Hungary hotel supply hiatus to lift profits

According to the Central Statistics Office (KSH), both the number of guests and guest nights in 2012 increased by 3.6% and 4.8% respectively, reaching a record high level. “Domestic tourism nights remained almost the same, while foreign tourism nights increased by 8%. Hotels performed above average, especially four-star hotels where foreign guest nights exceeded 18%. The number of guest nights (domestic and foreign) increased by 2.5%,” said Norbert Szircsák, researcher and valuation consultant at Colliers International Hungary. In Budapest, the number of guests and guest nights reached their highest point over the last decade; the former exceeding 3 million guests, the latter being over 7 million nights. However successful it may seem, these numbers accompanied an expansion in capacity, while average room rates remained at 2005 levels. Taking inflation into consideration, the overall picture is more unfavorable, but all in all, the signs are promising. Provided that the number of guests keeps increasing and the low room rates rise, the profitability of hotels may recover to a normal level. There is room for expansion, given that Prague hosts twice as many visitors as Budapest, and Vienna has 60% more tourists annually. Domestic tourism may be strengthened by the expected relatively high €exchange rate, which makes internal tourism attractive to Hungarians, while at the same time making Hungarian accommodation more favorable for foreign visitors. SZÉP cards are proving highly popular, as last year’s numbers indicate: HUF 70 billion has been transferred to these accounts out of which HUF 44 billion has been spent by card holders so far. The bankruptcy of MALÉV Hungarian Airlines resulted in a rather confusing outcome, with traffic at the airport not decreasing as much as expected; however, the loss of business travelers has been compensated by low fare travelers; which favours lower-category hotels. In 2012, six new hotels (plus one reopening) opened in Budapest adding 550 rooms, which is somewhat lower than for the previous year. Furthermore, it is highly likely that the supply will cease temporarily in the future, despite ongoing and abandoned developments. No hotels are due to open in the capital in 2013, unless the problems surrounding the long-deferred opening of Hotel Rácz are resolved.