Tourists return to Turkey after Russian ban and terror 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, along Turkey’s south-west coast. During last year’s summer season, the nadir of the Turkish tourism industry’s slump, only about 5 per cent of the 250 rooms were filled, Mr Ayik says. Today, it is fully booked.

The sector, a vital source of foreign exchange and jobs, has been in crisis for 18 months, its travails a microcosm of the broader challenges facing the economy. Turkey was one of the world’s best performing emerging markets, but a combination of political instability and terrorist attacks rattled investor confidence and caused a slowdown.

Hoteliers are now 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, according to government figures.

“In terms of tourist numbers, our figures are perfect right now,” says Mr Ayik, “But in terms of income, we still need time for things to stabilise — first, we need to make up our losses.”

Tourism’s woes began when Russia banned charter holidays to Turkey after one of its fighter jets was shot down by the Turkish military over the Syrian border in November 2015. Sun-seeking Russians, who 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 had dropped by 92 per cent.

“Everything stopped. It was like they pulled the shutters down,” says Mr Ayik, who is also the chairman of the Turkey Hotelier’s Federation.

The industry’s problems were exacerbated by a wave of terrorist attacks in 2016, 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 that 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, according to the International Monetary Fund. The number of visitors to Turkey plummeted by nearly a third in 2016 to about 25m — the lowest in nine years.

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 has lifted its sanctions on Turkey, and a fall in terrorist attacks since a gunman killed 39 people at an Istanbul nightclub on New Year’s Day. The economy has also showed signs of stabilising after President Recep Tayyip Erdogan won a contentious referendum on a new constitution in April that cements his grip on power.

But even if tourism rebounds this summer, the industry still faces challenges as it is burdened with about $17bn in debt.

The crisis brought an abrupt end to a decade-long boom for the sector that was fuelled by government policies and cheap credit, during which visitor accommodation capacity grew 2.5 times, the IMF estimates.

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 paid to charter airlines for each flight carrying 200 or more passengers into Turkey in 2016.

“The government did take all the necessary precautions — there were big subsidies, from tax issues and monetary support to all the flights coming to Antalya,” says Erkan Yagci, who runs the Concorde De Luxe Resort and chairs the Mediterranean Touristic Hotels and Investors Association.

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.

“If we keep getting involved in these political problems around the region — not only do you lose money, you end up spending money to save the businesses,” Mr Ayik says.

Tim Ash, a senior sovereign strategist at BlueBay Asset Management, says avoiding the instability that has blighted Middle East countries and preventing further terrorist attacks will be crucial.

“They can live with a drop in tourism for a year or two, but if it ends up in a Tunisia or Egypt situation, then the brand is really lost,” he said. “But improving the security situation might mean changing foreign policy.”

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