Over the past two years, Turkey has suffered political tension with neighboring countries such as Russia and the West. It also experiences a refugee crisis due to war and terrorism in the Middle East. Shortcomings such as these increase distress and debt in the country, besides scaring off tourists. The existing state regulation cannot adequately address the challenges unless the government introduces business reforms in the near future. The failing tourism sectors is a major blow to international Luxury hotels such as Hyatt, which enjoy a strong performance in other parts of the globe such as Africa and the EU. Even worse, the latest political coup attempt has scared off investors in the country, hence significantly shrinking the middle income earning population due to rising unemployment.
Further, the nose-diving tourism sector is a direct result of the dipping incomes of the population due to geopolitical events and failing currency. In particular, the polarization of domestic politics has serious negative consequences for the inbound market, national economy, and hotel industry. Currently, the Turkish government is trying to revive the ailing hospitality industry by restructuring more than $17 billion debt that luxury hotels such as Hyatt owe the local financial institutions. However, economic experts argue that the strategy is only a temporary solution to a deeply settled problem that can easily spiral out of control. Nonetheless, the government insists that it will continue the plan of minimizing the non-performing loans to tighten the lending regulations.
The decreasing tourist numbers have resulted in an oversupply of Hyatt hotel rooms in the country. Notably, the country’s hotel industry has expanded for more than a decade, considering the beautiful sceneries, secular culture, relative stability, and strategic geographical location Turkey (Akbaba, 2014). However, the economic woes in the European Union and Russia threaten the hotel’s performance. Hyatt’s management in Turkey admits that the development, coupled with weak global economic prospects, has pushed its subsidiaries to cut the room prices so that it can survive the turmoil.
Statistics indicate that annually, luxury hotels add more than 35, 000 beds in Antalya (A Turkish Mediterranean town). Already, the small town has more than half a million-bed capacity. It implies that Antalya needs more than a million tourists for profitability. Even worse, the Turkish government heavily taxes the luxury hotels like Hyatt, despite the poor business forecasts. The existing economic trend in the town and the country as a whole. In 2015, the hotel occupancy rate in Hyatt was 68%, an 8% fall from the same period in the year 2014.Contrastingly, the hotel occupancy rate at its US subsidiary was 83.9% (Statista, 2016).
Turkish hotel sector needs an all-inclusive publicity campaign especially in Russia to recover its tainted image. Further, the country lags behind in tourist income earnings even though Turkey ranks among top 5 global tourist destinations.
As of June 2016, Hyatt hotel reported a total debt of 1.5 billion dollars. While the global net national income increased by 67% to 3, 342 million dollars and adjusted EBITDA rose to $225 million (due to new subsidiaries in Shanghai), Turkeys, revenue dropped by 6% (Nasdaq, 2016).
In summary, turkey’s hotel industry is saturated after years of consistent growth. As a result, multinationals such as Hyatt suffer losses and low occupancy rate due to the weak tourism sector and the increasing number of local three-star hotels. Besides, the country faces major challenges as it tries to reassure the West about relative stability, particularly after a wave of terrorist attacks. A failed coup and subsequent crackdown on the opposition confirmed EU’s worst fears, hence resulting in a low hotel occupancy at Hyatt. In the end, the revenues have fallen sharply despite good performances by other subsidiaries across Asia and Africa.
- Akbaba, A. (2014). Measuring Service Quality in the Hotel Industry: A Study in a Business Hotel in Turkey. International Journal of Hospitality Management, 25(2), 170-192.
- Hyatt Hotels: revenue 2015 | Statistic. (2016). Statista. Retrieved 11 November 2016, from https://www.statista.com/statistics/257362/revenue-of-the-hyatt-hotels-corporation/
- Revenue, EPS, & Dividend – Hyatt Hotels Corporation (H) – NASDAQ.com. (2016). NASDAQ.com. Retrieved 11 November 2016, from http://www.nasdaq.com/symbol/h/revenue-eps