Turkey's tourism sector targets and growing visitor traffic attracting international hotel chains

New infrastructure and investment will be critical to reaching tourism targets as Turkey barrels towards its Vision 2023 goals, including welcoming 50m visitors and earning $50bn in tourism revenues annually. Hoteliers in Istanbul, the country’s largest city, are investing heavily in new offerings, with thousands of new rooms set to enter the market in 2015. More significantly, the government is moving to increase its transportation capacity through a series of infrastructure upgrades, including construction of the Istanbul New Airport, which will be the world’s largest commercial air transport hub and offer capacity for 150m travellers when all stages of construction are complete.

But the largest potential for infrastructure investment actually exists outside of Istanbul, on the nation’s coastlines, where hoteliers and resort operators are rushing to set up shop along the Aegean Sea to the west, the Black Sea to the north and the Mediterranean Sea in the south, as well as in second-tier urban centres. With government incentive and promotion activities at an all-time high, the future looks bright for the Turkey’s tourism infrastructure.

Rebound

Although negatively impacted by the 2008 economic crisis, Turkey’s tourism sector has rebounded in recent years, with the number of hotel facilities growing by 48% between 2007 and 2012, according to the Investment Support and Promotion Agency (Invest in Turkey). Today the country offers visitors 715,692 beds and 2800 hotels.

The majority of these are located in the southern city of Antalya, a longstanding tourism hotspot offering over 400,000 beds and 260 five-star hotels. Istanbul offers 94,000 beds across 1320 establishments, while Mu ğla and Izmir hold 90,000 and 29,000 beds, respectively. Turkey’s Tourism Investors Association (TYD) projects visitor numbers to rise to 60m annually by 2023, well surpassing Vision 2023’s target. The TYD anticipates that the sector will require at least 1.5m new hotel beds, $24bn in private investment, and $15bn in government support to reach this target. Within Turkey there are 165 chain hotels, with internationally branded facilities comprising 15% of the total. Hilton International’s portfolio is the largest in the segment, offering 22 facilities spread across 15 cities, with a further 23 under development. Hilton International are followed by Intercontinental Group with 16 hotels, Anemon Hotels (16), Best Western International (15), Dedeman Hotels (14), and Crystal Hotels Resorts and Spa (11). Others, including Accor Hotels Turkey, Rixos Hotels, Wydham Hotels and Marriott, also have a presence in Turkey.

“Within the last decade, the government has recognised Turkey’s potential to attract tourism investment, and has been quite proactive in developing the industry,” Tugrul Temel, development director at Hilton International in Istanbul, told OBG. “We continue to hear positive sentiment from the market.”

Government Incentives

There are a number of government support and incentive schemes for tourism operators in Turkey. The main legislation covering incentives for the tourism industry is Law No. 2634, offering a host of benefits to investors, including loans, public land allocation, provision of communication facilities, reduced utilities rates and funding for up to 15% of investments over 20 years, supplied by the Tourism Development Fund. Law No. 1319 provides income and corporate tax exemptions for tourism entities within their first five years of operation, while private institutions such as EXIM Bank provide loans to tourism promotion and travel agencies in Turkey.

The Ministry of Culture and Tourism (MoCT) has allocated significant funds to tourism investment, reporting that infrastructure funding to provinces and municipalities for tourism development increased by 425% between 2002 and 2012 to reach TL129m (€45.42) in 2012. According to the data gathered by Mediterranean Tourist Hoteliers Association (AKTOB), 107 new tourism projects received government incentives worth more than TL1.4bn (€492.94m) in the first three months of 2013 alone. Of these, 38% are three-star, 36% four-star, and 13% five-star hotels, with 38% located in Antalya and 12% in Istanbul.

In addition to physical infrastructure, e-government offerings are also aimed at improving tourism services. In January 2015 the government implemented the e-visa system, in which visitors should apply for a tourist visa online for $20 before arriving in Turkey, as a means to eliminating the waiting times to get a visa on arrival. Applications for a new e-visa can be made from up to three months before departure until 24 hours before travel, and cruise ship passengers staying less than 72 hours will not need a visa.

Istanbul

Istanbul is set to benefit most from upcoming infrastructure upgrades. The city has 20,000 hotel rooms entering the market by the end of 2015, according to the International Congress and Convention Association (ICCA). Hotel openings for 2015 are off to a luxurious start: SoHo House opened its doors in March, with 87 rooms in total, including 17 mezzanines and one apartment, followed by the St. Regis Hotel in the high-end Ni şantaşı neighbourhood, with 118 rooms and suites. Raffles Istanbul opened in the fall of 2014 at the Zorlu Centre, boasting 181 rooms and suites in a mixed-use development.

Hilton in particular has shown aggressive investment in Istanbul’s hotel industry over the past several years. The Hilton Bomonti, the city’s largest hotel, opened in January 2014 in the Şişli neighbourhood and offers 829 rooms and 12,000 sq metres of event space. The Hilton Istanbul Kozyata ğı Conference Centre and Spa, offering 320 rooms, opened in late 2014. “We regard Istanbul as a city with many opportunities, and with offerings across all segments of the tourism sector – from mid-market to luxury,” said Temel.

The Hilton Garden Inn Istanbul opened in January 2015, with 126 guest rooms within a mixed-use retail space, and the Hampton by Hilton Dolapdere, opening in 2016, will offer a further 170 rooms in central Istanbul. In Izmir, Doubletree by Hilton Izmir-Alsancak involves a $1m refurbishment of the existing Yıldızhan Hotel, bringing total room numbers to 115, while the Hilton Garden Inn Izmir Bayraklı will offer 182 rooms and eight suites when it opens in 2016. Other projects in the pipeline include a Park Inn by Ataturk Airport, and a Fairmont, due to open in 2016.

Third Airport

Ongoing infrastructure development and government investment will help Istanbul’s operators increase their activities. Building for the much anticipated third Istanbul airport is underway, with an ultimate capacity of 150m travellers, which would make it the largest airport in the world. The new airport’s first phase is scheduled to be complete in 2017, with an initial capacity of 90m.

The airport will be near the Black Sea coast on Istanbul’s European side, gradually replacing the existing Atatürk Airport and providing much-needed extra capacity for national carrier Turkish Airlines. Consulting firm Arup is currently overseeing a master plan with the Turkish consortium of Cengiz, Mapa, Limak, Kolin and Kalyon, who won a concession to build and operate the airport for 25 years in May 2013.

Outside Istanbul

With the majority of arrivals and visitors flocking to destinations outside of Istanbul, coastal regions in the south hold significant potential for infrastructure investment.

In its Vision 2023 tourism master plan, the MoCT identified the Mediterranean and Aegean regions as a focal area for increased government investment in infrastructure. The Mediterranean-Aegean Tourism Infrastructure Coastal Management Project was created as a result, with plans to implement a number of infrastructure projects aimed at improving potable water, sewage, waste treatment, and disposal facilities along 2000 km of coastline between the cities of Antalya and Içel by 2023. The region also falls within the government’s “high incentive” zone, with increased tax exemptions, government land allocations, and other benefits on offer to developers in the area.

The private sector has taken note, with Top Hotel Projects reporting that 16 new resorts offering 6000 new beds opened along the Mediterranean coast during 2014, including the 501-room Nirvana Lagoon Villas and Suites in Kemer, and the 533-room Regnum Carya Golf & Spa Resort in Belek.

On the Aegean Coast, Bodrum’s recently added offerings include the Swissôtel Resort Bodrum Beach, a 66-room beachfront property opening in Turgutreis in June 2015, while its Bodrum Hill urban resort will open in 2016 with 65 rooms and 35 private residences. Nikki Beach’s Bodrum development will span 40,000 sq metres and offer 57 private suites and villas when it opens in the spring of 2016.

Further north, Hilton is set to open the 147-room Hampton by Hilton in Kocaeli, one of the country’s most affluent cities, in 2016. Temel said the chain intends to continue to expand beyond Istanbul in the coming years. “We believe there is further potential in the Turkish market. Every year Turkey attracts record numbers of visitor arrivals, and we see this trend continuing into the future,” he said. “The country has many resources and tools underpinning its momentum.”