Hotels in Turkey are in trouble

Turkey hotels started having problems

By August-September, the Turkish tourism industry can expect a lot of unpleasant surprises: hotels began to have problems due to debt load, which has grown to incredible proportions – by the end of the year, the growth in hotel debt on loans will reach 100 billion Turkish liras (i.e., over 360 billion rubles on current exchange rate). By the end of the season, this could threaten hotels with bankruptcy, and it is mainly large hotels that are at risk, Turizm Ajansi reports.

Among the reasons for the crisis, the Turks cite “pandemic, earthquake, elections, high inflation and the fact that daily rent has become cheaper this year” – all this caused a lot of trouble for hoteliers. The main one is that rising costs, staff costs and reduced length of stay in hotels “disturbs the cash flow of hotels” and they are forced to resort to loans.

Erol Karabulut, the founder of the Tourism Data Bank and economist, told the media that there are 10,000 large and small hotels in Turkey, but mostly the hotels that borrowed money are large hotels with a large capacity.

“Hotel debt on loans increased by an average of 64 billion Turkish liras in the first 6 months of 2023. At the same time, only 41 billion Turkish lira was paid in June. If this continues, by the end of this year, the increase in loan debt will reach 100 billion Turkish liras. There has never been such an increase in credit over the past 4-5 years,” the Turkish expert said. According to him, if the decline in occupancy continues in the last months of the tourist season, then the crisis is inevitable.

According to his estimates, on average, about 700-800 hotels with a large number of places are in dire need of loans, and it was they who became the “generator” of the rapid growth in amounts. In small hotels, the amount of loans does not exceed 2-3 million liras. “Is this a wake-up call for the industry? We will see it in August-September. According to my estimates, from 5 to 10-15% of hotels will face the inability to pay. It should be taken into account that last year the hotels had a good turnover, and they took out loans, counting on the best – while many have debts that are not paid for 3-4 years, there are accumulated loans,” he said.< /p>

Hakan Saatchioglu, Vice President of the Association of Professional Hotel Managers (POYD), echoed his assessment: according to him, due to rising inflation, there are disruptions in income. “If a large hotel group has made or is making investments or renovations in recent years, it will need a loan that will have to be repaid,” he said. At the same time, hotels could not get as many tourists as they needed – a 25% increase in tourist flow had almost no effect on hotels.

Bugra Artik, Chairman of the Board of the Association of Tourist Hoteliers and Operators of the Southern Marmara Sea (GUMTOB), also added that the problem of lack of funds and funding for hotels was relevant last year, and still persists. At the same time, he added that banks are already trying to protect themselves, obviously from potential bankruptcies, and it is increasingly difficult for large hotels to get a loan. “At the same time, food and energy prices have risen by almost 100%, hotels have extremely high entry costs, this is reflected in prices. We are even more expensive than in some European countries,” he added.

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