city that has enough cultural and economic heft to attract business and leisure travelers from both the Western and Eastern worlds, yet enough security issues to keep many luxury visitors off the streets at night and holed up in their hotel bars and restaurants, is a bit of a sweet spot for high-end hotel developers.
The sweet spot in question is Istanbul, where Europe meets Asia. And hoteliers have taken notice.
Since last year, companies ranging from Jumeirah Group to Morgans Hotel Group to Viceroy Hotels & Resorts have either entered the Istanbul market or have announced plans to do so within the next two years. Meanwhile, Bodrum, which sits on the Mediterranean Sea on the southwestern tip of Turkey, will be the site of the country’s first Mandarin Oriental and its second Viceroy property in 2014.
Additionally, larger U.S. hoteliers are doubling down in Turkey. Hilton Worldwide this month announced plans for the first Hilton-branded hotel on Istanbul’s Asian side. And Starwood Hotels & Resorts, whose first Le Meridien hotel in Istanbul opened in March, will debut the Aloft brand in Bursa, about 50 miles south of Istanbul, next year. Two Sheratons will also open in Turkey in 2013, and the number of Starwood-brand hotels in Turkey will increase to 10 from six during the two years leading up to mid-2013.
In all, the Turkish hotel market will expand by more than 1,500 rooms by 2015, according to the industry research firm HVS, which noted that Turkey airport passenger arrivals have grown 13% per year since 2003.
As it is, the effects of higher demand are already being felt by Istanbul hoteliers. Last year, Hogg Robinson Group said Istanbul’s year-over-year room-rate growth of 24% for the first half of 2011 was the fastest out of the 50 cities it surveyed globally.
A combination of cultural, political and economic developments are drawing more visitors to Istanbul, an area whose population is approaching 15 million people and whose cultural history dates back at least 5,000 years. The city, which at various points in history fell under Roman, Byzantine and Ottoman rule, has become a relatively safe haven for travelers scared off by either political unrest in countries like Egypt and Syria or by the economic instability of Greece.
Turkey is also a good alternative to United Arab Emirates destinations like Dubai and Abu Dhabi because flights to Istanbul are usually less expensive from much of the Middle East, while Istanbul has the edge in terms of cultural activities and historical significance, said Konstanze Auernheimer, director of marketing and analysis at STR Global’s London office.
Thomas Willms, Starwood’s vice president and regional director for the Eastern and Central Europe region, said, “Istanbul, in particular, has experienced significant growth in tourism demand.” He cited a combination of more international leisure visits and an expanding middle class within the country as reasons for the company’s focus there. “Political and economic uncertainty in Middle Eastern and North African countries has resulted in making the Turkish region an attractive alternative tourist destination.”
Willms added that Starwood’s Istanbul and Ankara properties have about a 30/70 mix of Turkish/international guests, with the U.S. accounting for the most non-Turkish visitors. That said, the number of international visitors from the Middle East also appears to be on the rise, in part because Turkey does not impose the rigid visa requirements that citizens of Middle East countries face elsewhere.
“When the world is complicating visa processing for Arab nationals, we can simply pack up and go to Turkey with no complications,” said Mona Faraj, managing partner at Abu Dhabi-based Insights Managing Consultancy. “Turkey, despite being part of neither the Middle East or Europe, offers the best of both worlds.”
Granted, analysts were quick to point out that Istanbul and Turkey aren’t likely to lose their local hospitality flavor and be overrun by global brands anytime soon. As is the case in Russia, chains represent substantially less than 10% of the hotels in Istanbul.
Still, more global hotel investment is in store, not only for Turkey but for other countries in the region where Western visitors can get more bang for their buck — or euro — while Eastern travelers can avoid security hassles.
Azerbaijan, just east of Turkey on the Caspian Sea, is already experiencing an uptick in hotel-chain activity. Earlier this year, the country’s first Four Seasons and JW Marriott luxury hotels opened in the capital city of Baku, while Fairmont Hotels & Resorts will debut operations there later this year.
“You will see more and more developments in the emerging markets in Eastern/Southeastern Europe,” said STR Global’s Auernheimer. “Baku has huge natural resources which provide a solid background to the economy.”
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