Turkish tourism firms face credit crunch as banks fail to return calls

Turkey’s tourism industry, pummelled by a slump in bookings due to the COVID-19 pandemic, is facing more financial strain as companies struggle to repay loans and interest rates surge.

Banks are failing to return the calls of troubled companies seeking to delay loan payments, the Dunya newspaper reported on Friday citing Firuz Bağlıkay, head of the Association of Turkish Travel Agencies (TÜRSAB).

Bağlıkay said he had informed President Recep Tayyip Erdoğan of the problem.

“Banks are not picking up their phones,” he said. “There are problems with postponing loan repayments that are overdue. When they (the banks) say they will help, they are changing the rules of the game. They are making the conditions impossible by saying “ok, we will do it, but the interest rate isn't ‘x’ anymore, it's ‘y’”.”

Companies in the industry cannot benefit from special loans awarded by the state-run Credit Guarantee Fund (KGF) or lending from Eximbank, which helps Turkish exporters and related businesses, Bağlıkay said.

Turkey’s earnings from tourism slumped to $12.1 billion last year from a record $34.5 billion in 2019, slashing the profit margins of companies. In the first quarter of this year, revenue fell by an annual 40 percent to $2.45 billion, official data published on Friday showed. Visitors declined by 54 percent to 2.6 million.

Turkish businesses pay variable interest rates on loans compared with fixed rates for consumers. Borrowing costs have surged over the past six months after the central bank hiked rates to 19 percent from 8.25 percent to stave off a currency crisis and rein in double-digit inflation.

The average interest rate on a commercial loan stood at 21.5 percent last week compared with 9.4 percent a year earlier, according to central bank data. Inflation in the country is 16.2 percent.

Turkish travel companies are also reeling from a domestic lockdown on the population. The government tightened those measures this week, barring people from traveling on intercity buses without a special permit and extending a daily curfew. The steps will remain in place until at least May 17.

Akın Akıncı, head of the Antalya Industrialists and Businesspeople Association (ANSİAD), said the government’s decision to tighten the lockdown will be positive for the tourism industry, especially in Antalya, which attracts the most foreign visitors. But more help from the state is needed in the meantime, he said.

“Government support is important to keep the wheels of the economy spinning and to meet the losses that the business world will suffer during the process,” he said. “I would like to call on our state to work on this immediately.”

Tourism firms owed banks 136.4 billion liras ($16.5 billion) at the end of 2020, an increase of 43 percent from the previous year. Employment in the sector has dropped by 19 percent to 1.38 million, business website Patronlar Dünyası reported in April.