Tourists return to Turkey

Tourists return after Russian ban and attacks

As the sun blazed across the private beach and glistening pools at his family’s packed Mediterranean resort, Osman Ayik glanced across at his tanned guests and breathed a sigh of relief.

“This time, last year, it was almost empty,” he says at the Champion Holiday Village, which his father built near Antalya. During last year’s summer season only about 5 per cent of the 250 rooms were filled. Today, it is fully booked.

The sector, a vital source of foreign exchange and jobs, has been in crisis for 18 months. Turkey was one of the world’s best-performing emerging markets. But a combination of political instability and terrorist attacks caused a slowdown.

Hoteliers are hoping the industry is on the cusp of a recovery. After hotels slashed prices across the country, tourism numbers began picking up, enabling companies to at least stabilise their losses. In May, the number of arrivals hit 2.9m, up 16 per cent on the same month the previous year.

Tourism’s woes start when Russia banned charter after one of its fighter jets shot down. Turkish military  shot it down over the Syrian border in November 2015. Sun-seeking Russians, accounted for one in 10 of the visitors to Turkey, the second-largest group behind Germans, vanished. By May 2016, the number of tourists from Russia dropped 92 per cent.

The industry’s problems exacerbated by a wave of terrorist attacks. Including assaults on German tourists in Istanbul and the city’s Ataturk international airport. A coup attempt then rocked the nation last July and triggered a sweeping government crackdown. It has seen more than 140,000 people arrested, dismissed or suspended.

The tourism crisis shaved nearly 1 per cent off Turkey’s gross domestic product last year. The number of visitors plummeted nearly a third in 2016 to about 25m — the lowest in nine years.

Support measures

That led to a drop in foreign currency inflows. The average overseas tourist in Turkey spends about $700. A crucial source of dollars to fund the country’s current account deficit. Travel services revenue fell $8bn last year to $19bn, according to central bank data.

The pick-up this year follows a rapprochement with Russia, which lifted its sanctions on Turkey. And also a fall in terrorist attacks since a gunman killed 39 people at an Istanbul nightclub on New Year’s Day. The economy also showed signs of stabilising after President Recep Tayyip Erdogan won a contentious referendum on a new constitution in April. The government has since had to step in to help avert defaults, wary of the impact that would have on the banking sector. One Turkish government official estimates that state support to the sector exceeded $500m last year. This included tax holidays for companies and about $6,000 to charter airlines for each flight carrying 200 or more passengers into Turkey.

But Mr Ayik worries that Ankara’s interventionist policies in Syria’s civil war and in Iraq could spell more trouble down the line. And he and others warn that while government support has prevented defaults and businesses closing, it cannot be sustained if the crisis continues.

FT.com