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Cablegate: Turkish Tourism Down Only Slightly

VZCZCXRO1959
PP RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHAK #4493/01 2190515
ZNR UUUUU ZZH
P 070515Z AUG 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 7685
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHIT/AMCONSUL ISTANBUL 1049
RUEHDA/AMCONSUL ADANA 0991
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 02 ANKARA 004493

SIPDIS

STATE FOR EUR/SE AND EB/IFD
TREASURY FOR INTERNATIONAL AFFAIRS - CPLANTIER

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON TU
SUBJECT: TURKISH TOURISM DOWN ONLY SLIGHTLY

REF: (A) Ankara 2673 (B) Ankara 1460 (C) ISTANBUL 527

ANKARA 00004493 001.2 OF 002


1.(SBU) SUMMARY: Despite a drop in arrivals in May, second quarter
tourism revenues came in only 1.8% below the same period in 2005.
In the usual winter booking season, far fewer than the normal number
of tourists booked summer vacations at Turkey's Mediterranean beach
resorts, but Istanbul tourism continues to do well and the May-June
correction in the exchange rate, by moderating current account
deficit concerns, may make it less important that tourism is
financing a smaller share of the external deficit. End Summary.

--------------------------------------------- -------
AFTER MAY DROP, TOTAL SECOND QUARTER REVENUE NOT BAD
--------------------------------------------- -------

2. (SBU) According to Turkey Statistical Institute (TUIK) data,
although the number of foreign tourists visiting Turkey in May fell
16.7 percent year-on-year, tourist arrivals rebounded in June such
that the tourism revenues for the second quarter came in only 1.8%
lower than in the second quarter of 2005, a record year. TUIK
reported that total revenues in the second quarter were $3.692
billion. According to Turkish Tourism Investors Association
Chairman Oktay Variler, during the first quarter of 2006 there was a
30 percent drop in the number of tourists making summer reservations
in Antalya, Fethiye, Bodrum, and Marmaris. Despite this decrease,
the ever-optimistic Tourism and Culture Minister Atilla Koc said on
July 5 that the GOT expects the number of tourists to Turkey to
exceed 21 million in 2006. Koc's optimistic prediction may not be
as unrealistic as the 30% drop in Mediteranean resort bookings might
suggest. As reported earlier, tourism has remained strong in
Istanbul, and there have been some later bookings that would explain
second quarter revenues only being slightly down. The owner of a
hotel in the Mediterranean resort of Gocek echoed other anecdotal
reports that bookings are only down around 10% at beach hotels.

--------------------------------------------
RUMORS OF A VAT REDUCTION FOR TOURISM SECTOR
--------------------------------------------

3. (SBU) In a July 5 press interview, Koc said that the value-added
tax (VAT) in the tourism sector would be reduced from 18 percent to
8 percent in 2007. In a press conference on July 6, however, Deputy
Prime Minister Abdullatif Sener denied Koc's claim, saying the GOT
was not conducting studies on a tax cut in any particular sector.
Sener said that ministers made requests during every new budget
period, but that the GOT decides whether or not to meet these
demands based on budgetary conditions. The confusing Koc-Sener
comments reflect the continuing tension between pressures from the
tourism sector for tax relief and the GOT's need to stick to its IMF
program and avoid sectoral tax breaks.

---------------------
PLANS TO BOOST SECTOR
---------------------

4. (SBU) In his interview, Koc also reiterated plans in the works to
support the tourism sector (ref A). He emphasized the Ministry's
plans to increase thermal tourism facilities, noting that while
Turkey ranks seventh in the world in terms of thermal resources,
they constitute only 1 percent of Turkish tourism revenue.

--------------------------------------------- -------
TOURISM FINANCING A SMALLER SHARE OF CURRENT ACCOUNT
--------------------------------------------- -------

5. (SBU) Even if total revenues have only dropped slightly from
2005, Turkey's current account deficit has tended to grow at least
as rapidly as inflation-adjusted GDP. This means that even flat
nominal tourism revenues finance a smaller share of the current
account deficit. Concerns about Turkey's current account deficit
have eased a bit in recent months, both because the exchange rate
adjustment should moderate import growth and stimulate exports over
time and because the composition of financing has shifted sharply
towards a larger share of longer-term investments like FDI.
Consequently, the lesser contribution of the tourism sector may be
less of a concern than it would have been a year ago.

-------------------------------------------
Outlook: lower than 2005 but not a Disaster
-------------------------------------------

6. (SBU) With the world cup keeping some European tourists away in
early July and now Lebanese tourists unable to come, the critical
third quarter is likely to be down from 2005. Tourism sector
executives are not expecting a disastrous year, however.


ANKARA 00004493 002.2 OF 002


WILSON

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