Last year you have become the tour operator who sent the highest number of tourists from Russia to Turkey. There is a general acceptance that 2015 will be a difficult year. How do you assess the situation?
First of all, let’s look at the current situation. Currently there is an incredible amount of decrease in demand since December 1st, which is directly reflected to the sales. In fact, this decrease had started on November and even in September if we go back one step further. However, December was the break point. The bankruptcy of tour operators and the skyrocketing of exchange rate and the starting of the steady decrease in oil prices have also played a significant role. Now we are in the month of March. Currently there is a 50 percent decrease in departures to abroad for the winter period. This rate of decrease goes up to 70 percent for remote destinations such as Thailand and Dominican Republic. The ruble has lost value over 80 percent compared to one year ago. Even worse, still we can’t make a forecast for the coming days. The uncertainty is ongoing. People are very cautious due to this reason. In such environment we can’t follow or estimate what exactly our target customers are willing to do. This situation has been ongoing for the past four months.
How will this situation be reflected to total departures to abroad and separately to the region and the countries?
Last year total number of persons departing to Russia for vacation purposes has been realized as 16 million. This year the number can go down to as low as 9 million. Turkey will certainly be affected from this decrease. However, Turkey will continue to be a priority destination for Russian customers. Turkey is followed by Egypt, which is followed by Greece and Spain. This order would not change in short term. There is a customer mass travelling from Russia to miscellaneous European countries. However, if consider in terms of volume, we must examine two countries: Spain and Greece. These two countries constitute the destination for more than half of the number tourists travelling to 20 European countries. There is a 50 percent decrease in the European market. The price increase resulting from the loss in ruble’s value plays a role in this, as well as the people’s resentment against EU countries as a result of the embargo imposed by EU to Russia. Certainly there will be a downsizing in the market this year. We are also making a set of projections by considering the possibility of 30 percent downsizing. We planned 10-15 percent lower flight schedules compared to the previous year. We are placing an option of 10-15 percent for the possibility that the business would get better.
How do you evaluate the Hotel Operators’ approach in this period?
Hotel operators started to show those reactions gradually as of the end of February. They took action by firstly keeping the early booking rates at the highest, and sometimes by adding some more on several rates. Currently some hotels have early reservation rates with 40-50 percent discount. This means that the Hotel Operators have done what needs to be done. The salesman has a price of 100 dollars; in case of early reservation he sells for 60 dollars. Therefore, at the current period we can’t state that the Turkish Hotel Operators haven’t done anything. I don’t see a problem there. Hotels currently offered the best price they can offer, under the name of early reservation. Maybe one of them would offer a little more or less, but overall the Hotel Operators have offered the best prices they can offer. Now let’s see what will happen when this period is over. At that period would they offer further last minute prices? I don’t know the answer to that. This is bad too, but there’s nothing to do about it. What if the business turns around 180 degrees and gets better when the prices are decreasing at the last minute. Therefore, this year will pass as a difficult year. This situation will probably be reflected to the next year as well. However, everything may get back to normal in 2017.
What would be your advice to Hotel Operators?
I want our Hotel Operators to be aware of the following: Less profit will be generated in the year 2104 compared to the year 2015. Calculations shall be made by considering that the item which had price of 100 units last year will cost 90 units this year. Secondly, at present there is devaluation in Turkey as well, in the same way as it happened in Russia. Turkish Lira has lost value close to 20 percent. This devaluation can go up to 30-40 percent. Accordingly, the Hotel Operators must be aware of this: If 20 percent devaluation has occurred already, let’s set aside 10 percent of it as the contingency reserve for inflation etc; and the remaining 10 percent must be added to the calculations when making pricing. That is, a Hotel Operator can decrease the figure he will collect in 2015 to less than 25 percent of that of the last year. In my opinion, due to this reason Hotel Operators can give prices less than 25 percent of the price they gave last year. We also happen to be a Hotel Operator in addition to being a Tour Operator. We have 5 hotels in Turkey, of which 4 belong to us and 1 is a franchise, and we have 3 hotels in Egypt. We are carrying it out in this way for our hotels as well. It can be thought of in this way: Billions of dollars of income has been generated for the sector from the Russian market and customers in the past 10-15 years. People in Turkey have made billions of liras worth of investments by benefiting from this. Let’s not make that much profit this year. Let’s waive our profits for the Russian customer this year.
How is the situation in Egypt and Greece?
Their situation is different. They must not be compared to Turkey. They are different destinations in terms of product, season and service quality. Egypt is going on with amazing actions. A hotel room that is priced 80 dollars in Turkey can be found for 25-30 dollars in Egypt. Egypt is receiving capacity, but it is achieving it due the large reduction in prices. Egypt is already in a bad situation for the past 3 years.
Do you have any forecasts for the number of visitors to Turkey and the income?
I estimate that a 25 percent decrease can occur in the number of tourists coming from Russia to Turkey this year, and that the decrease in income would be even lower. There will be a loss at hand by any means. However, while making pricing the Hotel Operators must also take into consideration the devaluation that occurred in Turkey.
In this case, will the Hotel Operators meet the loss that occurs due to reasons beyond control? If the package tour comprises of three pillars, wouldn’t it be true to state that the loss must be shared between the accommodation, airline and tour operator enterprises? Why would the entire loss be met by the Hotel Operators?
First of all, let me state this: In such situations, everyone makes a compromise in his profit. Now when we talk about the costs in the creating of package tours: In this case the Hotel and the Airliner enterprises are the ones who present the product. Tour Operator is the intermediary unit between the consumer and the producer. Our role is limited with this. The Tour Operator doesn’t own a product such as an aircraft or hotel. The tour operator says to a person or to an insurer who owns a room or aircraft: “Do you want to sell this product? Then let me be the broker and help you with regard to this matter.” The tour operators’ role consists merely of this.
The Russian Government has extended the ban on leaving the country to cover the security personnel as well, which it imposed earlier on intelligence and military personnel due to the events in Ukraine. What kind impact would this have on departures for vacation purposes?
It is hard to estimate how much of an impact it would have. However, it would certainly have an effect.
Would this consumer mass head towards the domestic market?
Yes, there shall be approximately 30 percent increase in the Russian domestic market this year. 14-15 million people are lodging in the coast of Black Sea, if we include Crimea. If we take it as 30 percent, it exceeds 4.5 million. We had made our plans earlier with regard to the domestic market. Our estimates made in the year 2014 have been increased approximately 10-15 percent by us. We have increased the purchases to 200 thousand people, which we have made for 150-170 thousand people earlier. We have a 5-year projection for the domestic market in Russia. The Russian domestic tourism market will be our third largest market in short time. In addition, we are planning to carry out “incoming” to Russia.