Turkey Tourism Report Q2 2008

Tourism Overview Following a downturn in tourism in 2006, Turkey recorded an impressive recovery last year, with the number of foreign visitor arrivals totalling more than 23.3mn, a buoyant increase of 17.8% year-on-year (y-o-y). Of these data, very strong growth rates were achieved in arrivals from the Commonwealth of Independent States (CIS), Asian countries and the Americas. Arrivals from the European member countries of the Organisation for Economic Co-operation and Development (OECD) - which account for the largest proportion of visitors to Turkey - were also up an impressive 12% y-o-y to 11.4mn.

Forecast Scenario BMI anticipates a slowdown in growth in foreign tourist arrivals in 2008, although annual average growth should remain favourable over the forecast period to 2012. The background economic scenario is that BMI remains very positive on the Turkish lira over the medium term - dampening growth in visitor arrivals to Turkey - with appreciation to our end-year targets of TRY1.08/US$ and TRY1.04/US$

forecast for 2008 and 2009 respectively. In the short term, this is likely to be compounded by the global economic outlook, which has deteriorated significantly, with a further slowdown in demand anticipated in key European economies, including Russia, which are major source markets for Turkey.

Hospitality The hospitality sector clearly benefited from the strong growth in foreign tourist arrivals in 2007.

Following impressive growth in tourist room nights in the early part of 2007, with the number of foreign tourist room nights up an impressive 23% and 16.7% y-o-y in Q107 and Q207 respectively, growth slowed in the latter part of the year. In Q307, the total number of tourist (foreign and domestic) room nights grew 10.6% y-o-y, while the number of foreign tourist room nights was up almost 13% y-o-y. In Q407, meanwhile, growth in the total and foreign number of tourist room nights was some 6% and 1% yo- y respectively.

Turkish Airlines Turkey's national airline, Turkish Airlines (THY), recorded continuing buoyant growth in passenger numbers in 2007, with the total number of passengers carried increased by 15.9% y-o-y to 19.6mn (after growth of 19.4% y-o-y in 2006). The company aims to increase passenger numbers to 24mn in 2008 - a rather ambitious growth target of over 22% y-o-y. The airline also reported that growth in international flights in 2007 had exceeded that of domestic flights, reversing an earlier trend.