Is the cost of investing in tourism justified?

Published 08.08.2017 00:16

"I don't think tourism is necessarily a good thing," and with those words, a friend of mine from Ankara (who shall remain nameless) added perspective to an issue I had never really thought about. I am familiar with the many arguments against tourism. I am aware of the horror stories of reckless tourists ruining protected sites. But this argument was more specific. The argument is that some types of tourism have a net negative economic impact on the host country. Can this be the case?

In countries with fairly small populations and small land areas, tourists can seemingly overtake a country. In large countries with large land areas, tourists blend in. Turkey is somewhere in between these two extremes with tourism very much focused in a few specific areas. The city of Antalya beats out all other Turkish cities for the most visitors, as its beaches and resorts continue to remain a major destination for Europeans and Russians alike. Despite last year's failed coup attempt, tourists are back. Last summer I traveled to Cappadocia, and many of the vendors said that it was the worst year they had ever seen. This meant a bargain for domestic tourists but only if the lull in tourism was temporary. Had 2017 been like last year, many vendors would have been wiped out, leaving many destinations facing existential crises.

By the numbers, Turkey has gross revenues of over $30 billion from tourism. Meanwhile, Turkish citizens spent about $5 billion while traveling abroad. Unfortunately the difference between these numbers is not the net that Turkey makes from tourism. How much does Turkey spend to attract this $30 billion and, more importantly, what is the opportunity cost of such an expenditure? This is at the heart of what my friend meant by implying that tourism may not necessarily be a good thing.

I have been unable to estimate the total amount that Turkey has spent on attracting tourism because the country has been completely transformed in terms of infrastructure in the past decade. Cities and regions that never had highways now boast four-lane highways, allowing for much easier transport. I write this now from the city of Safranbolu, the home of Turkish saffron, and the transformation of the roadways since I was last here, about 15 years ago, is simply incredible. While anecdotally infrastructure supporting tourism is at all-time highs across Turkey, much of the same infrastructure is used by the local population on a daily basis. Domestic tourism to such areas has also increased, which translates into consumer spending. This consumption multiplies through the economy, increasing wealth for all.

The main question, however, does the opportunity cost of investing in tourism infrastructure outweigh its benefits, still stands. The ability to strip the year-round domestic benefit from the tourist receipts to reach a net figure would be a great study, if possible, as it would allow us to answer the aforementioned question. Unfortunately I have not been able to find such a study. However, I believe the net effect of tourism is currently positive for Turkey. Especially as cultural tourism expands, bringing high-spending tourists whose ecological footprint is also far less than the average beach-going tourist, Turkey is poised to benefit from tourism for years. Perhaps increased branding of Turkey as a cultural capital may serve to increase both cultural exchanges, which will benefit Turkey in the long term, as well a sun-and-fun destination, which will increase cash receipts and bolster the domestic economy in the near term.

A final note on my visit to Safranbolu is that Chinese tourists appear to be the number one draw to the region. Nearly all vendors have Mandarin signs on their storefronts and at least half of all tourists appear to be Chinese, from my discussion with the local operators. This means that not only has the Chinese tourist discovered Turkey as a cultural tourism destination, it also means that the diversity of tourists to Turkey has expanded considerably. While this may make the task of marketing Turkey a little more arduous, it also means that the benefits of doing so will be considerable.

I wanted to leave you with some market data: Turkey's credit-default swaps, which are insurance against economic and political instability, decreased on Monday to their lowest levels since 2014. Turkey is only 0.3 percent more costly now to insure than European Central Bank- (ECB) backed Italy, for example. Anecdotal tourist arrivals have, in this case at least, translated into market data.

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