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Tourism in low gear

Hungary’s tourism industry is slowly recovering from the economic crisis. However, the economic, business and political environment appears not to be as ‘tourism-friendly’ as one might hope, putting Hungary in a disadvantaged position relative to its competitors.

If you type ‘travel Hungary’ in the Google search engine it will generate 136 million results. Looks impressive. Or does it? The same search produces 216 million results for Austria and 774 million for France. This small exercise is in fact quite representative of the distribution of tourism market shares across Europe. In 2010, Hungary accounted for 2% of the tourism industry in Europe based on the number of arrivals, according to the UN World Tourism Organization. Meanwhile, Austria’s share was 4.6% and France’s 16.1%.

Even in the midst of the tourist season, when Váci utca is taken over by foreigners armed to the teeth with cameras and souvenirs, industry representatives are raising concerns. Barnabás Farkas, revenue manager at Art’otel Budapest, and Pál Kovács, director of public relations at Hilton Budapest, both identify high taxes and insufficient country marketing as the main challenges for the tourism industry. These and a number of other problems prevent Hungary from utilizing its tourism potential in full.

Why Hungary?

Tourists go to Germany for a beer fest, to Italy for a honeymoon and to France for a romantic getaway with wine and cheese. Hungary attracts crowds for its historical sites – Parliament, the Holocaust Museum, the Castle District and others, while numerous thermal baths offer a pleasant addition to tourists’ plans.

Moreover, Hungary’s convenient geographical location resulted in 14.1 million people transiting through the country in 2010, leaving behind approximately HUF 94 billion. Because of its location within Europe, Hungary is often one of the ‘Eurotripping’ stops among the younger generation arriving from North America, Western Europe and Asia.

Between Chain and Charles Bridges

Unfortunately, Hungary’s historical richness and strategic geographic position are not unrivaled. Charles Bridge in Prague and the Karlskirche church in Vienna are equally as appealing to tourists as Budapest’s Chain Bridge and St. Stephen’s Basilica, and these two capitals are Hungary’s main competitors. Austria and the Czech Republic are also centrally located, making them popular transit spots.

Although the Czech Republic is still slightly behind Hungary in terms of the European market share (1.3%), Austria welcomes twice as many international arrivals as Hungary. Surveys conducted by the World Economic Forum further reveal the underdevelopment of tourism in Hungary in comparison to its main competitors. The Travel and Tourism Competitiveness Index 2011, which measures the drivers of T&T competitiveness in economies around the world, rates Austria as number four in terms of the attractiveness of political and business environments for developing the sector. Czech Republic is number 31, while Hungary is number 38.

It’s got to be Austria Hungary!

Admittedly, worldwide recovery trends in tourism are visible in Hungary as well. The number of visitors increased to 9.5 million international arrivals in 2010, up 5% from the previous year and shows further, albeit rocky, progress in 2011. However, the country lags behind on many economic, social and business indicators, including infrastructure, attitude of population towards foreign visitors and quality of natural environment.

The most drastic difference is observed in the extent and effect of taxation, where Hungary is ranked number 138 – second to last – while Austria and Czech Republic occupy positions 63 and 49, respectively. The standard rate of value added tax is 25%, while reduced ones are at 18% or 5% – all higher than the EU average.

Another problem Farkas and Kovács pointed out is the lack of country marketing. In May, the government budget allocated HUF 5.2 billion (nearly €19.5 million) of state resources to the Hungarian National Tourism Office, whose main responsibility is country branding. The amount represents a 50% increase from last year. In comparison, the total budget of the Austrian Tourist Office in 2010 was €52.2 million, 60% of which was directed towards marketing expenses, a figure which remained relatively stable despite hard economic times. Moreover, twice as many international fairs and exhibitions are organized in Austria than in Hungary.

Beyond pálinka

Hungary’s weaker performance in terms of tourism in comparison to its immediate competitors does not undermine the fact that the country has just as much to offer, if not more. For example, Hungary has one world heritage natural site (shared with Slovakia) – Caves of Aggtelek Karst and Slovak Karst. Austria has none. There are eight world heritage cultural sites, the same as Austria. Hungary has around 1,000 thermal spas, 1,500 castles, palaces and manor houses and is home to the largest synagogue in Europe as well as the second largest Baroque castle in the world. Lake Balaton’s size is unmatched in Central Europe.

Average hotel rates are cheaper than in Austria or the Czech Republic as well as the cost of living. The country has something to offer tourists of all ages and interests, be it a vibrant night life or multilingual tours around castles and galleries. Perhaps, it is a matter of time before direct measures are taken to match the country’s economic and business environment to its tourism potential.