Tourism professionals get through Russian slippage with $ 10 million subsidy

Stating that they forecast a drop in tourist numbers from 4.5 million to 3 million due to the Russian crisis, OTI Holding Chairman Bektaş says that a support of 6 thousand dollars per airplane will cost the state 18 million dollars. “There will be rotten apples going bankrupt, so be it”, says Bektaş.

For the tourism sector that has been star of the economy for the last 5 years, the alarm bells have started to ring due to the Russian crisis. Although the news that the airplanes coming from 11 countries, including Russia, will be given a fuel subsidy of 6 thousand dollars, as reported in recent weeks, has cheered up the tourism sector, everybody is calculating how to survive this year with minimum loss. Ayhan Bektaş, chairman of OTI Holding that is the leader in the market of tourists coming from Russia to Turkey with a considerable market share of 25 percent, predicts that the Russian crisis will lower the number of incoming tourists to 3 million by a 30-35 percent fall this year. We talked with Bektaş on OTI Holding and the possible effects of the Russian crisis:      

§ Is a fuel subsidy of 6 thousand dollars per airplane sufficient?
It will boost up the morale, which is most important. The sector has slipped, and everybody is worried about if it will shrink too much. We can survive this through correct communication and actions to be taken on time. However, the bad apples will be weeded out; and frankly speaking we wouldn’t mind. One should not go charging in everywhere. The fuel support is very important, and for the moment, it appears to cover April and May. A 2-month support; nice but short.

§ How much will the state pay?                         
The calculation is based on 450-500 thousand passengers in total. That means it will be a subsidy of 18 million dollars.

§ How much would it cost to the state, if it would be extended to 6 months?
It would rise to 100 million dollars. For an industry yielding revenue of 35 billion dollars, it’s not big money. What is important here is this: most of the arriving airplanes are Russian airplanes, most of which fuel up in Russia.

§ Do you mean that the support is being given to Russians actually?       
Not exactly. The fuel is indeed paid by the tour operator, but when the fuel is bought in Russia, the process of invoicing the fuel and acquiring the subsidy may drag on unnecessarily. It is going to be reflected either this or that way, but the process may drag on. There might only be problems in invoicing, recognition, coordination. The support will go to the tour operator.

§ Have you said to the ministry something like ‘We can prevent the loss with this support up to such and such amount’, as a commitment?
Well, if a tourist doesn’t intend to come out and buy that certain holiday, you can’t change that, no matter how hard you try. You can’t change a determined person’s mind through subventions. The market will shrink, and that’s the reality. The Russian tourist potential of 4-4.5 million has emerged thanks to the Turkish players. What is important at the moment is that the market can preserve its structure and these players can stay in the game after the crisis. It is necessary to protect the entrepreneur in order to protect such a big market and let it return with the same size in 1-2 years. You will protect the tour operator and minimize the foreign exchange loss, simultaneously.

 

‘THIS YEAR’S TARGET IS TO KEEP WHAT WE HAVE’

Stating that they have difficulty in making their budgets for the year 2015 due to the exchange rate and the Russian crisis, Bektaş says, “For the year 2015, if we can keep what we have by focusing on domestic tourism, we should consider ourselves successful. We have almost 20 percent downward shrinking margin and our target is to keep it at minimum.”

 

‘TOURISTS ARE BACK TO LAST-MINUTE BUYING’

Is the price cut a solution? Won’t it be difficult for you to make a u-turn later if you resort to low-price practice now?

We believe that a revision is required for accommodation. Seeing the final situation at the beginning of March, a price revision must be made. There must be a revision covering the entire season, before it’s too late, because the consumers are tightening up at the moment. They don’t buy holidays. The situation we call last minute buying has returned. The flow of the reservations is too slow. There are two elements: airplane and accommodation. The oil price retreat has created approximately 15 percent decrease in the package tour cost. If a package costs one thousand dollars, this has fallen to 850 dollars thanks to the fall in the oil price. Despite this advantage, on the other hand, the package prices have risen by 90 percent due to devaluation of Ruble since summer. That means the effect of fuel has been laid to waste, minimized.  

 

‘THE INDUSTRY WILL RUSH TO DOMESTIC TOURISTS’

§ With whom will the industry recover the loss of Russian tourists?
The domestic market is the indispensable insurance for all tourism countries. For example, we brought 1.2 million Russian tourists to Turkey in 2014. We predict that this figure will drop to almost 800 thousand in 2015. But we also target to provide the remaining 400 thousand tourists with holidays within Russia or within the region. For example, the Black Sea coasts… 20 million passengers will be carried to the Black Sea coasts, and we want to have a share of it.

§ Then, will the domestic tourist become the king in Turkey this year?
Normally, it is sound that the domestic tourism has 20-25 percent share in the total; this figure is 10 percent in Turkey. For this year as well, it is a reflex in every tourism country to rush to domestic tourists, like insurance in case of a crisis. As the main players, we forecast 70 percent growth in the number of domestic tourists. This applies to us and the big players alike.

 

‘OUR TURNOVER HAS RISEN TO 2.8 BILLION DOLLARS’

Stating that the Russian crisis did not affect the figures of 2014 adversely, Bektaş says “We grew a lot abroad in the year 2014, and by 20 percent in total. Our consolidated turnover has risen to 2.8 billion dollars”.

‘Public offering has fizzled out in the short run’

§ There is news about the Russian tour operators going bankrupt. Is there anyone who told you ‘Acquire us’?
Bankruptcy news has been coming from Europe and Russia for the last three years. We shouldn’t confuse the present ones with the bankruptcy news of the past. Failures caused by mismanagement are different. Yes, we have made several interviews. There may be an acquisition or merger.

Why aren’t you convinced yet?

The present conditions aren’t suitable. Listing of OTI is our primary target. Listing on the stock exchange in 2-3 years has fizzled out in the short run. We had prepared Odeon, but gave up. Public offering or merger is probable 2-3 years later. We want to do that, but this is not the right time.

 

‘EU will shrink more’

§ How competitive is Turkey to catch Russian tourists?
If Turkey shrinks by 30 percent, Europe will shrink more by 50 percent. Since Spain and Greece are parts of the EU, the political tension between the EU and Russia will affect them more. The Russian tourists would prefer Turkey and Egypt. We have started to see this rather clearly after October. At the moment, everybody is developing one strategy or another to attract the Russian tourists. We should be produce our roadmap and launch a promotional attack without wasting any time.