Market Report Istanbul

ADR and Supply Growth for Istanbul Hotels As Demand Falls

On a compound-annual-growth-rate basis (CAGR), hotel supply (+3.7 percent) in Istanbul, Turkey, has grown slightly faster than demand (+3.1 percent) during the past five years, with demand falling in 2013 due to the demonstrations and civil unrest in Turkey, according to STR Global and HVS’s 'In Focus' report on Istanbul.

STR Global

On a compound-annual-growth-rate basis (CAGR), hotel supply (+3.7 percent) in Istanbul, Turkey, has grown slightly faster than demand (+3.1 percent) during the past five years, with demand falling in 2013 due to the demonstrations and civil unrest in Turkey, according to STR Global and HVS’s “In Focus” report on Istanbul. 

Average-daily-rate and revenue-per-available-room levels have increased at a CAGR of 5.2 percent and 4.6 percent, respectively, when measured in local currency, while occupancy fell by 0.6 percent. ADR solely has driven positive hotel performance during the past five years, already pushing RevPAR levels above prerecession figures in 2011. 

Istanbul CAGR for 2009-2013 (based on local currency)

Graph - Istanbul CAGR for 2009-2013 (based on local currency)

Source: STR Global

Year-to-date April 2014, Istanbul reported a double-digit increase in ADR when measured in local currency, offsetting the negative occupancy performance (-10.3 percent) and driving the highest RevPAR levels since 1996.

Demand in April (-4.6 percent) dropped for the second month in a row, while supply (+8.4 percent) picked up.

Istanbul monthly performance (all currency figures in local currency)

Graph - Istanbul monthly hotel industry performance (all currency figures in local currency)

Source: STR Global

“Demand for Istanbul declined on average in the past 12 months, as supply and ADR in local currency continued to grow in the same time period”, said Naureen Ahmed, manager, marketing and analysis at STR Global. “A strong ADR growth for the luxury segment, as well as recent hotel openings with majority in the Upper Upscale segment helped push rates for the market at the expense of occupancy. Over the next three years, Istanbul is expected to increase its existing room supply by more than 15.0 percent, mainly in the Upscale segment, suggesting a dampening of the continuous rate growth”. 

Istanbul, which has 380 hotels with more than 40,000 rooms, reported a supply growth of 7.7 percent during the first four months of 2014.

Nearly 50 percent of the total Under Contract hotel pipeline for Turkey is planned to come online in Istanbul. The market expects to increase supply by 15.3 percent, if all rooms Under Contract open, making Istanbul’s pipeline the strongest in Turkey.

Pipeline by phase (as of April 2014)

 

 

IN CONSTRUCTION

FINAL

PLANNING

PLANNING

TURKEY

43

10

20

ISTANBUL

21

5

10

ANKARA

3

0

0

TURKEY REGIONAL

15

3

7

Source: STR Global

“Hotel values in Istanbul recorded three continuous years of solid growth and came to about €305,000 per room for a typical internationally branded 4-star hotel in the city centre. This is still below the peak of 2008, and we estimate this level will be reached again by around 2017/18”, commented Arlett Oehmichen, director at HVS London. 

She added: “Despite growing interest from the investor and operator community, we have not seen any recent hotel transactions in the market. The preferred method seems to be development and redevelopment; however, prime sites are getting scarce”. 

STR Global

STR Global provides clients—including hotel operators, developers, financiers, analysts and suppliers to the hotel industry—access to hotel research with regular and custom reports covering Europe, Middle East, Africa, Asia Pacific and South America. STR Global provides a single source of global hotel data covering daily and monthly performance data, segmentation data, forecasts, annual profitability, pipeline and census information. Hotel operators can join the surveys on a complimentary basis and benefit from free industry data. STR Global is part of the STR family of companies and is proudly associated with STR, STR Analytics and Hotel News Now. 



Logos, product and company names mentioned are the property of their respective owners.