Average hotel occupancy in some regions of Turkey has fallen below expectations during its typically busy summer season, and hoteliers say inflation is to blame.
Rising costs have forced Turkish hoteliers to raise room rates, hurting domestic hotel demand.
Turkey's economic landscape, characterized by high inflation and fluctuating value of its currency, the lira, has had mixed effects on the sector.
“The inflation rate, which soared to 64.8% in early 2024, has nearly doubled prices across sectors, including hospitality,” said Tuğra Gönden, who is based in Istanbul and is chairman of Cushman & Wakefield's Turkey affiliate TR International.
This situation has inevitably affected hotel average daily rate in Turkey, with the cost of accommodations rising in local currency terms, Gönden said. He added, though, that the depreciation of the Turkish lira partly offset the impact of inflation for foreign visitors.
This summer hasn't seen as strong of hotel demand in Turkey compared to the past years immediately following the pandemic when cities ended lockdowns and travel boomed, said Eren Turan, group revenue and commercial manager at Antalya-based Liberty Hospitality Group.
“We need to clearly understand the notion of ‘revenge travel’ and ‘overtourism,’ which entered our lives during the post-pandemic period, and interpret the current global tourism movements accordingly,” he said. “The average accommodation stay of tourists has been shortened by one to two days this year compared to the previous year. The main reason for this is due to high inflation … resulting in the increase of holiday package prices.”
Yeşim Doğukan, Radisson Hotel Group's senior PR and field marketing activation manager of Turkey, said other European destinations have been more popular for tourists this summer, which hurts Turkey's hotels and resorts.
“The Paris Olympics … have negatively impacted hotel occupancy rates in Turkey, as in many other countries,” Doğukan said.
What's more, Turkey has partly lost its allure as an affordable destination among both domestic travelers and international inbound visitors.
“Inflation in the country has led to a significant increase in hotel expenses, resulting in prices that remain high compared to competitor countries,” Doğukan said.
Christy Tawii, research manager of travel and tourism for the Middle East and Africa at Euromonitor International, said “the Turkish hotel industry is struggling to manage rising costs while maintaining affordability.”
Turkey's inflationary trend has shown no evidence of being a blip, Tawii said. The country's hotel industry has been plagued by inflation for several consecutive years, and for residents, the cost of spending on a vacation in the country has become unreasonable even before 2024 price hikes. As a result, Turkish residents take vacations to cheaper, nearby countries.
“During 2023, ADR in all hotel price segments — luxury, upscale, mid-market and budget — jumped more than 50%,” Tawii said. “Turkish tourists opt for more affordable vacations in neighboring countries like Greece, where hotel prices are roughly half of that Turkey.”
Now, Turkish hoteliers are cutting room rates to try to induce demand and salvage the summer. According to TÜRSAB, the Association of Turkish Travel Agencies, hotels on the Black Sea and Mediterranean coasts have started slashing prices by nearly 50% in July and August in a bid to urgently sell more rooms.
Higher costs to operate hotels and slower airlift growth
More than 200 hotels have been driven out of business in Turkey due to inflation and price hikes, said Ömer Faruk Dengiz, president of the Bodrum Hoteliers Association.
“Going on vacation has become a great luxury, and this has directly affected our hotels. Increasing costs and decreasing demand have left many hotels in a financially difficult situation. We are concerned that if this situation continues, more hotels may declare bankruptcy,” he said.
Turan said uncertainty is the name of the game for the Turkish hospitality sector's owners and operators.
“Our 2024 ADR and RevPAR indicators are at a good level compared to the previous year, [but] if we factor in the increased rates for next year, this will not reflect the reality in Antalya’s all-inclusive resort hotel sector,” he said.
Inbound vacationers are still coming to the region, he said. Between April 1 and July 15 this year, the number of direct flights to Antalya’s international airport increased 15% from the United Kingdom and by 25% from Russia. But among flights from Germany, traditionally Turkey’s largest feeder market, there has been no change.
If prices continue to increase, the prospects of further inbound demand growth — which saved the Turkish hospitality industry from collapse this year — look vague, Turan said.
He added that if 2024 cost increases are reflected in 2025 sales prices, there will be a demonstrable decline in early booking sales that may possibly cause tour operators to reevaluate their position and cut flight capacity to Antalya.
“The second half of 2024 remains uncertain, and long-term planning puts a serious strain on hoteliers,” Turan added.
Oversupply
Hotel investment and the appetite for development of hotels and resorts in Turkey is still active, Gönden said. He added investors are hopeful inflation pressure will eventually ease and visitors will flock to the country like they historically did pre-pandemic.
“The [Turkish hospitality sector] market size is estimated at $5.58 billion in 2024 and is expected to reach $6.83 billion by 2029, growing at a compound annual growth rate of 4.12% during the forecast period,” Gönden said.
Yet hoteliers in Turkey are also worried about the country's tourism markets growing too big, too fast. If low demand trends persist, an oversupply of hotels also means Turkey's hotels are competing for fewer guests.
“Concerns about overcapacity have been raised, particularly with the rapid increase in the number of hotel chains and groups in Turkey, now totaling 67. This expansion has led to a significant increase in accommodation capacity, which could potentially lead to performance issues in some regions if demand does not keep pace with supply,” Gönden said.
It is of a particular worry in resort destinations, said Radisson’s Doğukan, who added it's possible overcapacity might not be felt so much this year.