Turkey Tourism Report Q3 2009

Overview

Turkey achieved a strong performance in the tourism sector last year, with BMI estimating that foreign visitor arrivals increased over 13% year-on-year (y-o-y) to nearly 26.4mn visitors; although the growth rate slowed compared with 2007. However, following a trend of weaker quarterly growth during the course of 2008, the latest data show further deterioration in arrivals as anticipated. In Q109, figures show a fall in foreign visitor arrivals (excluding Turkish citizens residing outside the country) of about 2% y-oy (this compares with annual growth of about 18% in Q108).

Hospitality

The latest hospitality sector data are for the first quarter of 2009 and reveal that the total number of tourist (foreign and domestic) room nights amounted to over 45.7mn nights, an increase of 3.8% y-o-y. The number of foreign tourist room nights – 68% of the total – rose a relatively strong 10% y-o-y to about 31.1mn nights in Q109, which is a favourable outturn given the decline in foreign visitor arrivals over the same period.

Forecast Scenario

Data on foreign visitor arrivals for Q109 are broadly in line with our view – which remains unchanged this quarter – of negative growth in arrivals of -3.5% y-o-y in 2009. This is set against a background of severe worsening of economic conditions in Turkey’s major source markets, including Germany, Russia, the UK and the eurozone. Modest recovery in arrivals should take place next year. The weakness of the Turkish lira against the US dollar and the euro, as seen in 2008, is also expected to continue during the course of this year (subject to significant volatility in the near term), which will assist the competitiveness of Turkey’s tourism sector. From 2010 however, BMI forecasts appreciation of the lira against both currencies, dampening growth in visitor arrivals to Turkey over the latter part of the forecast period.

Turkish Airlines

In financial results for 2008, Turkey’s national airline, Turkish Airlines (THY), reported a net profit of US$874mn, up a strong 26% compared with a year earlier. Revenue was up a similar annual percentage to US$4,719mn, with proceeds from international traffic accounting for 78% of total revenue, while 22% was from domestic traffic. Fuel costs, meanwhile, accounted for 34% of total operating costs, compared with 27% in 2007. Latest results for Q109 show THY achieved a net profit of US$94mn, which was down 45% y-o-y (but only a fall of 24% in Turkish lira terms). While operating revenue increased by 18% y-o-y, the decrease in fuel prices reduced the share of fuel costs in total expenses from 32% to 22% (compared with a year earlier). The number of passengers carried also increased 8% y-o-y to 4.9mn. In May 2009, as part of a large-scale expansion plan, THY and Boeing signed an order for five Boeing 777- 300ERs at a current cost of US$1.36bn.