Tourism Suffers from Political Unrest

I was in Turkey in May presenting performance data with a focus on recent rate and demand growth in the country. It was an exciting time for Turkey. Through April, average-daily-rate and revenue-per-available-room growth exceeded 10% from the previous period in 2012. Supply increased 4.2% during the same time period. Demand growth kept pace with the new hotels opening, allowing the market to quickly absorb the new supply.

And I wasn’t the only speaker excited by Turkey’s prospects. My presentation was preceded by a leading economist whose outlook for the country’s general economy was extremely positive. During the first five months of the year, Turkey welcomed almost 10.5 million tourists, an 18.5% increase from the same time period last year according to Turkey’s Ministry of Culture and Tourism.

However, the day I left, the police carried out a dawn raid on protesters occupying Gezi Park filling the park and neighboring Taksim Square with tear gas and pepper spray. Even as a frequent traveler and repeat visitor to Turkey, being caught up in the violence was unsettling, frightening and had an impact on my perspective. In the successive weeks the protests spread throughout the country. While off the front pages, there still has been no resolution and apprehension abounds. When I was there, it was a country full of optimism and excitement about its potential tourism opportunities. And now, a month on, Turkey is in turmoil, which is impeding on the country’s expanding and important tourist industry.

While investors become concerned about these protests, travelers, too, take note of these violent eruptions and become less risk tolerant, canceling trips with no intentions of rebooking. A recent Trivago study showed hotel searches for Istanbul have decreased by 99%; searches for Ankara, Turkey, have declined by 86%. With what should be the start of its high season, our own preliminary results based on June daily data indicate hotel demand for Turkey was down 12% year over year, with RevPAR down 15% as compared with June 2012. With demand down 22% in Ankara and with Istanbul 30% lower than last year, the two cities are bearing the brunt of the impact. RevPAR for the nation’s capital (Ankara) and largest city (Istanbul) is down 19% and 33%, respectively. The resort destinations remain unaffected as the Turkey Riveria has reported year-over-year gains of 4.3% in demand and an 8% increase in RevPAR.

In today’s uber-connected world, it is interesting how protests, unrest or violence can turn the perception and reputation of a country on a dime, having prolonged consequences. Egypt, once a stalwart country in the Middle East and North Africa region, has been struggling to recover from the debilitating Arab Spring riots a few years ago, and the ousting of President Morsi in recent days leave the world watching to see what’s next. Even before the recent upheaval, Cairo was performing far below historic norms, and investment and development in the capital is almost nonexistent.

Without drawing too many parallels as it is a bit like comparing apples to pears, Turkey is also in a similar precarious position, which could have ongoing implications to its tourism industry.

Outside of Turkey and Egypt, hundreds of thousands of people took to the streets of Brazil’s biggest cities in mid-June—a country that is rife with opportunities and global interest in advance of next year’s World Cup and 2016 Olympic Games. While the government’s response to the protests was categorically different to Turkey’s hard-line stance, the resolution and outcome of these protests could deteriorate all the goodwill developers, investors and travelers have for the country.

The United Kingdom, too, was the scene of recent tumult, with the London riots impacting the city in 2011 for four days, generating looting, arson and mass police involvement. The riots were not citywide and destruction was concentrated in several boroughs, but while the communities and individuals impacted by the riots are still putting the pieces back together, London has moved on. No one stopped coming to the gateway city and the reputational tarnish was quickly polished out.

Tourism begets investors, which begets developments, which begets job creation and tax revenues all of which contribute to a strong economy and financial security. The foundation for tourism is geo-political stability as global travelers want to visit destinations exploding with opportunities, not violence.