Turkey’s tourism revenues increased by 8.7% y/y to $5.41bn in the second quarter of the year as foreign tourists, especially Russian visitors, began returning to the country for holidays.

The country’s tourism industry has been impacted by several terror attacks as well as by tensions with Russia, which banned charter flights to Turkey, and with the EU over crackdowns launched by the government during the ongoing state of emergency imposed after last year's attempted coup and April's referendum-approved switch to a powerful executive presidency.

In the first quarter of this year, tourism revenues declined by 17% y/y to $3.7bn. That showed that the industry is still suffering from the negative sentiments generated by the various political controversies and anxieties over terrorism, but there is a clear uptick under way driven by Russians returning to Turkey since Moscow and Ankara put their differences aside.

Turkey relies on tourism revenues to finance its large current account deficit which soared 68% y/y to $5.24bn in May.

The foreign arrivals data showed growth on an annual basis for the second consecutive month in May. In the month, a total of 2.89mn foreign tourists visited the country, a sharp 16% y/y increase. Across the first five months of the year 928,376 Russian tourists arrived in Turkey, up 572% compared with the same period of 2016. The number of European tourists visiting Turkey declined by 17% y/y to 3.44mn across January-May.

Tensions between Ankara and Berlin, which last week threatened to escalate to a whole new level after Germany toughened its foreign policy towards Turkey, may mean the country’s tourism industry is in for more woe. Berlin has warned all German nationals minded to visit Turkey to exercise more caution as there have been incidences of Ankara denying standard consular access to detained foreign nationals. In 2015, 15.4% of foreign arrivals in Turkey were Germans, while the corresponding figure was 15.34% for 2016.

On a related note, Istanbul hotels’ loss in revenue exceeded €1bn in the first half of 2017 compared to the same period of 2015, Hurriyet Daily News reported on July 31, citing a report by the Hotels Association of Turkey (TUROB).

In Istanbul, hotel occupancy rates increased to 53.3% in January-June this year from 49.2% in the same period of 2016, but revenue per room declined from €39.4 to €32.7, according to the report.

Hotel occupancy rates across Turkey rose to 53.3% in the first half of the year from 50.8% in the same period of 2016 while revenue per room fell from €39.4 to €32.7, the newspaper reported.