Israelis were up, Russians down, and as of February the Dutch seemed unfazed. Yet total tourist arrivals to Turkey fell 10% compared with the same month last year, a blow to the nation’s $32bn industry.
The drop in arrivals in February, the biggest in a decade, marked a record seventh consecutive month of declines, as terror attacks that have been striking Turkish cities since last summer begin to weigh on the economy. That’s not only hurting an industry that accounts for 5% of the country’s gross domestic product, but with it, 50 related industries including banking, according to Hakan Ates, chief executive officer of Denizbank, which lends more to the tourism industry than any of its competitors.
Turkey should expect a decline in tourism revenue this year of about $10bn, or between 25% and 35% of last year’s total, Ates said on Saturday from a summit in the ski resort of Uludag. The attendees at the event were almost exclusively Turkish, yet the hotels bore signs in Cyrillic script for Russians, a reminder of the tourists staying away. Visitors from Russia, who used to account for 5% of all foreign visitors to Turkey, have more than halved since last year.
“The banking sector has the biggest part of the burden,” Ates said. He estimates that tourism companies have borrowed $17bn, of which $2.5bn is due this year in principal repayments. Banks expect another $800mn in interest repayments, while the industry’s working capital requirements are another $800mn.
Repayments “used to come in via tour operators’ advance bookings, which this year will be weak,” said the CEO, whose company is owned by Russia’s largest lender, Sberbank.
Turkish banks are seeking help from the state to compensate for some of the losses, he said after meeting with Deputy Prime Minister Mehmet Simsek to discuss the issue. If the state gives hotels a few years’ reprieve on rent payments for state-owned land, redirecting that money to banks instead will make them more inclined to restructure debts, Ates said.
“We may have to get ready for a two-to three-year downturn,” he said.