Hotel investment in Turkey continues to increase, with much incoming capital deriving from Gulf Cooperation Council countries.

Such money has not been deterred by political instability within the country and without, nor by some deceleration (or declines) in hotel performance. 

Recent investment deals from GCC countries in Turkey include:

• Abu Dhabi-based Rotana Hotel Management Corporation opened its first two Turkish properties in a partnership with Turkish developer DapYapi. Adjacent and on the Asian side of Istanbul, Tango Arjaan by Rotana and Burgu Arjaan by Rotana have 188 and 222 rooms, respectively.
  
• Dubai-based property developer and hotel firm Emaar Hospitality will open in 2016 the first non-Dubai hotel of its flagship The Address Hotels + Resorts brand. The 197-room The Address Residence Istanbul comes with a shopping center, underwater zoo and 2,400-seat theater.
  
• On 1 May, Dubai-based Jumeirah International and Turkish firm Targets International opened the 135-key Jumeirah Bodrum Palace.

Mehmet Önkal, managing partner of BDO Hospitality Consulting, told Hotel News Now Turkey is going from strength to strength, despite 2015 showing a deceleration in hotel performance.

“Investment has picked up. We’ve been working on three requests from GCC investors over the last three months, for both resorts and 4- and 5-star hotels. The Gulf is very enthusiastic,” he said.

“Istanbul is booming, with investment increasing more than 10% over last year. Rate concerns us, but it’s showing signs of picking up,” Önkal added.

A show press release from research company TopHotelProject stated “hotel construction in Turkey is at an all-time high with 75 projects and 12,968 new rooms in the pipeline.”

According to STR Global, Hotel News Now’s sister company, Turkey has a pipeline of 13,457 rooms, a year-on-year July 2015 increase of 5.2%. In Istanbul the pipeline is 6,885 keys, an increase in the same period of 14.2%. An additional 1,291 keys under contract in the Turkish Riviera, which includes destinations such as Antalya, Bodrum, Çesme and Marmaris, represented a 0.7% increase.

The country’s hotel industry has posted moderate gains year to date in the key metrics of occupancy (4.4%), average daily rate (1.8%) and revenue per available room (6.3%) in Turkish lira terms, according to STR Global data. 

In Istanbul, year-to-date July 2015 occupancy is up 6.4% to 66.2%, and while its ADR is down 5.2% for the same period. As a result, RevPAR rose 0.9%. 

For the same period in the Turkish Riviera, occupancy fell 4.1% to 56.7% but ADR and RevPAR jumped by 28.8% and 23.4%, respectively.

Kaan Bozdemir, managing partner of Turkish real-estate company Reha Medin Commercial, said tension ahead of Turkey’s November election has not deterred huge sums of GCC money, including one Saudi billionaire who arrived in late August unannounced to his office.

“They’re taking the risk, and if there’s political chaos in Turkey, it’s nothing to what is happening elsewhere in the region. These countries have no idea what to do with their money, but with land prices in Turkey having risen by 20% in the last three months traditional hotel company money is being joined by that of opportunists. They are not futurists,” he said.

Bozdemir said there seemed little sense in how fast Turkish real estate was growing, although he did not see a bubble forming. His opinion runs contrary to that of Emre Narin, VP of Marti Hotels & Marinas, who warned last year at the 2014 Turkey & Neighbours Hotel Investment Conference that “the real estate gold rush in Istanbul has to stop, though … the city does need more beds.”

“The rising trend will not lose power in upcoming months or years. Capital from Kuwait, Qatar and Bahrain. … We’re also seeing interest from Iran,” Bozdemir said.

Sources said some Western travelers are wary of ongoing troubles in and near neighboring Syria, despite that area being far from Turkey’s principal destinations. Travelers from GCC countries, however, are increasingly traveling to Turkey, rather than to other volatile countries in the region.

Also, in April 2013, the Turkish government extended residency permits for foreign property owners from three months to 12, with guaranteed annual extensions.

Önkal added Turkey remained a safe destination, one that had seen increases in domestic tourism.

Reha Medin’s Bozdemir said Istanbul is Turkey’s most secure market, with new business districts being developed. He warned climate change was making destinations such as Antalya a less likely bet.

“In the last 20 years Istanbul has expanded five times as much as it did in the last 2,000 years,” Bozdemir said, “but global warming might make places such as Antalya look like North Africa in the next decade.”

Bozdemir added that some investment in destinations such as Çesme and along Turkey’s Black Sea coast had adopted operations and structures demanded by observant Muslims, although sharia-compliant money and trends remained tiny.

“Those decisions are based on customer targets. Because by the end of the year we will see an overall drop in Turkish hotel performance of around 25%, it will be interesting to see where the owners of those hotels that fall by that amount come from,” Bozdemir said, who added his prediction did not concern him in regards to the overall future prognosis.

BDO’s Önkal said he had seen no sharia-compliant investment.