Hoteliers could profit from lira slump more than tour operators or package holidaymakers

Turkish destinations such as Alanya are selling well this year.
Turkish destinations such as Alanya are selling well this year.

The dramatic fall in the value of the Turkish lira could benefit hoteliers with revenues in euros more than tour operators or package holidaymakers, according to experts.

The lira has crashed massively against the euro and the dollar over the last week as investors sold off the currency due to worries about the country’s economy amid spiralling inflation and political tensions between Ankara and the US administration. The share prices of TUI and Thomas Cook dropped on Monday because of investor concerns.

As a result of the currency devaluation, international tourists in Turkey now get more liras for their euros, dollars or pounds. This means they can spend more on local activities such as shopping, eating out or going on excursions without actually increasing their overall holiday budget too much. International tourists in Istanbul, for example, are reportedly already splashing out on low-price luxury goods.

But the devaluation will have little effect for the vast majority of package holidaymakers who book all-inclusive holidays on the Turkish Riviera coastline around Antalya. They tend to remain mostly in the hotels or at the beach, and normally do not spend much in the destination itself.

Tour operators in Germany and other large source markets such as Russia or the UK will also not benefit particularly from the lower lira this year. They fix hotel rates in euros or dollars (in the case of Russia) long in advance for the following summer season.

Öger Tours managing director Songül Göktas-Rosati and Bentour CEO Deniz Ugur both said that the currency decline will not have any major impact on tourism in the short term as demand continues to surge for Turkey thanks to a mix of attractive prices and good value for money. “There are no signs of effects from the attractive exchange rate on the booking behaviour of our guests,” said Göktas-Rosati. Similarly, there will be no impact on hotel prices at present due to the long-term price agreements and this year’s strong demand, explained Ugur.

Turkish hoteliers, however, could get a windfall from the currency devaluation this year. They will continue to earn revenues in hard currency while most of their costs, such as for staff, catering and energy, are in the local currency. Given that many hoteliers were forced to cut prices during the recent slump in demand before this year’s strong comeback, this currency effect will help them to stabilise revenues and improve profits (or reduce losses).

The picture for 2019 is less clear, however. Tour operators are in the midst of negotiations over hotel rates and contingents for next summer. But it is unclear whether they will be able to secure lower hotel rates (in euros) because of the lira devaluation. Many Turkish hotels have high occupancy levels this summer which would normally result in stable or higher prices for the following year. So it is likely that hoteliers will try to maintain stable rates in euros to help improve their long-term pricing levels.

Meanwhile, German-Turkish leisure airline Sun Express is benefiting from the currency devaluation as well. The airline increased turnover by 27% to US$589 million in the first half of 2018 as passenger numbers increased. “The weakness of the Turkish lira has driven demand,” Commercial Director Peter Glade told fvw. The Antalya-based airline sells about 80% of its tickets in euros and 20% locally in Turkish lira.

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