Turkey is playing a continually important role in the international political arena, particularly as a bridge between Europe and Asia and its geographically strategic location has fostered investment interest in the country in general and in the hotel industry in particular.

Highlights:

• Despite a dip in economic growth in 2009, the economy has started to show healthy growth in 2010 again fuelled by GDP and FDI growth compared to the same period on the previous year. According to the Economist Intelligent Unit (EIU) Turkey's GDP growth is expected to reach  6.5 % in 2010, 4.4% in 2011 and an average of 5.0% thereafter;
• Even though Ankara is Turkey's political capital, Istanbul remains the financial centre of the country. Istanbul has experienced strong increases in visitation and overnight numbers translating into hotel performance levels that have seen year-to-August 2010 figures improving noticably on the previous year. Occupancy increased by  13.1%, while RevPAR showed an impressive increase of 17.5% in euro terms, from €86 in 2009 to €101, on the back of an increase on average rates, of approximately 3.8%;
• Istanbul remains the focal point for foreign developers to enter the Turkish hotel market. Still characterised by a dominance of unbranded hotel supply, the number of developments carrying an international brand are increasing. Brands from all categories will be entering the Istanbul hotel arena in the coming years, including luxury brands such as Shangri-la as well as limited-service midscale brands such as Hilton Garden Inn and Courtyard by Marriott;
• Istanbul's declaration as ‘2010 European Capital of Culture' further emphasises the city's importance within the international environment in addition to providing more exposure for Istanbul to attract an increased number of visitors in the future.

Ataturk, Istanbul's main airport, has shown a strong annual compound growth rate (CAGR) of 8.6% in passenger numbers over the past 20 years. The airport has experienced double-digit annual growth in domestic travellers since 2004, while international travellers have also shown significant growth peaking at 25.5% in 2008. The airport is now almost operating at maximum capacity. Sabiah G..kcen Airport (on the Asian side) is Istanbul's second airport.

This airport has seen the arrival of low-cost airlines and proves to be popular with domestic travellers. Growth rates over the last few years have been extraordinary at an annual compound growth rate of 60.0%, albeit from very low levels. The airport has recently inaugurated a new terminal in order to be able to sustain future passenger growth levels. A third airport is said to be planned for development, located 40 km west of Istanbul, in the Silivri neighbourhood. 

Arrivals and overnights have shown a steadily increasing pattern over the past five years. Domestic travellers have maintained stable growth levels, while international travellers have consistently grown year-on-year. The international market still shows further potential having registered a compound annual growth rate of approximately 8.0% in both arrivals and overnights between 2005 and 2009. 

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This market snapshot is part of a series of articles that HVS is producing every month on a series of key markets. In writing these articles we aim to combine the market expertise of HVS with STR Global data for each key market. Our analysis for this market is based on data for a sample of 37 mainly branded properties as provided by STR Global. These properties represent the branded supply in the city. We note, however, that the majority of hotels are operated independently and most of the total stock are unbranded. Their performance can thus be different from the picture presented herein.