Turkey Tests TUI's Business as Terrorism Hits Top Tourist Market

  • CEO predicts bookings to Turkey to slow, hotel prices to fall
  • Travel ban would have bigger impact than incidents in 2015

TUI AG, Europe’s largest tour operator, said any moves by the region’s travelers to avoid Turkey following the Istanbul bombing on Tuesday would pose larger risks for the company than the consequences of attacks in North Africa in 2015.

Turkey’s tourism industry will now see fewer early bookings and declining hotel prices as customers, especially families, await authorities’ response to the suicide bombing that killed 10 people and injured 15 in Istanbul, TUI Chief Executive Officer Fritz Joussen said. While it’s unlikely that the attack will result in government travel warnings similar to those that closed parts of Tunisia and Egypt to tourists last year, the incident is “critical” and Turkey faces a tough time as a destination, Joussen told journalists late Tuesday in Dusseldorf, Germany.

The casualties included eight Germans who died and nine who were injured, according to Turkey’s foreign ministry. The victims were a group of customers from Berlin-based Lebenslust Touristik travel agency. Germany has been the single largest source nation for visitors to Turkey for at least the past six years. It’s also the biggest source of TUI customers.

Turkey ranks third as a destination for TUI’s customers from Europe, behind Spain and Greece, meaning the company would have far more difficulty relocating tourists to free beds elsewhere should they turn their backs on the country.

TUI’s business was affected last year by terror attacks in Tunisia, including an incident at the resort of Sousse in June when 33 of 38 people shot dead were the company’s customers, and Egypt, where the October crash of a Russian jetliner that killed all 224 people on board was blamed on a terrorist bombing. Still, TUI’s net income in the year through September jumped 40 percent as revenue growth and the one-time effect of integration of its U.K.-based travel unit outweighed adverse effects from those attacks.

Offering to shift clients to same-value vacations at other destinations is becoming increasingly difficult as TUI has already switched customers from Tunisia and Egypt to islands in Spain, where empty beds are now scarce, Joussen said. Revenue per bed at its RIU hotel venture rose 13 percent last year, fueled by the run on beds in regions considered safe, and occupancy rates in the country were at record levels, the CEO said.

“Turkey is a summer destination, so we don’t know yet, but clearly the attacks don’t help,” Joussen said. “It’s not comparable to Egypt or Tunisia, where single incidents effectively closed these destinations overnight, but Turkey would be a whole different ballgame.”

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