Redwood has agreed a long-term management contract with Hard Rock International for the operation of the 136-room hotel in Nagymező utca in District VI. The “life-style” hotel is located in a party hub in Budapest and reflects the growing sophistication of the Budapest hotel market and the perceived need for different models of hotel development in relation to demand.  

Hotel operation is a completely different skill to office operation and therefore a management contract was agreed with Hard Rock International who will operate the hotel, according to Bálint Erdei, founder & CEO of Redwood.

This is the first such contract with Hard Rock Hotel in Europe. The EUR 55 million plus Hard Rock Hotel Budapest has been financed by a combination of equity and bank finance.

The 10,000 sqm complex was designed by the Hungarian architects Studio’100 Építészeti Kft., with the interior work by the Barcelona-based Lázaro Rosa-Violán Studio.

Bálint Erdei argues that the hotel creates an environment that is currently lacking in Budapest with there being a lack of life-style hotels in the city. He anticipates a combination of tourists and a strong local customer base from Budapest that will make use of the hospitality facilities at the hotel as a life-style hub.

The complex includes a Sessions Bistro with a capacity for 80 guests and the Roxy rooftop lounge with a 150 guest capacity.

Strong Potential

Developers, investors and hotel operators have seen strong potential for hotel development against the background of rising tourism indicators and demand indicators in recent years.

A number of hotel projects in Budapest and wider Hungary are ongoing and the hotel sector has attracted developers and investors from the more traditional commercial property sectors seeking long-term partnerships with hotel operators for the day-to-day operation of the buildings.

However, the hotel and the hospitality sector has been severely hit by the coronavirus with the impact of the crisis on both tourism and international business travel.

CBRE have traced a development pipeline of 3,340 hotel rooms across 27 hotels in Hungary due to complete by the end of 2022. Budapest, with a 75%-plus share of this pipeline, is the primary destination for hoteliers.

However, this delivery schedule needs to be revised downwards with a significant proportion of projects slipping back. Further, several projects have been put on hold with no new delivery dates announced. That said, the pipeline remains strong and investment discussions are expected to restart, increasing the potential for next year.

Bálint Erdei sees a slow recovery from the second half of 2021 with a potential 50-60% occupation rate at Hard Rock Hotel Budapest by 2022, moving upwards to a projected 70-75% occupation rate by 2023.

This article was first published in the Budapest Business Journal print issue of December 11, 2020.