Market monitor: Turkey at a glance

Economic environment

Turkey’s broad economy benefits from a domestic market of 75 million people and a rapidly expanding middle class. Solid economic infrastructure supports the banking sector, which, in turn, promotes business investment.

Services dominate, accounting for 60% of gross domestic product. Manufacturing accounts for a further 20%; Turkey exports a quarter of the goods and services it produces. Tourism makes up about 4% of GDP.

The country achieved record growth of 11.1% in 2011. But last year Turkey’s economy grew just 3.2% in 2016. Terrorism, a failed political coup and the government’s response to it factored into the decline. Government-backed stimulus measures and credit guarantees have helped in 2017. Turkey’s economy is on track to expand by 5%. But as the stimulus programs expire and the government reins in spending, growth is forecast to drop to 3.5% in 2018, according to Oxford Economics.

Rising geopolitical tensions — including Turkey’s opposition to a recent Kurdish independence referendum and strained relations with the European Union and the U.S. — also may weigh on the country’s economic performance.

Travel

After enjoying a few years of international travel growth of about 4% annually, on average, Turkey saw international arrivals fall 30% in 2016. The sharp decrease was prompted by terrorist attacks at Istanbul Ataturk Airport, effects of the civil war in neighboring Syria and Turkey’s own political crisis.

Demand is slowly recovering, with an expected 3% uptick in 2017 and growth of 8% a year by 2021, as foreign travelers return to the market. Germany is Turkey’s most important source of inbound travel, accounting for 16% of visitors. As Russian-Turkish political relations improbe, Russian travelers are returning to the country. Their numbers are predicted to grow more than 20% per year through 2021.

The Turkish business travel market was worth more than US$12 billion in 2016. Domestic travel accounts for 43% of spending, with inbound travel accounting for 38%. Between 2011 and 2016, spending in local currency increased, on average, by 11% per year. But in 2016, a 9% drop in spending by international travelers dragged growth below 3%. Political stability is leading to renewed expansion that should average 11% a year through 2021. Spending by inbound travelers is forecast to increase by 15% per year over this period.

Air

Turkish Airlines dominates Istanbul, the country’s largest market, accounting for 63% of flights. The airline has developed Ataturk Airport as a connecting hub to rival operations of Persian Gulf carriers; flights connect to 39 domestic markets and 210 international destinations in 102 countries.

Low-cost carrier Pegasus Airlines is Turkish Airlines’ main competitor in a number of markets. It’s the largest operator at Istanbul’s secondary airport, Sabiha Gokcen, handling 62% of flights. It is also the second-largest carrier in Ankara, Adana and Trabzon. Pegasus is pursuing the corporate market, targeting corporate travelers with a Business Flex fare that includes a number of amenities.

Other airlines in the market include SunExpress, which operates flights for Turkish Airlines under the Anadolu Jet low-cost carrier brand; Istanbul-based LCC Onurair; and rapidly expanding full-service airline Atlasglobal.

Accommodation

Hotel chains have focused on Istanbul, which has 525 hotels offering more than 50,000 rooms. Hilton is the largest chain operating in the Turkish market. Its portfolio of 57 properties across the country extends from the upper midscale Hampton by Hilton brand up to its luxury Conrad offering. Hilton’s nearest rival is Wyndham, whose strength lies in its midscale offering of 38 Ramada hotels among its 49 properties in the county.

Recent openings include DoubleTree by Hilton Istanbul Topkapi and Hilton Garden Inn Istanbul Umraniye, as well as Hyatt House and Hyatt Centric properties. More hotels are in the pipeline, with Carlson Rezidor set to open two Park Inn properties before the end of 2017. Marriott is slated to open two Four Points by Sheraton hotels in 2018.

The chains also are expanding outside Istanbul. Recent openings include new Holiday Inn hotels in Antalya, Bursa and Kayseri; Four Points by Marriott Izmir; and Park Inn by Radisson Samsun. Hilton plans to open Hilton Garden Inn Adiyaman and Hilton Antakya Museum Hotel soon.

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