Turkey is emerging as an important inbound and outbound tourism market at the same time as its ecommerce sector starts to mature.
NB: This is a guest article by Joseph Andrik, business development director for B2C in CIS and East Europe for Aerobilet/IATI.
Context
Turkey's tourism sector is growing and its government has set ambitious targets - it wants to attract 60 million visitors a year by 2023, with these visitors worth $80 billion to the economy.
According to the latest data published by the Turkish Statistical Institute (TurkStat) the country attracted 41.4 million tourists during 2014 - 5.6% up on the previous year - with the amount spent averaging is $828 per individual totalling $34.4bn - 6.2% ahead.
This in turn can be broken down into $26.2 billion from individual travel with $8.2 billion generated via tour operators and packaged holiday offerings.
Turkey's most important source markets for tour operator business is Germany, Russia and the UK.
In 2015 Turkey expects more than 42 million tourist to generate some $36 billion.
Online sales in travel and transportation are growing, but from a relatively low base - in 2013 online travel sales were worth $2.7 billion.
However, wider adoption of technology and a range of other positive indicators will drive a growth in online travel sales.
- With a population of more than 80 million, around 70 million use mobiles, one in three of whom has a smartphone.
- In 2014, 6% of online shoppers used their mobile devices for shopping.
- 3G services are available to 40 million users
- With an average age 29.7 years, Turkey is one of the world when it comes to social networks adoption - it is Facebook's seventh most popular country and number 10 on Twitter's list.
- Internet penetration is 53% and 25% of the total population at once something buy online.
- There are 59 million credit cards and more than 100 million bank cards used in Turkey
But as with most big opportunities there are some risks.
The infrastructure in Turkey is more than adequately equipped to support online sales but online sales generally are low, for a number of reasons:
- Most OTAs use 3D-Secure, which lowers the conversion.
- Shoppers generally are also aware of the risk of fraud which does not help to stimulate online sales.
- Despite the high number of smartphone users many companies do not have a mobile-optimised web site.
SupplyThere are also local dynamics in play for OTAs and travel sellers securing supply.
To get the best airline inventory, OTAs need a number of separate direct connect agreements with airlines - GDS content is limited by the number of low-cost carriers in the market which are not available on the GDS.
It usually takes about two years for a online travel business to develop a relationship with an airline and because you need a separate relationship with each airline this can take up a lot of time and resources.
The global hotel chains and OTAs control the supply of hotel inventory. It can be hard for new entrants to get access to hotels at a decent price point.
Market leaders
For some years, the main way to travel across Turkey was by bus and the biggest online travel site in Turkey was Obilet, which built a single platform for all bus companies and was attracting 1 million users a month.
But as Turkey's aviation industry grew, bus companies could not compete on price, and now airline dotcoms are the most popular online travel sites.
Turkish Airlines' THY and main website attract 14 million users per month) while Pegasus' Flypgs has six million. The percentage of online sales for these airlines is 30% and 50% respectively, decent returns but with room to grow.
Etstur, with two million visitors per month is one of the biggest tourism sites in the country. It is a vertically integrated tour operator with high street outlets, its own airline, hotels and cruise ships.
One of the few Turkish online travel businesses to get overseas investment is Tatilsepeti. It is an online-only inbound specialist founded in 2004, is a leader in the online segment of incoming tourism.
In 2013 London-based investment trust Bancroft Private Equity became took a stake in the business, with reports valuing the investment somewhere between $15 million and $30 million.
Geziko is another new Turkish OTA, launched in 2013 by South African OTA, Travelstart.
Conclusion
Concerns about e-commerce generally will subside in Turkey in the next few years, which should prepare the ground for an online travel boom.
Other drivers are in place: the transformation of Istanbul into one of the largest hubs of the world, the general improvement in aviation and transport infrastructure, better fraud detection.
These factors will create a path for technological and financial improvements, increased confidence between suppliers and intermediaries, and open new window of opportunity for investors.
NB: This is a guest article by Joseph Andrik, business development director for B2C in CIS and East Europe for Aerobilet/IATI.
NB2: Turkey keyboard image by Shutterstock