GROWTH & RESILIENCE

Turkey 2011 | TOURISM | REVIEW: TOURISM

With Turkey staying near the top of the tourism charts in the Mediterranean, the development of higher value options is the next step forward.

While the global downturn forced many countries into tourism survival strategies in 2010, visitor numbers to Turkey were up 6%, marking an all-time high of 28.6 million foreign arrivals. A lower expenses-per-capita ratio among European visitors, however, meant that tourism income did not keep pace with the increase in arrivals. Nonetheless, Turkey is one of the few Mediterranean regions to have closed 2010 with a profit.

Arrivals to Turkey have risen 17 fold over the last three decades and 16% over the last three years. In line with Turkey's overall economic growth, the trend looks set to continue. Global market research group RNCOS anticipates that tourist arrivals in Turkey will increase at a compound annual growth rate (CAGR) of around 7% during 2011-2014.

Accordingly, Turkey has consistently increased its share of the world tourism market. It was ranked seventh in terms of arrivals and sixth in terms of revenues in 2009. The government is targeting the number five spot in both categories by 2025. Tourism has been a key driver of Turkey's economic development, particularly in terms of reducing unemployment, raising national GDP, and improving the country's balance of payments. In 2009 the tourism and travel sector generated approximately 10.2% of Turkey's GDP and represented 7.2% of total employment, according to the Ministry of Culture and Tourism and TurkStat.

Germany, Iran, Russia, and the UK are the top sources of international visitors, respectively. Despite the decreasing number of European travelers in general during the global recession, the contribution of Europe to the Turkish tourism industry has increased due to strong promotional activities conducted by the government.

Turkey's proximity to Europe has also helped make it a more prudent option for European travelers who may otherwise tend towards holidays further afield. In 2011 Turkey's coastal cities may also gain a share of Egypt's Red Sea Riviera travel market, as holidaymakers look for other options due to volatility in the region.

The resort city of Antalya and the cultural capital of Istanbul are the two most popular destinations, accounting for 32% and 24% of 2010 tourist arrivals, respectively. The southwestern province of Muğla—home to the resort towns of Bodrum, Marmaris, and Fethiye—ranks as third, followed by Edirne and Izmir.

In a nod toward growing domestic demand and spending power—arguably the most important chapter in Turkey's economic success story—the largest tourism increase was among Turkish citizens. In 2010 the number of days Turks spent travelling to both foreign and domestic locations increased 25%.

REINVENTING THE SECTOR

While sun, sea, and sand (SSS) travel still takes the lion's share of Turkey's tourism industry, the government is making a concerted effort to “reinvent" the sector by diversifying its product offering and targeting niche markets. Specifically, Turkey is looking to position itself as a major destination for health tourism, winter sports tourism, cultural tourism, golf tourism, and yacht tourism. Other emerging segments include convention tourism and ecotourism.

Turkey currently has 20 ski centers, 14 golf courses, and around 40 marinas, and it is focused on capacity investment in these specialty areas. For example, the Ministry of Culture and Tourism plans to increase Turkey's yacht capacity to 50,000 berths on the Mediterranean. New marina projects are set to be implemented via the Build-Operate-Transfer (BOT) model, to avoid putting pressure on the national budget.

In 2011, two new marinas in Mersin and Kaş, both on Turkey's southern coast, were opened. Tenders were also held for the construction of marinas in Tekirdağ, Avşa Island, Silivri, Yeni Foça, Sifne, and Seferihisar Ürkmez. Üstün Özbey, General Manager of the new Kaş Marina, says that these investments are resulting in “new routes being assessed" along the Mediterranean coast.

The country is also hoping to tap the growing demand for geothermal spas. In terms of potential for geothermal tourism, Turkey is among the top seven countries in the world and number two in Europe with 1,300 thermal springs. Bed availability in thermal vacation resorts has reached 35,000.

Events are driving Turkey's diversification efforts as well. In what should prove a windfall to the country's burgeoning golf tourism segment, the town of Antalya recently won its bid to host the World Golf Amateur Team Championship 2012. In 2010, golf tourism contributed an estimated $680 million to the economy.

The first annual Istanbul Shopping Festival, held over 40 days in March and April of 2011, attracted 150,00 “non-traditional" tourists and contributed approximately $500 million to the city's total retail trade.

Investments in the culturally rich but less-accessible eastern provinces are creating geographically diverse tourist alternatives. In 2010 157 out of 193 tourism investment projects were focused on Anatolian cities.

“In 2011 we are seeing increased flights in non-peak seasons and expanding budgets and investments to new historical destinations like Van, Mardin, and Urfa," says Levent Demirel, Deputy Director of Promotion at the Turkish Ministry of Culture and Tourism.

“We're expanding heavily, supporting low-cost airlines, making traveling more flexible and expanding to the east, while offering undiscovered new tourist alternatives as more than simply sea resorts," he told TBY.

HOTEL MARKET

Turkey's hospitality sector has a capacity of 567,470 beds, with hotels in investment stage accounting for a potential additional capacity of 258,287 beds. CAGR in bed capacity between 1998 and 2008 was 6.1%.

The Mediterranean region has the largest bed capacity, at nearly 275,000. Number two is the Aegean region, which is developing rapidly and is expected to grow by 67% with a number of new investments coming online.

According to 2008 figures, hotels account for 83% of operational bed capacity, followed by holiday villages with 10%. Apart hotels—serviced apartments that use hotel-style booking—are rapidly growing in popularity, particularly in Istanbul, and figures indicate that the capacity under construction is larger than the current operational capacity.

Five-, four-, and three-star hotels account for 38%, 31%, and 19% of the operational bed capacity, respectively. Nine out of the top 10 hotel chains are represented in Turkey.

Industry analysts see opportunities for hospitality development. “Hospitality investment in the region is way behind other industries yet the opportunity is huge," says Jonathan Worsley, Chairman of Bench Events and co-founder of the first Central Asia and Turkey Hotel Investment Conference (CATHIC), held in Istanbul in 2011. To illustrate, he noted that the overall average hotel room rate in Istanbul was €94 in 2005 while in 2010 it was €150, an increase of more than 50%.

Haluk Kaya, President of Bekay Property Partners, echoes the industry sentiment that mid-market hotels are particularly underrepresented in Turkey. “Turkey's business traveler and tourist profile demands a weighty presence of international mid-tier brands, as opposed to five-star trophy assets," he said. “There is an opportunity for three- and four-star hotels throughout the country."

CATHIC's 2010 Best New Hotel in Turkey award was given to Pera Palace Hotel in Istanbul, which opened in September 2010 after a lavish $23 million restoration. And it was here that Agatha Christie was said to have written Murder on the Orient Express, way back at the beginning of the modern tourism industry in the 19th century.