The political instability in the wider Middle East region is having a devastating impact on Turkey’s tourism industry which has now seen a collapse for the summer of 2016.
Tourism remains a key revenue generator for the country. According to figures from the World Tourism Organisation, Turkey welcomes over 35 million visitors each year who, in turn, contribute about $20 billion to the Turkish economy. Over the past decade, Turkey’s economy has been growing strongly which has meant that these days, percentage-wise, the tourism industry contributes a smaller percentage to the economy now (4.5%) compared to previous years even though the sector has been growing.
The new Istanbul airport combined with the expansion of Turkish Airlines is part of Turkey’s aim to generate higher tourism numbers with a grander aim of attracting 50 million visitors by the middle of the next decade.
However, after a spate of terrorist bombings in central Istanbul and Ankara (often targeting popular tourist areas), tourists are cancelling their holidays in Turkey: hotel bookings have reportedly dropped by 50% for this summer. The Turkish Government will be well aware that despite Turkey’s best efforts to increase tourism from a logistical perspective, security fears will be at the forefront of any potential tourist’s decision. Crucially, bookings for from Germany – one of the most important markets in terms of numbers and spenders – dropped by 40% in March according to TUI, a German travel agency.
As well as the loss of potential income, another factor to bear in mind is the number of people that are employed by the tourism industry – currently around 2.5 million in Turkey.
In the case of Tunisia, the ISIS beach attacks caused tourist numbers to plummet and subsequently unemployment figures rose by 30%. The attacks also had a knock-on effect on Foreign Direct Investment from foreign companies who require security as basic requirement to invest. The main difference between Turkey and Tunisia in this respect, is that Tunisia’s economy had been in a deep recession for many years prior to the attacks and the situation went from bad to worse.
A balancing act
From an economic perspective, Turkey will undoubtedly be able to ride out the current drop in tourism but if it still wants to reach its ambitious target of 50 million visitors then security will be a major challenge. However, I feel that the recent events in Turkey also highlight further concerns.
Turkey is in a prime location not just for commerce but also for tourism: the country has access to over 1 billion people within four hours of flying time. The country has much to offer to any type of tourist: fifteen UNESCO heritage sites, good food, beaches, mountains, lakes, vibrant cities – and the list continues. Due to its location and growing economy, the country is also an attractive proposition for foreign companies as we have highlighted on this site for some time.
However, with this central location comes many neighbours and often conflicts. Turkey has raised the stakes in Syria, in the Kurdish regions and even with Russia. Turkey historically relied on soft power but the recent increase in military and political assertion has come with repercussions at home. If the conflict escalates and the repurcussions continue then we could expect to see a knock-on affect on Turkey’s FDI and domestic employment. The recent military escalation is also in contrast with Turkey’s motto: Yurtta Barış, Dünyada Barış – (Peace at home, peace in the world).
It will be a fine balancing for Turkey to increase its political and military presence in the Middle East as well as increase its tourism sector.