ISTANBUL–Tourism, the lifeline of Turkey’s fragile economy, is facing tough times due to a sharp drop in Russian visitors after Moscow’s political stand-off and economic sanctions against Ankara over a jet downing incident and a series of terrorist attacks on the country’s major metropolitan center.
A quick look at the country’s balance of payments clearly shows how much Turkish economy is dependent on tourism. It is running chronically large current account deficits, which result from even larger trade deficits that relate to Turkey’s excessive dependence on imported energy and intermediary products.
A vital factor in financing this deficit, albeit partially, is the trade in services. While Turkey has a deficit in the trade of goods, it has a surplus in the trade of services, in which tourism has by far the largest share.
According to the Turkish Central Bank’s balance of payments data for 2015, there was a $47.8 billion deficit in the trade of goods, whereas the trade in services generated a surplus of $24.0 billion, with a massive 88.7% of this corresponding to the trade surplus created by the tourism industry.
At the same time, tourism is also one of the largest providers of livelihood in the economy. More than one million registered workers are employed by the industry, and to this figure one should add the large amounts of part-time employees, seasonal workers, and their dependents as well.
Russia has traditionally been one of the main sources of tourists for Turkey. However, this market is now being lost due to the sanctions imposed by the Russian government after the downing of a Russian jet by Turkish planes on November 24 last year. Russia has banned charter flights to Turkey and the sale of tourism packages including Turkish destinations.
In 2015, Turkey’s tourism revenues dropped from $34.3 billion in the previous year to $31.5 billion. During the same period, the number of tourists from Russia went down by 18.5%, compared with a rise in the number of tourists arriving from Germany by 6.3%.
Given the fact that the crisis between Turkey and Russia erupted in the closing weeks of the year, these figures reflect more the already existing problems such as the economic crisis in Russia which led to a rapidly declining demand among Russians for travel services, and less the effects of the political stand-off and sanctions.
However, early figures from 2016 do show that worse is on the way. According to data released by the tourism office of Antalya, the Mediterranean province which used to host 75% of the Russian tourists coming to Turkey, the number of Russian tourists coming to the province in January 2016 was 81% lower compared with the same month in the previous year.
Antalya’s statistics reveal that there has been a decline in German and Dutch tourists as well, by 16% and 20% respectively. It is not only the Russian sanctions that are hurting Turkey’s tourism industry, but also the heightened security situation within the country.
The terrorist attack in Istanbul’s historical Sultanahmet district on January 12 was deliberately targeted against a group of Western tourists, and the blast cost the lives of 11 German citizens. Twenty-eight people were killed when a suicide bomber struck in the heart of Turkey’s capital Ankara in the previous week. This situation may pull the tourist numbers further down as the summer months approach.
Turkey’s tourism industry was already suffering from the repercussions of the global financial crisis, which led to a significant decline in tourism revenues for countries relying on these revenues for their growth prospects.
Turkish media reports that 1,300 hotels around the country have been put up for sale by their owners, who were already dealing with mounting debts, and now losing any hope for a way out of the situation, given the rapidly deteriorating conditions in the industry after the Russian sanctions and terrorist attacks.
Moreover, it is not only those in the tourism industry who are suffering. Tourists provide income for many other industries, which are now going through the same nightmarish process hoteliers do. Significant job losses and bankruptcies in jewelry and leatherwear sectors are only one example, there are many more.
Turkish government and the business community are making efforts to reverse the trend. New sources of tourists are sought after.
In a report published by the Association of Turkish Travel Agencies, targets were set to receive one million tourists from the United States and half a million from Latin American countries with the hope that these tourists would spend three to four times more than Russians and Germans do when they are in Turkey.
In the meantime, tourist numbers from the Middle East are rising. More tourists are coming to Turkey from Iran, which is entering its post-sanctions period, and from Israel, with which Turkey is currently in a rapid process of rapprochement. In addition to these countries, the Gulf market with its high disposable incomes and generous spending habits is another main target for Turkey’s tourism industry.
Turkey, however, has also competitors in the business, which are likely to make serious efforts to turn Turkey’s crisis into their opportunity. Greece has recently begun to issue three-year multiple-entry Schengen visas for Russian travelers.
Statements by Russia’s Ambassador in Ankara, Andrei Karlov, have certainly a grain of truth to them: “It will be difficult for most Turkish companies to return to the Russian market, and perhaps they will never manage to do so, because their place is already taken by companies from Egypt, Israel, Azerbaijan and Iran. There are many more foreign companies willing to fill the void. Even if the relations recover, it will be difficult for Turkey to come back.”
The first measure taken by the Turkish government was to pass a law subsidizing charter flights operated by travel agencies. A more comprehensive package of policies for supporting the tourism sector is said to be on the way.
There are tough times ahead for Turkish tourism, but in the medium to long run, part of the losses is recoverable. Subsidies will be useful to some extent, and new markets can also help to make up for the losses in the Russian market.
The biggest obstacle emerges however not at the economic, but at the perceptional level. Terrorist attacks, if they continue, may lead to the creation and solidification of a negative reputation for Turkey as an “unsafe place.” This is the greatest danger that Turkish tourism is facing, and when tourism suffers, the Turkish economy as a whole does so as well.
Dr. Altay Atlı is a lecturer at the Asian Studies graduate program of Boğaziçi University in Istanbul and a senior research associate in Turkey’s International Strategic Research Organization (USAK)
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