One of the world's great tourist destinations, Istanbul is facing mounting security challenges from the self-proclaimed Islamic State, as well as from far left and Kurdish militants. The Turkish government is aiming for $50bn in annual tourism revenues by 2023, but the continuing violence throughout the country will deal a serious blow to that goal and the countermeasures being proposed by the government, including ramping up its offensive against the Kurds with 162 civilians killed so far, look unlikely to stabilize the situation any time soon.

The latest terrorist attack in Sultanahmet killed at least 11 and injured 15 in the heart of the city’s main tourist area – very near to the renowned Obelisk of Theodosius, Hagia Sophia Museum and Blue Mosque – on January 11. The suicide bomber has been identified as a 28-year-old Saudi-Arabian born, Syrian-origin IS militant named Nabil Fadli. 

The authorities said that all the victims were foreigners, with nine Germans killed. The German and Danish foreign ministries warned their nationals to avoid tourist sites in Istanbul.

This explosion followed another three weeks ago at Istanbul’s Sabiha Gokcen Airport, which killed one and wounded another, in an attack claimed by Kurdish militant group TAK – an offshoot of the outlawed Kurdish terrorist organization PKK. And last year again in Sultanahmet, a female suicide bomber, allegedly an IS sympathizer and linked to the leftist group of DHKP-C, blew herself up in front of a police station, killing one police officer and wounding another.

A sign that shows the extent to which the terrorist group understands the fundamental importance of Istanbul, IS releases a monthly propaganda magazine online in Turkish called “Konstantiniyye”, which was the Ottoman name for the city.

Turkey, which is the sixth most attractive tourist destination in the world, currently hosts some 40mn tourists each year, generating annual revenues as high as  $34bn. Istanbul, the jewel in the crown, is the world’s fifth most visited destination, and attracted more than 12mn tourists last year to its magnificent historical buildings and vibrant urban life.

But hotel representatives have concerns that the rising security challenges in the country and the government's countermeasures could put an end to the tourism boom.

Following criticism from its Western allies that it was being too soft on IS, the Turkish government has recently accelerated moves to detain suspected members of IS and identify hidden cells inside the cities before attacks can be launched. It is believed that IS has about 50 cells in Istanbul alone. The government is also boosting cooperation with Western officials especially in updating its no-entry list and tracking of IS suspects. Turkey has deported 2,896 IS suspects so far.

Turkey’s spat with Russia since it downed one of its warplanes in November is also having repercussions on internal instability. Ending the feud would help with winning the war next door in Syria, though relations are under the spotlight again after Turkey said it detained a day after the Istanbul blast three Russian citizens suspected of helping IS attacks in the country. “Perhaps a significant and notable development – let's see how this impacts Russo-Turkish relations,” says Tim Ash of Nomura International.

In the coming days, Turkey could face more pressure from the West to take further border security measures to avoid IS infiltration into the country. This is likely to push the government – which is obstinately fixated on fighting in Kurdish-majority areas – to choose the main front for its anti-terror fight, either against IS or the PKK. If it chooses the former, the peace process could be again put on the table to bring relative stability to the region and to better protect borders from IS infiltration, though that’s far from being a sure thing.

“The optimistic spin is that sooner or later everyone will want to stop, exhausted by the stalemate that a simple study of a hundred years of history could have shown they would reach,” writes Suna Erdem, bne IntelliNews columnist. “But since [President Recep Tayyip] Erdogan has seen that more violence can indeed mean more votes, then what’s to stop him concluding that even more violence will bring him even more votes.”

View from the ground

Alican Demir, general manager of Boutique Saint Sophia Hotel, which is just 200 metres away from Tuesday’s bloody attack, witnessed the blast, and his hotel was rattled by the force of the explosion.

Demir, who claims that the various attacks since last year have created a deep anxiety among tourists, relates that some staying at the neighbourhood hotels immediately cancelled their stay in order to return home after this blast. There are about 7,000 hotels just in the Sultanahmet area alone. “Tourist demand for Istanbul never ends and tourists will continue visiting the city after a certain amount of time,” he tells bne IntelliNews. “But the continuing of such attacks will cheapen the city overall and will decrease its competitiveness over its competitors like Roma or Barcelona.”

“And at the end of the day,” Demir warns, “2016 might be again a lost year for our tourism industry”.

Since the IS attacks in the southeastern province of Suruc and in the capital of Ankara last year, many hotels in Istanbul had to cut their room prices in order to attract tourists. Since those attacks, many countries – including Germany and Russia – released travel advisories for their citizens travelling to Turkey and advised them to be careful when using public transport.

According to the latest figures, hotel occupancy rates in Istanbul saw a double-digit decline of 12% to 56% last November compared with the same month of 2014, while average daily room prices were €105, also showing a decline of 8% compared with the previous year.

However, Letizia La Cava, a 55-year-old Italian woman who has visited Istanbul four times so far, says that despite this blast and the previous attacks, Istanbul will always have a place in her heart. “I will continue visiting the city –  I don't want that terrorism changes my habits,” La Cava tells bne IntelliNews. However, she thinks that her fellow citizens could react to this blast with fear and probably change their tourist preferences. “But at the end of the day, this is exactly what terrorism aims for.” 

Naz Masraff, director for Europe at Eurasia Group in London, points out that Turkey’s tourism sector already suffered in 2015 from the downturn in the Russian economy and escalating political tensions with Moscow over the downing of a SU-24 bomber. According to official data, over 15% of visitors in Turkey during the first nine months of 2015 were of German nationality, while Russia was the source of the second biggest group of tourists after Germany. “This blast will add insult to injury, particularly given that Germans constitute the largest source of tourists in the country,” Masraff tells bne IntelliNews. “Istanbul in particular is a key tourist destination generating roughly one third of Turkey’s total tourism revenues, or around $10bn.”

Masraff notes that the timing of the bombing is particularly bad, coming just as advance bookings for package holidays are normally done. “Overall, the blast will increase the sense that Turkey is neither a safe place for tourists nor stable politically,” she says.

It will also have economic repercussions, especially with regards to the central bank, which has been under constant pressure from President Erdogan and the ruling AKP government for sharper interest rate cuts to support the weakening economy, one of the main pillars of the government’s electoral power over the last decade. But with the lira falling to record lows under the pressure of terrorist attacks, there will be a need to keep monetary policy tight. “With the deteriorating security environment, economic sentiment and growth will take a hit this year, making it more likely that the government increases political pressure on the central bank not to tighten the rates going forward,” Masraff says.