Rising Tourist Visits Attracting Hotel Developers


As tourist visits to Hungary and Budapest continue to rise, developers and hotel operators see the potential for more hotel development.

Aria, a classical boutique hotel in the historic city center.

In 2017, an estimated 11.8 million tourists visited Hungary, the highest figure on record according to CBRE. Budapest accounted for 36% of arrivals, representing around 4.3 million tourists and hotel occupancy rates for Budapest rose to 78.8%.  

In addition to tourism, the other significant growth area is an increase in the number of business travelers. CBRE has traced a pipeline of 18 three-to-five-star hotels under construction in Hungary, a clear majority of these in Budapest, with a further 13 in the planning stage.

Hospitality consultancy Horwath HTL sees opportunities for hotel development in Budapest. With regard to supply of hotel rooms in comparison with, for example, Prague and Vienna, there are no concerns about possible oversupply. However, despite the current boom in the Hungarian and Budapest hotel market, the labor shortage is acting as a brake on both hotel development and tourism industry growth, according to the consultancy.

The latest extension of the Budapest Ferenc Liszt International Airport is due to be completed this summer and will increase its capacity to 15 million passenger arrivals.

In a niche hotel development, Wing has opened the first hotel at the airport. The 145-room ibis Styles Budapest Airport Hotel is seen a landmark building that will raise the profile of the airport. Wing has invested HUF 3.2 billion (more than EUR 10 million) in the project, financed by the Hungarian state-owned EXIM bank. The bank has the aim of developing the tourism sector in the 60-140-room hotel range.

Historic Center

In the next significant delivery at the top end of the Budapest hotel market, the Hungary-based, Jordanian-owned hospitality developer Mellow Mood is due to complete the 110-guest room and suite Parisi Udvar Hotel in the historic center of Budapest by the end of the year. The complex has been designed by Archikon and a franchise agreement has been reached with Hyatt Unbound Collection. The Párizsi udvar (as it is known in Hungarian) building dates back to 1931.

The project has been under development for several years, reflecting the difficulties associated with the redevelopment of a listed building in the heritage protected center of town. However the large number of historic buildings in key central locations provide the opportunity for their redevelopment as boutique hotels and with rising construction costs this can be a more economic development option in central areas of the city, where there is limited provision of plots.

In another redevelopment of a historical building, the five-star W Hotel Budapest on Andrássy út by QPR Properties (part of Constellation Holdings) has been at the planning stage for several years, and is now scheduled to deliver 160 rooms by 2022. The project will represent the launch of W Hotels Worldwide by Marriott in Hungary.

ibis Styles Budapest Airport Hotel.

In another high-end pipeline project due for delivery this year, Accent Hotel Management is constructing the 210-room Hilton Garden Inn Budapest in District VI. The Egyptian-owned Zenobia Hungary is also due to deliver the 150-room, five-star Zenobia Palace Hotel in District VIII this year. Matild Palace, under reconstruction by the Turkish Özyer Group, is scheduled to deliver a 130-room Marriott The Luxury Collection branded hotel in 2020.

In the medium-level of the market, Bedori Investment is due to deliver 184, three-star rooms at the 7,500 sqm Meininger Hotel Budapest in Csarnok tér, next to the Great Market Hall in the third quarter of the year. The hotel will be operated by Meininger Hotels based on a 20 year lease.

Key Locations

Germany’s Deutsche Hospitality, in conjunction with the B&L Group has acquired construction permits for the 310-room, 16,000 sqm InterCity Hotel Budapest, its first CEE InterCity Hotel, at the Keleti Railway Station. The company has the policy of developing the brand at what it sees as key train stations and airport locations, and the Budapest project is scheduled to be completed in 2020.

Outside of the capital, in Nyíregyháza (230 km east of Budapest), the 9,000 sqm Hotel Sóstó Spa & Resort is due to deliver 122 four-star rooms in the fall. In Gyöngyös (78 km northeast of Budapest), the Avar Hotel by Aranypart 2000 Kft. will deliver 98 rooms at around the same time.

As with other property development sectors, market growth is being hindered by a shortage of skilled labor and rising construction costs.

“Due to capacity shortages and price increase in the construction sector, many of the new projects shifted their delivery date. Several major luxury hotel chains are planning to enter the Hungarian market in the coming years,” commented CBRE. The company has traced as many seven pipeline projects with 150-plus rooms on the Pest side of Budapest.

The positive trends in the tourism industry are attracting investors: EUR 140 million in hotel investment transactions were concluded last year. The five-star hotel sector in Budapest in particular is attracting the interest of international investors, as this hotel market segment has occupancy rates of around 78%, Starwood Capital acquired the Sofitel Budapest Chain Bridge Hotel from Orbis Hotel Group for EUR 75 million. Budapest is regarded as part of a Central European “golden triangle”, along with Prague and Vienna, from a hotel investment perspective by many hotel investment analysts.

However, that EUR 140 mln still represented only a marginal 8% share of the overall commercial property investment transactions for Hungary and is well below the long-term potential for the market sector in the view of CBRE. The hotel sector is generally regarded as higher risk than, for example, the office and retail sectors, and therefore has the resulting higher yields.

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