I understand that the currency in Turkey is the Lira, but all of the hotel prices are in Euro. If I am planning on paying cash for my hotel, should I plan on bringing Euros with me as well as Lira?
Even though prices are quoted in Euros, when it comes time to settling the bill it will be in the local currency. Hence, no need for much Euros other than for paying the visa fee at the airport.
It's always best to pay in the local currency. In Istanbul many establishments will accept euros or even US dollars but you will always pay a hefty markup. Ask your hotel to quote their rate in Turkish lira.
Tom's makes a good point. We found that in some of the markets the price was marked in Euro. Ask the seller the cost in Lira. A necklace that I bought was initially priced 12 Euro but after some negotiation I paid 12 Lira. A big price difference.
Some hotels have better prices in Euros and others in Lira. The best place to get local currency is either an atm withdrawal or exchange within the Grand Bazaar. Some exchanges within the Grand Bazaar will do spot exchanges that are even better than what US Banks get.
Edwin
AM Arnold states that you need Euros to pay for the visa at the airport. It is my understanding that we US citizens need to pay for the visa with US $$.
We paid $20 (US) last May but I think you can pay in Euro (15 Euro.) It does need to be cash. Make sure you go through the Visa line before you get in the Passport Control line.
Hotels often price in euros because the euro has historically been a lot more stable than the lira, which in the past was subject to hyper-inflation. They don't want or expect you to actually pay in euros, though.
From a US perspective, having the euro as the default currency reference has meant that a Turkish hotel price has tended to float upward with the euro against the dollar over the course of a year, since most hotels set their rates a year or so in advance. We have found over the years that Turkish hotel prices are often negotiable, though. When I find a place that I want to book, I email the hotel to let them know that I am willing to pay in advance for a better rate. I've gotten discounts of up to half on the internet published rate that way. Of course, you have to be pretty confident that you are going to like the hotel, since you're now locked in to it.