Future of Turkey’s tourism sector in the balance after failed coup

A vendor waits for customers on a half empty Taksim street in Istanbul. Ismail Ferdous / Bloomberg

The extent of the failed coup’s impact on Turkey’s tourism sector hinges upon the government’s response over the next few months, according to analysts.

Tourist numbers had already been declining this year amid a series of terror attacks, including at Istanbul international airport last month.

In January, a suicide bomb attack against tourists in the Sultanahmet district of Istanbul killed 10 people. A similar attack in March in the capital city killed four people. Five more bomb attacks up to June have killed dozens of people.

And following the coup attempted by parts of the military, there is now a risk of a much more aggressive consolidation of power by the president Recep Tayyip Erdogan, according to Michael Harris, the head of global research and a Turkey expert at Renaissance Capital in London. “If this ends up turbocharging the erosion of political institutions and the checks and balances that we have seen in the past couple of years then that will make investors jittery,” he said.

“The tourism and travel sector already was awful and this will reaffirm that. This season is lost.”

The escalation of the problems in Turkey should come as no surprise to any investors who have done their due diligence, according to Mr Harris.

“Within two months, if it has gone the route of reconciliation that could be positive for Turkey,” he said. “If it goes the other way, I don’t think it means people will flee but they will hesitate, it will give them pause.”

While other sectors may not be so vulnerable to such short-term instability, investment decisions in the tourism and hotels sector are among the most sensitive to sentiment, according to John Podaras, a partner at the hospitality consultancy Hotel Development Resources in Dubai.

“Prolonged periods of insecurity and unrest are damaging for the local tourism,” he said. “The authorities now need to restore calm and make some visible confidence-building measures that the country is back on a path to stability and economic growth.”

Hotel operators in Turkey are already feeling the heat from fewer tourists.

During the first half of the year, Istanbul properties reported an average occupancy of 51.1 per cent, down 23.2 per cent compared to the same period last year, according to the research company STR.

The average daily rate was 321.63 Turkish lira (Dh398), down 6.1 per cent from the same period last year. However, the Abu Dhabi-based hotel operator Rotana still expects to add three more properties in Turkey before 2020. “The openings remain as scheduled and we remain optimistic for the future of the tourism sector in Turkey,” said Guy Hutchinson, its chief operating officer.

The coup attempt on Saturday also comes during the busy school holidays and summer travel period in the Arabian Gulf, including in the UAE and Saudi Arabia, some of Turkey’s major source markets.

Rotana’s key source markets for its two Istanbul properties, which opened in July last year, are Germany, Russia, Lebanon, Jordan and the Arabian Gulf.

It has reported an impact on bookings during the first half of the year.

“Instability is always a factor in shifting travel booking decisions, and we do anticipate that inbound tourism to the country will be affected; to what extent though, it is too early to say,” Mr Hutchison said.

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