According to STR Global, sister company of HotelNewsNow.com, 58 hotels with 9,471 rooms are in the development pipeline in Turkey, nearly half of which (27 hotels with 5,447 rooms) are under development in Istanbul, the country’s business and cultural center.
“Turkey’s booming economy, and stable political environment make it very attractive for development,” said Tarik Nasser, VP of development, Turkey for Marriott International. “It has a very solid domestic business traveler market and is within a three-hour flight of key source markets in Europe and the Middle East.”
Marriott has nine hotels in Turkey with two more set to open this year. The products range from luxury to select service: Ritz-Carlton, Edition, Renaissance, Marriott and Courtyard by Marriott.
Turkey has become a popular vacation destination, especially for Western Europeans and travelers from Central Asia. According to the Ministry of Culture and Tourism, the number of foreign travelers arriving in Turkey for the first three months of 2013 was 5.2 million, a 13.5% increase compared with the same quarter last year. From January 2013 to April 2013, Germany was the top feeder market for Turkey with 917,876 arrivals, followed by Georgia (466,220 arrivals) and Syria (451,352).
Mehmet Onkal, managing partner of BDO Hospitality Consulting based in Turkey, credits Turkish Airlines for driving a lot of foreign visitors to the country. He said the carrier flies to 200 destinations from Turkey and is planning an expansion with a recent deal for 117 planes from Airbus Industries to its current fleet of 215 planes.
“The contribution of Turkish Airlines to the (country’s) tourism industry has been tremendous,” he said. “Istanbul is its hub, so people fly there to go on to the Middle East, Central Asia, Africa and beyond.”
Interest from the chains
“We looked at the market and saw the demand,” said Rui Barros, senior VP and managing director, Europe, Middle East and Africa, for Wyndham Hotel Group. “A lot of Europeans who would have normally gone to Western European countries in search of sunshine and culture are now coming to Turkey and, in particular, Istanbul.”
Wyndham opened its first hotel in the country in 2007 and now has 18 hotels—all but two are Ramadas—with 2,700 rooms. In 2012, Wyndham added 10 properties to its portfolio, including its first Wyndham-branded hotel and its first Tryp by Wyndham in the country. Ten of Wyndham’s properties in the country are in Istanbul.
A wide range of global chains have been expanding aggressively into Turkey:
The development challenge
“Local investors fund 95% of the (new hotel) projects,” Onkal said. “Turkey produces and exports a lot of textiles, and those people and companies in that business have made a lot of money and they’re investing it in tourism and the building of hotels.”
According to Metin Erdogdu, president of Istanbul-based PFD Consulting, finding financing is not the most pressing challenge for developers of hotels in Turkey. He said because of the country’s strong economic conditions and the performance of the tourism sector, “financing has dropped down to third rank after land and property cost and securing construction permits” as issues developers must face.
“Most tourism investments are financed by commercial banks, and as tourism has become the most popular in overall real estate investments, there is vast competition among banks to finance bankable tourism (projects),” Erdogdu said.
Most hotel executives downplay potential disruptions to Turkey’s tourism economy from the political instability in parts of the Middle East, including Turkey’s southern neighbor, Syria. Most recently, Turkey has faced its own unrest when a protest movement erupted in Istanbul after authorities announced they would replace Gezi Park, the only green space in the city center, with a shopping mall, according to CNN.
“We have a number of hotels in the Middle East already and more proposed for the region and some of these areas are volatile,” said Jeff Doane, VP of hotel sales for Fairmont. “Parts of Turkey are near some of this (instability), but when you’re in Istanbul you’re a million miles away from that. It has a tremendous European/Asian feel to it. It feels safe and that’s one of the reasons it has such growth from a tourism perspective.”
Hotel executives are more worried by operational challenges than geopolitical crises.
“Our main concerns as an international luxury hotel operating in Turkey are more based on bridging the cultural gaps that may exist at the (human resources) levels and selecting the right pool of local talent,” said Arab of Nikki Beach. He also cited “managing inflationary risks inherent to the country and keeping cost structures within competitive boundaries” as challenges.