This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 ANKARA 001460 
 
SIPDIS 
 
STATE FOR EUR/SE AND EB/IFD 
TREASURY FOR INTERNATIONAL AFFAIRS - CPLANTIER 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EFIN ECON TU
SUBJECT: TURKEY'S LOWER 2006 TOURISM NUMBERS COULD 
WORSEN CURRENT ACCOUNT DEFICIT 
 
REF: (A) ANKARA 1105 (B) 05 ANKARA 3058 
 
¶1. (U) SUMMARY.  ON THE HEELS OF 2005'S RECORD TOURISM 
NUMBERS, A "SERIES OF UNFORTUNATE EVENTS" - THE AVIAN 
INFLUENZA OUTBREAK, THE CARTOON CONTROVERSY, AND RUMORS 
OF AN ALCOHOL BAN - HAS LED TO A SHARP DECREASE IN THE 
NUMBER OF 2006 BOOKINGS FOR FOREIGN VISITORS IN TURKEY. 
WHILE THE ANTALYA'S MASS-MARKET TOURISM IS BEARING THE 
BRUNT OF THE DECREASE, INDUSTRY EXPERTS BELIEVE THAT 
TURKEY WILL BOUNCE BACK BY THE END OF THE YEAR, DESPITE 
CONCERNS ABOUT A STRONG LIRA HURTING COMPETITIVENESS. 
THE TOURISM SECTOR DIRECTLY AND INDIRECTLY EMPLOYS OVER 
2.5 MILLION PEOPLE AND IS A MAJOR SOURCE OF SORELY 
NEEDED FOREIGN CURRENCY.  SUBSTANTIALLY LOWER TOURISM 
RECEIPTS WOULD EXPAND TURKEY'S GROWING CURRENT ACCOUNT 
DEFICIT.  END SUMMARY. 
 
--------------------------------------------- --- 
2005: A Record Year for Turkish Tourism Industry 
--------------------------------------------- --- 
 
¶2. (SBU) 2005 was a banner year for Turkish tourism, 
with the number of visitors soaring by 20 percent to 
21.1 million and net tourism revenue reaching USD 15.3 
billion.  Antalya, on Turkey's Mediterranean coast, is 
the country's tourism hub.  According to Ali Tulek, 
Garanti Bank's Antalya regional manager, 30 percent of 
the tourists who visit Turkey come to Antalya, which 
translates to between six and seven million tourists 
per year.  Tulek told us that 550 flights per day - 90 
percent of which are charter flights - land in Antalya, 
making its airport the busiest in Turkey.    The 
majority of visitors to Antalya are Russian, British, 
and German, although in 2005 the number of Americans 
grew significantly, as the number of cruise ships 
calling on Turkish ports increased. 
 
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Worries in Antalya 
------------------ 
 
¶3. (SBU) In sharp contrast to the "sky is the limit" 
attitude about Antalya tourism in 2005 (ref B), 
Mediterranean Association of Touristic Hoteliers 
(AKTOB) President Osman Ayik told us that hotel 
bookings in Antalya are down 50 percent from the same 
time last year.  He explained that avian influenza, the 
Danish cartoon crisis, and the rumors of more severe 
alcohol restrictions throughout Turkey (which received 
significant coverage in the European press) all 
occurred when European customers were deciding where to 
vacation for the summer, leading to a sharp drop in 
bookings.  Ayik told us that, while he believes the 
tourism industry will bounce back from the latest 
setbacks, they need more support from the GOT.  He 
noted that the tourism sector is hoping that the GOT 
will decrease the value-added tax rate, as it recently 
did for the textile industry. 
 
¶4. (SBU) Ayik also pointed to a decline in price 
competitiveness as a threat to the Antalya tourism 
industry.  He said that hoteliers' profit margin fell 
by as much as 30 percent in 2005 with the strengthening 
of the lira (ref A).  To maintain their margins, Ayik 
explained that hotels have had to raise prices, 
weakening Turkey's comparative advantage and 
encouraging more tourists to book vacations in other 
Mediterranean countries, notably Spain. 
 
¶5. (SBU) Tulek noted that the increase on all- 
inclusive, "sun-sea-sand" vacation packages were also 
affecting many smaller hotels' and businesses' profit 
margins.  He said that, while millions of tourists 
flock to Antalya annually, local businesses do not 
benefit, as the visitors spend their entire vacation 
inside their hotel compound.  He said that large all- 
inclusive resorts generally purchase their supplies and 
food from wholesalers rather than from local small 
businesses, so last year's surge in tourism did not 
trickle down to the local economy.  Tulek believes this 
all-inclusive trend will increase in the coming years. 
 
--------------------------------------------- --------- 
GOT, Travel Agents Believe the Sector Will Bounce Back 
--------------------------------------------- --------- 
 
¶6. (SBU) In contrast to the grim outlook in Antalya, 
tourism officials in Istanbul and Ankara were 
optimistic that the sector would bounce back in the 
coming months.  In January, the Association of Turkish 
Travel Agencies (TURSAB), which is based in Istanbul 
and has over 4000 members throughout Turkey, projected 
that the number of foreign visitors to Turkey would 
increase by 15 percent in 2006.  Cengiz Yucel, director 
of TURSAB's research and development department, told 
us that they revised this estimate after the avian 
influenza outbreak and the cartoon crisis, but said 
that they still expect the number of foreign tourists 
to increase by five percent this year.  Yucel 
acknowledged that Antalya has been hit the hardest, 
with the number of flights in Antalya down 35 percent 
from last year at this time, but said they expect the 
numbers to be back on track again within three to four 
months.  He said that the number of tourists in 
Istanbul increased 40 percent in 2005, and TURSAB 
expects the number to increase even more in 2006. 
 
¶7. (SBU) Yucel told us that coming up with new ways to 
promote Turkey is the biggest challenge the tourism 
sector is facing.  Echoing Yucel's comments, Senol 
Aydemir, director general for investments and 
enterprises at the Ministry of Culture and Tourism, 
said that the GOT is developing two "master plans" - 
one focusing on historical/cultural tourism and one 
focusing on geothermal tourism - to diversify the 
industry.  He said that 75 percent of tourists come to 
Turkey for "sun-sea-sand" vacations, but the GOT is 
hoping to extend the tourism season year-round by 
promoting the country's geothermal potential and its 
historic sites. 
 
¶8. (SBU) Aydemir also echoed Yucel's hope that Turkey's 
tourism sector will bounce back from its "series of 
unfortunate events" quickly.  He cited the advantages 
that Turkey has over its Mediterranean competitors, 
especially Spain - Turkey's facilities are newer and 
cheaper, and, Aydemir says, the quality of customer 
service is higher.  He believes that the tourists who 
opted to go to Spain instead of Turkey this year will 
return in 2007 once they see the higher prices and 
"lower service standard" in Spain. 
 
--------------------------------------- 
Tourism Sector Seeks Government Support 
--------------------------------------- 
 
¶9. (SBU) Tourism sector businesses have been pressuring 
the government for special tax breaks and subsidies, 
citing lower bookings and the Government's recent VAT 
rate cut for textiles.  At a March 15 "tourism summit" 
arranged by TOBB (Turkish Union of Chambers of 
Commerce), tourism sector leaders made their case to 
Government leaders, including Prime Minister Erdogan. 
The tourism executives raised the specter of job losses 
and sharply lower foreign exchange receipts.  They 
point out that Turkey's VAT rate, at 18 percent, is 
above the average of comparable Mediterranean tourist 
destination countries and are keen for a sectoral VAT 
rate cut, like the one for the textile sector that 
recently got the GOT into hot water with the IMF. 
Tourism sector representatives also requested that the 
GOT cut both payroll taxes and the special consumption 
tax rate on alcoholic beverages.  They also requested 
support for their marketing activities. Following the 
meeting, PM Erdogan said the GOT would strive to 
encourage increased productivity in the sector, and was 
ready to implement whatever would be needed together 
with the tourism sector. 
 
--------------------------------------------- ------ 
Lower Receipts Would Worsen Current Account Deficit 
--------------------------------------------- ------ 
 
¶9. (SBU) The tourism industry plays a key role in the 
Turkish economy, particularly for employment and as a 
source of foreign exchange receipts.  With recent 
strong economic growth unable to create jobs at a 
faster rate than the growth in the labor force, Turkey 
can ill-afford a slump in a labor-intensive sector: 
tourism sector representatives on March 15 claimed that 
as many as 360,000 jobs may be at risk if the lower 
bookings so far this year and high labor costs 
continue. 
¶10. (SBU) With its structural trade and current account 
deficits, which have been on a widening trend in recent 
years, Turkey's balance of payments depends on tourism 
receipts as a source of foreign exchange. In 2005, for 
example, net "travel revenues" (mostly tourism) 
component of the Balance of Payments showed a 14.3% 
increase to $15.3 billion, a significant number when 
compared with Turkey's $22.85 billion current account 
deficit.  (Gross travel revenues inflow was $18.15 
billion.) 
 
¶11. (SBU) On March 20, the State Statistical Institute 
announced that the tourism numbers for January and 
February are down 7.4 percent from the same time last 
year.  If the lower bookings in 2006 continue, leading 
to substantially lower tourism receipts it will worsen 
the current account deficit.  The deficit was around 
6.4% of the GDP in 2005, and some private analysts 
expect it to reach $26 billion in 2006 despite the GOT 
projection of $22 billion. 
 
 
Wilson