Turkey Tourism Report Q1 2008

Tourism Overview After a decline of over 6% year-on-year (y-o-y) in the number of foreign arrivals visiting Turkey in 2006, recent data indicate a very strong rebound. The most recent cumulative data for the period January to October 2007 show that the number of foreign arrivals totalled almost 21.1mn, a buoyant increase of 18.3% y-o-y. Over this period, the strongest growth rates in arrivals were recorded from the Commonwealth of Independent States (CIS), Asian countries and American countries (although from a low base). According to provisional data for the month of October, foreign arrivals were up a considerable 25.6% compared with the same month in 2006, at nearly 2.2mn. This quarter, BMI has also raised its growth estimate for tourist arrivals in 2007.

Forecast Scenario As Q207 data points to continued weak household demand in Turkey, we are highlighting downside risks to our 2007 GNP growth estimate of 5.5%. That said, the longer-term picture is still extremely positive, with the monetary policy loosening forecast to begin in Q407 expected to be a major stimulus for growth in 2008 and beyond. As a result, we have revised upward our long-term GNP growth forecasts to 2012.

After a rebound in foreign tourist arrivals in 2007, our forecast is for growth in arrivals to slow in 2008 and 2009, but annual average growth should amount to a favourable 5% over the extended period to 2012. Aside from bird flu and domestic political violence, this takes account of long-term appreciation of the Turkish lira and recent forecasts of a further slowdown in demand in key European economies - major source markets for Turkey - which are likely to dampen growth in visitor arrivals to Turkey over the next few years.

Hospitality In the hospitality sector, recent data confirm the strength of the recovery in the tourism sector, with the total number of tourist (foreign and domestic) room nights in all accommodation establishments amounting to 59mn nights in Q207, up a marked 13% y-o-y. The number of foreign tourist room nights was up an even more impressive 16.7% y-o-y to 45mn nights over the same period.

Turkish Airlines Turkey's national airline, Turkish Airlines (THY), continues to record buoyant growth in passenger numbers (after growth of 19.4% y-o-y in 2006), with the total number of passengers carried increasing by 16.6% y-o-y to 17mn in the period January to October 2007.

Turkey Tourism Report Q1 2008 Atlasjet Airline Crash In November 2007, tragedy struck the local charter carrier Atlasjet (which was subject to a terrorist incident in August 2007) when an MD 83 airliner, which took off from Istanbul to Isparta, near the Mediterranean coast, crashed attempting to land, killing all 57 people on board. The cause of the crash was not clear as weather conditions were normal and the aircraft had no known technical problems.