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Hungary Ambitiously Building on Record Tourism Figures

Hotels

As any stroll through central Budapest will attest, tourism is booming. Registered guest nights in the capital were up 8% last year, topping a record ten million. In Hungary, guest nights show a 70% rise since 2009, when the economic crisis hit. Such numbers are attracting both domestic and global interest, says Péter Kraft, a former ambassador who runs his own eponymous tourism consultancy.

Péter Kraft

“Hungary’s tourism is continuously performing very, very well. We sometimes ask ourselves why are we so successful?” says Kraft, before answering his own question, reeling off attractions, from an ever increasing offering of cultural events via “world-class” public transport and a safe environment in the capital to stupendous night-time illuminations.

For Kraft, who runs his own tourism consultancy, such expansion means work, and lots of it.

“I’m dealing with, I don’t know…. ten projects in Hungary, and talking about another 100, of which 50% are in Hungary. Of these, we’ll probably get 15-20 [associated contracts] in the next three years,” he says.

For Kraft, the attractions are clear: “In the hotel business, if [properly run] you have, say 45% occupancy, you cover the expenses, and you are able to pay back the loans. If you have an occupancy of 60%, you are making a reasonable return. If you have 70% and over, that is a cash machine!”

On the domestic side, the boom has attracted leading business interests that have previously steered clear of the sector.
“One of the industrialists from among the 100 richest men in Hungary came to this office and told me that he’d decided ‘to have my own hotel. Can you get one for me?’ So we are looking for a hotel now, for him, in the range of EUR 10 million–20 million.”

Budapest Expansion

International hotel companies, “mostly from Europe”, are also increasingly eyeing expansion in Budapest. “They say: either get me a functioning hotel, or a building I can convert into a hotel, or give me a piece of land, and I’ll build a hotel. There are quite a number of transactions like that going on,” he says.

Moreover, serious international interest is now making an impact outside the capital. Kraft is particularly proud of his efforts to bring Sheraton to Kecskemét (92 km southeast of Budapest), and Marriott Autograph to Pannonhalma Abbey, near Győr, 121 km away to the west [see box, below].

In another project, Kraft is aiming to bring an international brand to the little-known spar village of Bogács, about 146 km northeast of Budapest, in the Bükk foothills.

“You’ve never heard of Bogács, but we did our research, and it attracts 100,000 guest nights per year. The mayor is very entrepreneurial,” he says.

Nor is potential development limited to high-end hotel investment. Depending on conditions, well-designed, well-run hostel operations can outperform even luxury hotels.

More is More

“A hostel may have eight or ten beds to a room. At EUR 14 per bed, that makes EUR 140. With a high occupancy rate, it means a higher return than a room in a five-star, while the investment is significantly lower. There is business all around!” insists Kraft.

Such optimism for the sector is admirable, but with the current level of interest, especially from those well-connected to government, isn’t the sector at risk, both in terms of a level playing field, and, ultimately, of an investment bubble?

“Mr. Mészáros [Lőrinc Mészáros, often portrayed by the opposition as a front man for Prime Minister Viktor Orbán] and people close to the highest political levels have decided to invest in hotels. Some hotel managers … how to put it, are critical … asking how Ráhel Orbán [the prime minister’s daughter] could become so important in the tourism industry,” Kraft admits.

“My comment is that they are totally wrong, because now we have a first-class lobbyist that tells her father how important tourism is at Sunday lunch. Suddenly, we have significant support for the industry at the highest level,” he argues.

And the risk of an investment bubble? “The last time that was asked was by a Russian investor in this office. My response was, when we have three times as many three-, four-, and five-star hotel beds as in Prague and Vienna, then we have the risk of a bubble,” Kraft retorts. “Currently we only have roughly one-third as many as those cities.”

A comparison with Prague and Vienna may sound reasonable, but is it realistic? Vienna, in particular, is richer, acts as a regional hub, and boasts OPEC and United Nations offices. Kraft is unfazed.


“Today, tourism represents about 10% of GDP. The decision has been made for tourism to represent 16% of GDP by 2030. That is 50 million room nights [per annum]. That is government, national strategy that targets that,” he says. “So, we know where we want to go, and there are plans and these are quantified.”

Pannonhalma to Host Marriott Boutique Brand

The Benedictine monastery at Pannonhalma, near Győr in western Hungary, after toying with building a 250-rooms, five-star hotel, settled on a more modest, four-star, 100-room scheme proposed by Kraft in 2016. He was then charged with bringing in an international hospitality brand as the operator.

But while Pannonhalma features strongly in the mindset of a historically minded Magyar – it is a UNESCO World Heritage site, and Habsburg princes were educated at its school – selling the site to a hospitality executive from outside the region proved a tough task.

The international hoteliers were dismissive. “They said: Pannonhalma? Who cares?” So Kraft pointed to the industrial park at Győr, 14 km distant. “I said it has 116 companies, from 13 different nations, together with an annual turnover of EUR 6 billion. That was the turning point: they said ‘We’re coming next week’.”

Kraft proved successful in luring Marriott to operate the hotel – although work is only expected to start on the project later this year, later than originally hoped. Ever the optimist, Kraft brushes off the delay. “The Benedictine order has been there since before King Saint Stephen established the Hungarian kingdom,” he says, “A year or two doesn’t make much difference.”

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