Hotels Seen as an Attractive Building Option
Developers, investors and operators see strong potential for hotels against the background of positive tourism supply and demand indicators: CBRE have estimated a pipeline of 3,750 rooms in Hungary, 85% of which are in Budapest.
The capital has an average occupancy rate of 74%, as of the summer, according to Hungary’s Central Statistical Office (KSH).
With very different skills required for running a hotel than, for example, those needed in the office sector, developers tend to work in partnership with specialized hotel operators.
“After years of relatively limited new supply, the total volume of new hotel deliveries finally took off in the first half of 2019, and we registered 590 modern rooms in four individual schemes that have been handed over in the past six months,” says Laurent Lassier, head of hotel services at CBRE Hungary.
“We expect the delivery volume to increase as the yearend approaches. We know about some additional 1,100 rooms to be delivered by then; out of this, 740 rooms across seven hotels are in Budapest. Currently, CBRE monitors circa 3,330 rooms in 25 schemes under construction and hoped to be delivered by yearend 2020,” Lassier adds.
However, due to the complex development process and labor issues, delivery dates are very difficult to accurately estimate, and completions are slipping back. Commercial property developers such as Wing, Horizon Development and Redwood Real Estate Holding have ongoing hotel projects, while DVM is working on the construction of a hotel project for a regional hotel developer.
Major hotel brands such as Hilton, Hyatt, Marriott and Accor Hotels have planned hotel projects. Horizon Development is redeveloping a listed 1870s building in the historical center of Budapest into a 150-room luxury hotel in partnership with KKH Capital & properties.
Attila Kovács, managing partner of Horizon Development, says the project essentially sees the transfer of skills learned from the development of such projects as Eiffel Palace to the hotel sector.
Almost all Budapest hotel projects are located in Districts V, VI, VII and VIII. JLL has traced a pipeline of eight hotel projects under construction in District V alone, scheduled to be delivered in 2019-2022; the biggest of these is the five-star, 250-room Marriott Autograph Collection.
The largest project outside the capital is the 123 room Hunguest Hotel Sóstó in eastern Hungary.
In a high-end project in the historic center, Accent Hotel Management delivered the four-five-star, 214-room Hilton Garden Inn Budapest Center in District V1. The Hungarian company agreed a franchise agreement with Hilton Hotels for the complex, located 100 meters from the Hungarian State Opera.
In a renovation/regeneration project, the Hungary-based, Jordanian-owned hospitality developer Mellow Mood has opened the long-awaited, 110-room and 18-suite Párisi Udvar Hotel, also in the historic center of Budapest. A franchise agreement has been concluded with Hyatt Unbound Collection.
Another top-end hotel historical reconstruction by the Turkish Özyer Group will see the 130-room and suite Matild Palace become Budapest’s first Marriott The Luxury Collection branded hotel.
In the mid-range segment of the market, Deutsche Hospitality, in conjunction with the B&L Group, is building the 300-room and six-conference room, three-star InterCity Hotel Budapest, its first in the CEE region, at Keleti Railway Station.
The company has a policy of developing the brand at what it sees as key train stations and airport locations; the Budapest project is scheduled to complete in 2020.
A contract with DVM group has been agreed for the design and construction management of the development.
Wing, which is active in all commercial markets, has agreed a forward contract to develop a hotel in Boráros tér in District IX for the French hotel chain B&B Hotels. The project is a reconversion of a former office building with a view overlooking the Danube.
Wing delivered the 145-room Ibis Styles Budapest Airport Hotel in 2017, which is still the only hotel with direct access to the Ferenc Liszt International Airport.
The Hungarian developer Redwood Real Estate Holding has agreed a management contract with Hard Rock International for the operation of what it calls the 140-key Hard Rock Hotel Budapest in Nagymező utca in District VI, due to complete in the fourth quarter of the year.
The four-five-star “life-style” hotel and Hard Rock Café, located in a party hub in Budapest, reflects the growing sophistication of the hotel market and the need for different models of hotel development. The hotel and leisure complex, designed by Studio 100 of Hungary, will include a Hard Rock Café restaurant with a seating capacity of up to 120.
“Hotel operation is a completely different skill to office operation and therefore we are developing the project and, upon completion by the end of the year, the hotel will be operated by Hard Rock International,” comments Bálint Erdei, founder and CEO of Redwood Holding.
In addition to attracting developers, the hotel market is also drawing in investors who have not traditionally concluded hotel acquisitions. As an example, Hungarian- and American-owned investment manager Indotek has purchased the Art Nouveau, 230-room Gellért Hotel, overlooking the Danube.
The fund plans to refurbish the landmark building and upgrade the hotel to five-star status, for which the new owner is looking for an international luxury branded hotel operator.
Elsewhere in Budapest, a K&K Hotel was purchased as part of a European portfolio acquisition by a joint venture of Event hotels and InterGlobe Enterprises.
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