It’s no secret that 2016 has been a trying year for Turkey, with multiple terror attacks and a failed coup attempt under its belt. But despite recent challenges, government incentives and Turkey’s Vision 2023 tourism strategy is set to bolster tourism and drive visitors back to the region. Hotel News ME analyses how new sub-sectors of tourism can provide prime investment opportunities for hotels, including medical, halal and MICE tourism.
With a selection of archaeological ruins to rival that of Italy and Greece, 7200 km of scenic coastline, Istanbul’s unique blend of rich heritage and cosmopolitan culture, and an advantageous location at the crux of three continents, Turkey’s diverse visitor offerings have seen its popularity grow rapidly over the past decade and the country is now becoming a leading international tourism hotspot. The country ranks as the world’s sixth-most-popular tourist destination, after France, the US, Spain, China and Italy. In terms of source markets Germany remains the number one tourist market for Turkey, recording 5.2 million visitors in 2014, and is closely followed by Russia at 4.48 million and the UK at 2.6 million. The country is well on its way towards meeting many of its Vision 2023 tourism goals, including the overarching goal of welcoming 50m visitors annually. With new hotel and transport infrastructure, as well as increased government promotion of various tourism sub-segments, the sector is expected to remain healthy.
Over the past 10 years the number of visitors to Turkey has grown 115.7%, going from 17.08 million in 2004 to 36.84 million in 2014. The country ranks as the world’s sixth most popular tourist destination, after France, the US, Spain, China and Italy.
While visitor arrival numbers continue to grow despite recent instabilities, 2014 saw a slight dip in the rate of growth. A record 36.84 million foreign arrivals were recorded in 2014. While an increase of 5.52% on the 34.91 million arrivals in 2013, this marked a slight slowdown on the 9.84% increase between 2012 and 2013. Even still, the country is set to meet many of its Vision 2023 tourism goals, including welcoming 50 million visitors annually. With new hotel and transport infrastructure, as well as increased government promotion of various tourism sub-segments, the sector is expected to remain healthy.
Challenges persist, however as visitor spending has remained flat in recent years, still recovering from a dip in 2012. Istanbul’s diminished occupancy rates during low season have some hoteliers concerned about a flood of new rooms over-saturating the market. But with a new airport set to greatly expand capacity, anticipated growth in meetings, incentives, conferences and exhibitions (MICE) tourism, and rapidly expanding medical, halal and cruise ship segments, the sector appears to have a promising future.
The tourism industry’s governing body, the Ministry of Culture and Tourism (MoCT), has played an increasingly proactive role in the sector’s development since President Recep Tayyip Erdo ğan – then prime minister – launched the Vision 2023 economic development plan in 2007. Among the targets set out for achievement before its 2023 centenary, Turkey aims to attract 50 million visitors annually, become the fifth-largest tourist destination worldwide and generate $50bn in annual revenue. Turkey’s tourism sector has much to offer, including 11 UNESCO World Heritage sites, 352 Blue Flag beaches, 19 Blue Flag marinas and 20 international-standard golf courses. Tourism revenues have been rising steadily as a result of increased international attention and a sizeable domestic tourist base.
While Istanbul is still the most popular port of entry to the country, the southern region has seen an enormous uptake in visitor arrivals since 2011. In 2013 Erdo ğan announced that the government had invested TL13bn ($4.58bn) in Antalya’s development since 2002, and data from the MoCT found that Antalya was the most popular city for tourist arrivals in 2012 and 2013, a close second behind Istanbul in 2014. The city reported 11.50m arrivals in 2014, just behind Istanbul’s 11.82m. The south-western city of Mu ğla ranked third, with 3 million visitors recorded in 2014.
Tourism income has grown impressively in recent years. The WTTC expects tourism spending will grow by 4.6% annually to reach TL131.8bn – 4.7% of GDP, by 2025. Visitors in the leisure segment dominate tourism, with Turkey offering a diverse array of historical and archaeological sites, as well as ample variety in climate and culture. The WTTC found that leisure travel spending generated 84.4% of direct travel and tourism GDP in 2014, compared to 15.6% for business travel spending. Turkey’s domestic segment is also growing; Turk-Stat’s figures for the first three quarters of 2015 showed a 25% increase in total expenditure by domestic tourists, compared to the same period in 2014.
Despite good overall growth, operators have highlighted low visitor spend as a challenge for the industry. Foreign visitors accounted for 80.97% of foreign tourism revenues in 2015, with Turkish citizens living abroad comprising the remainder. However, while visiting Turkish citizens spent an average of $1130 per capita, foreign visitor spend averaged of just $775.
However, the industry’s contribution to employment is increasing; the WTTC reports that travel and tourism generated 580,000 jobs directly in 2015 (2.2% of total employment); and the number of jobs generated is expected to rise by 5.9% Y-o-Y. By 2025, the WTTC expects tourism to generate 915,000 jobs in Turkey.
Turkey’s hotel capacity is set to grow substantially. Invest in Turkey reported in 2013 that licensed hotel facilities increased 48% between 2005 and 2012, with the country now offering guests 715,692 beds. The TYD projects the country will need to add an additional 1.5 million hotel rooms by 2023 to meet growing demand and tourism agendas. According to the Istanbul Convention and Visitors Bureau (ICVB), Istanbul offers 94,000 hotel beds and over 170 4-and-5-star hotels. Significant potential exists outside of Istanbul; while the city is often viewed as the largest tourism city in Turkey, its hotel numbers fall short of Antalya, which offers over 400,000 guest beds and 260 5-star hotels, according to the International Congress and Convention Association (ICCA). Izmir, with just 29,000 beds, is hoping to expand its offerings via increased foreign hotelier investment, according to Invest in Turkey. There is some concern from Istanbul’s operators, however, that with low season occupancy rates averaging 25-35%, an influx of new hotel rooms in the city will over-saturate the market. Resorts are becoming increasingly popular; while ownership of summer residences is common for domestic tourists, a rise in disposable income domestically is leading families to choose large, all-inclusive resorts for summer holidays, signaling significant investment potential. The example of Bodrum, where Swissôtel Resort and Nikki Beach Resort recently opened, demonstrates the market potential for international investors.
Turkey’s hotel offerings include 165 chains, 15% of which are international brands, according to Invest in Turkey. Hotel beds are expected to greatly increase on the back of new foreign investment, especially in Istanbul, where new offerings from Hilton, Mondrian and Sheraton are opening by the end of 2016. Internationally branded hotels are in shorter supply outside of Istanbul and Ankara, signifying further investment opportunities for international operators.
Business tourism holds significant potential in Turkey, and Istanbul is becoming a high-profile MICE tourism destination, with national carrier Turkish Airlines offering over 239 direct destination flights between Istanbul and five continents, and an additional 300 international airlines serving two major airports on the European and Asian sides of the city. Along with every other segment, MICE activities are expected to expand even further with the opening of the Istanbul New Airport, which will be the world’s largest and offer an annual capacity of 90m passengers when it opens in 2017 where capacity is eventually expected to rise to 150 million.
In a 2014 report by the ICCA, Istanbul was the eighth-most popular conference destination worldwide, hosting 146 international meetings in 2013. The city can accommodate events of up to 30,000 people, according to the Istanbul CVB, with offerings including seven purpose-built convention centres, three exhibition centres, and a large selection of palaces, waterfront venues, and convention hotels.
Outside of Istanbul, MICE tourism has room for growth, and an increasing number of first- and second-tier cities are seeing new construction and renovation projects catering to the MICE segment with Antalya one such city. In November 2014, when Antalya hosted the 53rd ICCA Congress, ICCA President Arnaldo Nadone noted in his programme that “21st century Antalya is reinventing itself as a top quality, modern and international conference destination, building on its tremendous success over recent years in the leisure tourism industry.”
Izmir is also making strides in increasing its MICE activities, jumping more than 100 places in ICCA’s international convention cities ranking. The new Izmir Fair Exhibition Centre opened in 2014, featuring 80,000 sq metres of space, with the existing exhibition centre set to be converted into a smaller 24,000-sq-metre conference centre and mixed-use development. The Izmir International Fair, Turkey’s oldest trade show, is set to celebrated its 85th anniversary in 2016, and attracts 3m visitors annually, including 40,000 foreign visitors.
At nearby Ku şadası, the 43,000-sq-metre Ephesus Convention Centre opened in August 2013 giving business travellers the additional draw of the ruins of Ephesus, currently under consideration to become Turkey’s 12th UNESCO World Heritage site. Other UNESCO sites in Turkey include the archaeological site of Troy, Göreme National Park, the rock sites of Cappadocia and the Neolithic site of Çatalhöyük, with evidence of human activity dating back to 7200 BC.
Halal tourism is a rapidly expanding segment worldwide, with the industry expected to reach a value of $160bn by 2017. Designed for Muslim families and business travellers who abide by sharia rules, the segment offers hotels with separate swimming pools and beaches for women and men, halal-certified food and kitchens, and non-alcoholic beverages. Muslim tour operators may also provide pork- and alcohol-free flight options, facilities with prayer announcements and religious broadcast TV options.
Turkey’s touristic offerings, adaptable hospitality industry, and proximity to Arab countries have made it a significant player in the halal tourism market; in March 2015, Turkey took second place in the MasterCard-CrescentRating Global Muslim Travel Index. Evaluated on attentiveness to the needs of Muslim travellers, including the presence and accessibility of halal restaurants and the provision of prayer rooms in airports, malls, and hotels, the survey ranked Turkey ahead of the UAE, Qatar, Saudi Arabia, Singapore and Morocco. A 2014 survey by the Mediterranean Union of Hotel Owners reported that there were 75 halal-friendly hotels currently operating in Turkey. Muslim-friendly offerings include the Caprice Thermal Palace, the Adenya Beach Resort and Hotel, the Karya Hotel and the Şah Inn Paradise, and are mainly located in the southern, Aegean, north-western and Black Sea regions.
With a highly skilled, multilingual workforce and relatively low equipment and HR costs, Turkey’s medical tourism segment holds formidable potential for the industry. In 2014, 496,000 foreigners received treatment in Turkish hospitals, according to Invest in Turkey. The Ministry of Health (MoH) expects health-related tourism to grow to $20bn by 2023, serving two million international patients. The government has been working hard to promote investment in the sector, offering incentives to providers and launching a worldwide marketing campaign to attract more patients.
In 2013 the MoH began investing in state-run research hospitals, focusing on core areas that are expected to rise in international popularity over the next decade. In 2014 the ministry also launched a campaign entitled “Turkey: Right Choice for your Life,” promoting the most popular segments of Turkey’s medical tourism industry abroad: cosmetic surgery, orthopaedics, cardiology and ophthalmology.
Booklets in a variety of languages, including English, French, Spanish and Arabic will be distributed to airline passengers, espousing the benefits of medical tourism in Turkey, as well as offering information on accredited health institutions and the services they provide. The MoH also plans to launch as many as 20 new websites to promote medical tourism, according to Invest in Turkey. The campaign aims to increase Turkey’s health tourism target of $5.6bn to $10bn by 2018, and to compete with other leading medical tourism destinations, including Dubai, Thailand, India and Singapore.
Cruise ship tourism holds significant potential for Turkey, and increasing activities in the sea tourism segment has been listed as a priority in the Vision 2023 tourism master plan. The Mediterranean region is ranked as the second-largest cruise market globally after the Caribbean. A report by the International Association of Maritime Economists (IAME) found that cruise operators deploy 25% of their vessels with a capacity of 29.5 million bed-days to the Mediterranean region, with activities expected to increase in the coming years.
The Izmir Chamber of Trade (IZTO) moved to create a Union of Turkish Cruise Ship Ports in 2012, identifying 13 port cities that hold significant potential for cruise-ship growth. Ports in Istanbul, Ku şadası, Izmir and Marmaris are the most popular cruise destinations in Turkey, with Ku şadası, Bodrum, and Marmaris all hosting specifically designated cruise ship terminals.
In 2012 the Anatolia News Agency reported that passenger numbers in Turkey grew by 276% between 2002 and 2011. The industry has grown by 10% annually, with 1,623 ships carrying 2.2 million passengers in Turkey in 2011. Long-term demand is expected to grow, especially with a growing segment of Turkish tourists choosing cruise ship holidays departing domestically.
Despite recent friction in Turkey due to the failed coup attempt and various terror attacks, tourism growth remained strong in 2015, with rising visitor arrivals in Antalya, Istanbul, and regional cities expected to drive hotel and operator expansion well into 2023. Although visitor spending and capacity issues pertaining to the new airport and rising influx of hotel rooms remain, the government is lobbying hard to increase foreign investment, grow the industry nationwide, increase visitor spending and reassure travellers that Turkey is a safe destination. With all major sub-segments – especially MICE, medical, halal, and cruise ship tourism forecast to rise substantially in the coming years, Turkish tourism’s international standing and contribution to its domestic economy, relieved political tensions and stability will aid Turkey’s tourism industry for years to come.