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The drop in tourism has not reduced hotel development

Although 2009 saw a decline in tourism, hotel development has not diminished, but numerous new players plan on entering the market in 2010, due to developments started before the crisis.

"Higher quality level buildings proved to keep their value, although decrease in price was most characteristic in this segment too. Looking at occupancy levels, four and five star hotels performed the best. As for tourist destinations, Budapest is by far the most popular destination for travelers from abroad" – said Ákos Balla, director of valuation and market research at Colliers International’s Hungarian office. 

The global financial crisis resulted in a worldwide decline in tourism, and depressed Hungarian tourism as well – both number of guests and number of guest nights decreased during the course of 2009. The level of decline was 8% in both cases, although the number of tourists arriving from abroad declined more than the number of domestic tourists. Within Hungary, Budapest remains the most popular destination for travelers from abroad, with more than half of the guest nights in the country spent in the capitol. As for domestic tourists, Balaton is the number one preferred destination. 

Budapest hotels have been seriously affected by the level of decline from foreign tourism, and as a result of which most categories suffered occupancy drops of around 10%. The average hotel occupancy rate in 2009 was 49%, with different categories experiencing differing occupancy rates depending on their level of quality. Due to this, five star hotels experienced the smallest decline, while the four star hotel decline was unequivocally influenced by new hotel handovers.  

Regarding room prices, stagnation or slight decline can be observed. Decrease in prices is more characteristic of higher price categories. Stagnation is due to the high forint/euro exchange rate, as well as the decrease in VAT guidelines for hospitality services. In general, Budapest hotel room rates count as competitive in the region: the average room rate for a five star hotel in Budapest is €118, four star is €58 and three star hotels are €35.

Pécs can be featured from a development viewpoint, as numerous hotel projects are being constructed as a result of the many programs and events stemming from being Europe’s Cultural Capital of the year. Besides Pécs, European Union-backed hotel developments can be found mostly near thermal bath sites. 

 „We can expect several hotel handovers in Budapest as well during the course of 2010, mostly in the higher-end hotel segment. These handovers are mostly a result of development projects initiated before the start of the crises. Among others, this year we can expect handover of the four star Marriott Courtyard, the Alta Moda Fashion Hotel, the Eurostars Hotel and the Continental Hotel Zara. In the five star segment, Thermal Hotel Rácz and Buddha-Bar Klotild Palace are preparing to dominate the market. The hotels mentioned above make for 1,000 new rooms for the Budapest market themselves," said Norbert Szircsák, analyst in valuation and market research, on Colliers International’s market review of the Budapest hotel market. (BBJ Online)