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Economy

Turkey's domestic strife punishing tourism sector

As terror, instability spook foreign visitors, industry squabbles add to woes

Coastal beach resorts in Turkey are popular with both domestic and foreign tourists.

ISTANBUL -- Turkey's important tourism industry is being hit hard as it suffers the fallout from growing domestic instability. Terrorist attacks, last year's attempted coup and eroding democracy have contributed to a decline in tourists to this once-popular destination.

The German hotel brand Steigenberger closed its Istanbul location in March. A cafe in a corner of the reception floor still operates, but all the guests are gone. The hotel was especially popular with foreign visitors.

"The room occupancy rate wasn't that bad," said a man working at the cafe. "But falling room rates probably pushed down earnings."

According to local media reports, a court ordered bankruptcy for the Turkish operator over alleged unpaid rents worth millions of dollars.

Reception area of the recently closed Steigenberger hotel in Istanbul.

Tourism accounts for more than 10% of Turkey's gross domestic product. The industry is also a major source of foreign currencies. But the number of foreign visitors has continued declining year-on-year for 20 consecutive months since August 2015.

Only 25 million visitors entered the country in 2016, a 30% drop from a year earlier.

Despite less foreign tourists, a few new hotels have sprung up, but these were mostly planned while Turkey's tourist industry was booming a few years ago. As a result, many hotels struggling to fill vacancies are offering significant discounts on rooms.

According to research company STR Global, the average room rate in Istanbul came to 69.81 euros ($78.4) in March, over 40% lower than three years ago. Some regular business travelers from Tokyo have found that luxury hotels that were previously beyond their reach are now within their company's expense limit.  

The country expects more Russian tourists this summer, but their numbers will not replace those lost from other Western countries and Asia.

Turkey has restored relations with Russia after the downing of a Russian warplane in 2015. Last year, Turkish President Recep Tayyip Erdogan apologized to his Russian counterpart Vladimir Putin, with the Russian president acknowledging last month that relations were back to normal.

Industry bickering

Meanwhile, the industry has suffered further blows. A Turkish court in March ruled to block Turkish access to Netherlands-based Booking.com -- one of the world's most popular travel websites -- over alleged unfair competition claimed by a group of domestic travel agencies. The ruling may be doing more harm than good for domestic travel, as it blocks anyone in Turkey from obtaining information on domestic tours.

Even the chief of the country's hotel industry association has criticized the complaint by the domestic travel agencies, saying that the ruling could hamper Turkey's goal of achieving 10 million domestic tourists a year, up from last year's 6 million.

Some 13,000 hotels and other accommodations across Turkey have received reservations via Booking.com. Blocking access hurts this sector, especially small to midsize locations with limited marketing budgets that depend on the website to be found.

A different hotel lobby group in Turkey has asked the court to overturn the ruling, but nothing has happened, leaving the country's tourism industry uncertain at best.

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