, with Germany following in second place and Saudi Arabia in third.

As with TUI, Hotelbeds said that it was reviewing its portfolio of hotels and contracting additional properties in order to adjust to the evolving demand, with plans to contract a further 400 hotels in the coming months, ready for the upcoming summer season.

“Since the beginning of the new financial year on October 1, we have noticed a clear recovery of Turkey as a destination for all of our group’s businesses,” Sam Turner, responsible for sales and sourcing at Hotelbeds Group said. “This increase of tourists has in large part come from the return of the British traveller to Turkey. We feel this is due to the general traveling public feeling that stability has once again returned to the country. However, other source markets such as Saudi Arabia have grown strongly, and whilst the numbers are much smaller we have nonetheless seen a doubling in the number of Spaniards reserving hotels for the destination.”

Turner said that the company was seeking “additional properties to respond to this growing demand.”

Supply and Demand

This growing demand looked to be met with supply growth, at least in the Turkish capital, with STR reporting that Istanbul had 3,867 guestrooms in construction in 20 hotel projects. Only London and Munich had larger pipelines.

And the visitors keep coming. The UNWTO used its latest tourism barometer to report “extraordinary strength” in Southern and Mediterranean Europe, with a rapid recovery seen in Turkey and double-digit increases for most of the region's other destinations.

“These robust results, the best we have seen in many years, reflect the sustained demand for travel around the world, in line with the improved global economy and the rebound of destinations that suffered declines in previous years,” said UNWTO Secretary-General Taleb Rifai told the second UNWTO/UNESCO Conference on Tourism and Culture, held in December in Oman.

TUI is planning to address demand with “disciplined expansion of own hotel content.” The company has shown this year that it is not afraid to use it balance sheet and acquire properties to be sure of supply. Other tour operators may be forced to follow suit.

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

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