Antagonizing Russia and coddling ISIS come back to hit tourism which amounts to 11% of Turkish GDP but is now in dire straits
The combined effect of Russian sanctions and a series of terror attacks in major cities has dealt a serious blow to Turkey’s tourism sector. However, many in the business also blame the government’s reckless policies and criticize it for not doing enough to ameliorate the effects of its mismanagement.
It’s hard to underestimate the importance of Turkey’s tourism industry for the $800bn economy. It accounts for around 11% of it and will play a key role in funding the expected $28.6bn current account deficit for this year. As such, tourism’s sharp deterioration will likely kill the government’s ambitious pre-election promise to put the economy in the world's top ten by 2023 and undermine its economic credibility with voters who are now struggling to make ends meet.
The government’s target of reaching 50mn tourists annually by 2023, the centennial of the republic, already looks a stretch. Some 1,300 hotels, left on the brink of bankruptcy, are up for sale on the Aegean and Mediterranean coasts. In Antalya alone, the tourist capital of the Mediterranean coast, 410 hotels, 120 of them five-star resorts, have been put up for sale.
The EXPO 2016 in Antalya, which will run from April to October, is expected to cover some of the losses of the tourism sector, but the all-inclusive, cheap package holidays will be decimated by the security threats and Russia's ban on the sale of Turkish tour-packages that was instituted after Turkey shot down one its military jets in November.
The government of President Recep Tayyip Erdogan has been at pains to stress that the sector should be able to cope with some state help. At the opening of the East Mediterranean International Tourism and Travel (EMITT) Fair in Istanbul on January 28, Tourism Minister Mahir Unal said: “Our sector is quite experienced in crisis management and problem solving. We are able to maintain security in our tourism destinations and offer state support to the sector.”
But recent data from his Tourism Ministry paints an alarming picture. Russia and Germany are the two largest sources of tourists for Turkey, yet both are now staying away in droves.
The number of Russian visitors to Turkey fell from 4.5mn in 2014 to 3.65mn in 2015. Given the diplomatic crisis between the two countries only kicked off in November, this figure largely hides the pace of the fall suffered at the end of the year, when the ban on charter flights from caused the number of Russian visitors to drop by 46.9% in December compared with the same month of 2014. And the Kremlin shows no sign of relenting. In late January, Russia’s federal tourism agency issued a warning that Islamic State is planning to kidnap Russian citizens in Turkey. All this could lead to a loss of between $4.5bn and $7bn in tourism revenues this year.
Even more worrying, the number of European tourists to Turkey also fell in 2015, with visitors from Italy, France and Japan declining by 27%, 18% and 40% respectively. The recent suicide bombing in Istanbul’s historical city center of Sultanahmet in early January, which killed 10 German tourists and injured 17, is likely to further discourage European tourists from visiting Turkey.
Consequently, a large number of hotels and companies operating in the tourism sector, whose main clientele were Russian and European tourists, face escalating debt problems.
Tourism representatives interviewed by bne IntelliNews express concern that 2016 will be devastating for the industry – a victim of the government’s shortsighted policies and mismanagement that hasn’t taken into account its importance as one of Turkey's biggest hard currency earners. “It is impossible for Turkey’s tourism industry to get through such big crises without any governmental incentives and a support package,” argues the president of Antalya’s Kemer Touristic Hotelmen Association (KETOB), Tayyar Gul.
“About 60% of our sales target foreign clientele, while this number even rises to 85% in some tourist zones. It is somehow a ‘delivered export’ for Turkey so the tourism ministry should provide certified tourist facilities in Turkey with 'exporter status',” Gul tells bne IntelliNews, referring to the fact that when foreign exchange earnings of a sector surpasses $1mn per year it gains “exporter status” and benefits from incentives, such as some expenses like renovating facilities can be reclaimed from the Foreign Trade Undersecretariat as well as credits from Türk Eximbank.
Gul says the drop-off in foreign clientele in the southern provinces will also have a devastating impact on employment in these regions, and calls on the government to implement its already promised social security premium support for the tourist hotel sector. “Tourism has the potential to influence by its own 56 other sectors in total, including food, textiles, construction and agriculture. So we are in dire need of regaining the image of a secure and stable country with the use of professional advertisement strategies,” he says.
“The tourism sector also expects some measures to decrease its increasing costs, like water, electricity and increased taxes on alcoholic beverages,” he adds.
Gokce Ozdemir, an academic working on tourism trends from Izmir’s Yasar University, says the latest crises in the sector shows massive mismanagement by the government and its belated reaction to help such a key area for the Turkish economy. “This change in clientele has led the Turkish hotel industry to shift its focus to Middle Eastern and especially national tourists. However, these new markets will remain insufficient for the tourism sector to regain its financial strength,” Ozdemir warns.
From another perspective, Cem Baslevent, an economist at Istanbul’s Bilgi University, notes that the sharp decline in oil prices should cut Turkey’s energy-import bill and thus the current account deficit. “However, since a considerable portion of Turkey’s foreign visitors come from energy-exporting countries nearby, namely Russia and Iran, the drop in purchasing power in those countries is also likely to lead to a decline in tourism revenues,” Baslevent tells bne IntelliNews.
According to Baslevent, the totally unexpected deterioration in Turkey’s tourism revenues due to the recent crises will inevitably hurt not only employment, but also Turkey’s growth rate, as tourism has close ties with other sectors such as transportation and construction. “Some ongoing construction projects are likely to be delayed due to financing problems and some planned projects may be cancelled in view of all the political and economic uncertainties,” he says.
On the plus side, Baslevent thinks the current situation could give Turkey the opportunity to rethink its tourism strategy and find ways to attract wealthier tourists from other parts of the world. “There is clearly the need to make a greater effort to protect Turkey’s natural beauties and historical heritage. More importantly, people need to view Turkey as a democratic and safe country, which they would want to spend time in,” he says.
Source: bne IntelliNews