Central Asia Turkey Hotel Investment
CATHIC 2012: Turkish delights for international hotel investors
ISTANBUL, Turkey - Unlock the Potential was the theme of the second CATHIC - Central Asia Turkey Hotel Investment Conference - held in Istanbul from February 6-8, 2012. Yapi Kredi Bank's Cevdet Akçay kicked off the Central Asia & Turkey Hotel Investment Conference with a call to Turkey's economic and financial community to improve its communication with the rest of the world. "Turkey has a perception problem because we are not doing a good PR job on our economy. My idol is Brazil, because there are many similarities between our economies, but Brazil is doing an excellent job of managing the perceptions of their economy," he said.
CATHIC is co-organized by Questex Media Group LLC and Bench Events, who also organizes the Russia and CIS Hotel Investment Conference, Arabian Hotel Investment Conference, International Hotel Investment Forum Asia Pacific, and the International Hotel Investment Forum Berlin being held next week from March 5-7, 2012.
In a session on securing finance for hotel development in today's market, moderated by Elif Egeli Nisanci of Jones Lang LaSalle Hotels, Serdar Bilgili, Chairman of Bilgili Holding, explained how he has created a hotel investment fund to tempt international institutional investors into the Turkish hotel sector. He believes the Turkish real estate market is one of the best in Europe, but there was not a suitable vehicle that was attractive to these institutional investors.
Bilgili outlined the difficult path to success: "After one-and-a-half years of raising funds, we have fifty percent of what we wanted," because, he said, real estate institutional investors are very careful. Interestingly, Bilgili expected most of the money to come from the Middle East, but in fact most of the interest so far has come from US pension funds and university endowment funds.
Bilgili also pointed out that his company has three hotels in Istanbul, but doesn't manage any of them. The global hotel management companies give the banks confidence to finance projects. "If my hotels were called Bilgili Hotels, I don't think the banks would have financed them - the brands give credibility," he said.
Serdar Bilgili, owner of first “W” Hotel in Europe, opened in Istanbul in 2008.He is currently transforming a spectacular palace and former American Consulate into a hotel in historic Pera, which has become one of the most trendy zones in Istanbul.
Among all global players of international hotel chains who are all pushing forward to get more marekt shares in Turkey, the Turkish Dedeman Hotels & Resorts International (DHRI) are opening hotels and implementing Turkish hospitality outside of Turkey.
And the Oscar and well-deserved “This Year Leadership Award” was handed over to the very down-to-earth Turkish hotelier, Mr. Murat Dedeman, Chairman of Dedeman Hotels and Resorts International. Award winner Murat was deeply touched and said: “Everything I have achieved, I owe to my father.
“My road map was my father, who traveled to New York in 1951 and stayed at the Waldorf Astoria. He liked it so much that he built the first Dedeman flagship hotel in Ankara, which was opened in 1966, had 190 rooms, and the construction lasted 10 years.”
“People coming to our hotels are not customers, but our guests,” wrote 1966 Memet Kemal Dedeman, founder of Dedeman Group and father of Murat Dedeman. Forty-five years later, the Dedeman Hotels & Resort International has consolidated its leadership position in Turkey under the presidency of Murat Dedeman. It is Turkey’s first and only hotel chain which operates under its own brand on an international stage with hotels in Uzbekistan, Bulgaria, Northern Cyprus, and opening its first Dedeman hotel in Moscow and in Iraq this year.
Asked by eTurboNews’ Elisabeth Lang, what has happened to the three Dedeman hotels in Syria, (Aleppo and Palmyra) with the contract ripped off by the Syrian government on January 31of this year, Murat Dedeman answered: “Sadly, there was not even one guest in the hotels during the last 5 months in Syria. We have made huge investments and [have] lots of hope. But Turkey has always been going through [a] crisis, and our company is going through [a] crisis, and we will continue with it,” Mr. Murat Dedeman said.
It is incredible what has happened in the last 5 years in Turkey and the hotel and tourism industry. Hotel companies are getting over-exited and not looking too much into what is really needed. Here we could get to a stage of burn out. We see all the investments coming in. The return of relationships with EGO operators who like to be part of the trophy. But smaller hotels are more creative, warned Ömer Isvan, President of Servotel Corporation, a firm advising to worldwide investors, including branded prospective properties, such as Starwood, Four Seasons, Jumeirah, Fairmont, Raffles, etc.
Turkey has 20 cities with more than one million inhabitants, and there is lot of room for hotels.
But in Turkey it is also a long tradition to stay with relatives when visiting others cities. And this tradition has become a growing trend with greater numbers of tourists visiting Turkey in 2011 choosing to stay either with friends or relatives, according to data released by the Turkish Statistical Institute (TÜİK), which analyzed the growing trend among foreign tourists to purchase property in Turkey.
Of the foreign tourists, more than 22.7 percent stayed with relatives or friends, meaning that 1 out of every 3 visitors to Turkey preferred staying in homes rather than hotels. Roughly 50 percent stayed in hotels and the remaining 4.6 percent stayed in rental accommodations.
Hamdi Akin said: “In Turkey, which has a tradition of travelers staying with family and friends, we need more 3-star hotels. You can enter a market with a 5-star property, but we need mid-market product for the smaller cities. Certainly we are focusing on 3- and 4-star opportunities.
Turkey has a lot of family-run hotels in this mid-market sector, but they do not offer clear standards and don't always meet the travelers' requirements. With branded hotels you feel more confident putting your relatives or friends into a hotel, and we want to expand these recognized hotel brands.”
“This will change,” said Denis Hennequin, Chairman & CEO of ACCOR and former McDonald Europe President, “We have only family hotels and need more 3- to 4-star hotels in small cities. Brand names give confidence. We can see [a] good future in that. We need more IBIS in Turkey.
“There is room for improvement, and there is room for middle-class hotels. We don’t have a Sofitel in Turkey, with an economy growth [of] 20 percent. Consumer profiles [have] changed. The same person now is staying in an economy hotel near the airport – but is attending a 5-star hotel for a meeting.”
And stars are important, and more stars are to come.
Donald Trump and Ivanka Trump will participate in the inauguration of the Istanbul Trump Towers Mall when it is officially opened on April 20. Doğan Holding is the parent company to D Yapi, the company that partnered with Donald Trump to bring the project to life.
The new Trump Towers Mall in Istanbul will feature 190 different stores, and a Pure Jatomi Fitness Center is entering the Turkish market for the first time, with a shopping center and one whole floor of 8,000 square meters dedicated to children. The “children’s floor” will include a Disney Theater and a Fox entertainment center, to make it different from other shopping malls.
Istanbul is already hosting some of Europe’s largest shopping malls, like Konya and fashionable Istinye Parc, with more luxury cars parked in the garage than anywhere else in Istanbul.
But one can’t beat the biggest shopping mall built in 1455, which is still one of the world’s largest covered markets with over 4,000 shops – the Grande Bazaar with the silhouette of Topkapi Palace, the residence of the Ottoman sultans for over 400 years.
The Turkish government also has a very ambitious project in the pipeline. A new and gigantic finance center – a project that is going to be far bigger than the world’s largest finance centers in New York, London, and Dubai, hosting a mosque, hotels, schools, police station, offices, and bank headquarters on a gigantic 2.5 million m² lot.
It is no wonder that all the international hotel chains are seeing big potential in Istanbul. However, a huge barrier is the price of land. Developing a hotel right in the center of Istanbul is out of the question - where plots of land are sold for $US18,500 per square meter and where a plot in the old city is valued at $US36 million.
“Istanbul’s land is so expensive, that you must build a 5-star hotel and hope that you get guests,” said Haluk Kaya, “But first of all, we [have] to solve our chaotic traffic problem. Istanbul is growing every day by 1,000 people since 1958. We don’t use the old seaways when Istanbul only had one million inhabitants, but why not?
“Turkey’s acceleration is due to the global crisis. Europe is not the partner to focus on in the long run. Markets should focus on – not look into – the long run. The long run looks like doom.” A lot of hotels are needed in Istanbul, but Turkish banks don’t like to lend money to hotels, said Mehmet Onkal. Right now there are 65 international branded hotels in Istanbul and 100 hotels will follow.
Hilton Hotel is the market leader in Turkey and has successfully set up a base in Istanbul for many years, with 20 hotels running and 20 more in the pipeline. “We are looking in [the] budget to mid-scale market, and team[ing] up with local partners,” said Simon Vincent, Area President, Europe Hilton Worldwide.
According to latest survey of the Visa Europe Mediterranean Countries Tourism Report, foreign tourists spent a total of 723 million euros in the period from September to December 2011, British tourists spent the most in Turkey with 103.8 million euros, followed by Russians (69.2 million euros), Americans (64.6 million euros), Germans (56.8 million euros), and French (53 million euros).
The group that had the largest increase in spending in Turkey was Saudi Arabian tourists, with a 49.7 percent increase from the same 4-month period in 2010. Tourists from Saudi Arabia spent a total of 15.3 million euros. Other tourist groups which witnessed large increases in spending were the Swedes at 31.1 percent, the Germans at 28.7 percent,and the Russians at 25.4 percent, according to the report.
Foreign tourists spent most in the entertainment sector, which witnessed a 41 percent increase from the same period in 2010. Spending on airline tickets was also up by 32.8 percent, while spending on hotels increased by 20.3 percent.
With land being extremely expensive in Istanbul, it is the reason that many luxury hotel brands are paying large sums to put a foot in Istanbul. The sudden auction of ING Bank selling its historical building - shortly after the CATHIC Conference - was, therefore, not a real surprise. The property is located on Bankalar Avenue in front of Galata Tower, surrounded by some of the most stunning scenery in Istanbul. Many investors are interested in acquiring Tütün Han, situated on a 433-square-meter plot and features 66 rooms, which makes it an ideal investment for boutique hoteliers.