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Tourism sector enjoys sunny times

The upward trend in visitor numbers and revenue are driving growth, but officials say the industry’s impact on the economy can be even greater.

Lake Balaton is one of Hungaryʼs big tourism draws.

With natural thermal waters feeding inviting spas, great wine regions, famous music festivals, sprawling Lake Balaton, and beautiful old architecture in the capital and other cities, Hungary has a lot to offer tourists, who are coming in growing numbers.

Foreign visitors bring a lot of tourism revenue, but domestic tourists are also helping drive up the numbers, and this summer promises to bring a bounty to the industry. The next challenge, according to officials, is to increase the business by expanding the length of the tourism season.

As shown by the latest official data of the Central Statistical Office, the Hungarian tourism industry has solidified its position on a growth path and is showing no signs of veering off course. The number of nights spent by foreign and domestic tourists at accommodation establishments went up by 5.4% in the first five months of 2016, compared to the same period last year. Inland tourism has been doing well in particular as locals’ appetite for staying at Hungarian hotels and the like grew by 6.1%. And experts wouldn’t be bothered by the May figures that ended up being slightly more modest.

“All-in-all, May produced last year’s high level which makes us happy. The data for May was further influenced by the fact that May 1 was a Friday in 2015, whereas this year it was a Sunday, therefore there was one less long weekend in May 2016,” Gusztáv Bierneth of the Hungarian Tourism Agency told the Budapest Business Journal. On the other hand, fluctuations in guest night numbers are also natural to some extent. The weather or changing exchange rates of certain currencies may be an additional factor, not to mention a change in the political situation of the country the tourist comes from.

Dr. Ákos Niklai, president of the Association of Hungarian Hotels and Restaurants, explains the possibilities of Hungarian tourism. On the facing page is one of the country’s biggest draws for visitors: Lake Balaton.

Don’t underestimate voucher power

Some have speculated that the rise in terrorism attacks at popular tourist destinations might have contributed to the positive developments, prompting local travelers to stay at home and diverting foreigners to safer havens like CEE. However, Bierneth believes that the full impact of terror attacks can only be measured by peak season figures, since both Turkey and Egypt are typically summer destinations for Hungarians, so a fall of those markets wouldn’t alter travelling habits in the first few months of the year.

“It is important to highlight that such effects can be only assumed since travel-related decisions are influenced by several other factors,” Bierneth said. “In the short-term, the turn of events due to the terror threats may be favorable to us, as we can capitalize with great deals and marketing. But in the long run it’s in everybody’s best interest if stability comes about and destinations would compete against one another based only on their own strengths.”

Another key development of inland tourism is that the use of SZÉP national voucher card is also witnessing new records. The vouchers, redeemable at tourism businesses, allow employers to give their workers additional compensation that is taxed at a lower level than regular pay. Hungarian guests shelled out HUF 6 bln in this way, an increase of 8.9% compared to the previous year.

Many attach further potential to this, not least Dr. Ákos Niklai, president of the Association of Hungarian Hotels and Restaurants. As he points out, domestic guests pay some 22% of accommodation bills using this method of payment. “The popularity of the SZÉP card is beyond any doubt, it is key that it continues to exist. We would like employers, in turn, to make available even bigger amounts of money to employees in order to further speed up their related spending,” he says.

Filling up quickly

These positive trends naturally affect occupancy rates, which are now reaching levels that were last seen before the recession. But there is still room for improvement, both on a regional basis and in terms of accommodation categories. “Pre-season and post-season activity should be developed more for this purpose. At the moment existing capacities are fine. There are some projects to build quality boutique hotels in Budapest in the pipeline, but that’s just enough for now,” Niklai said in assessing the situation.

Occupancy rates could be improved in an even more spectacular manner as a result of upcoming international sports events. The World Aquatics Championship in Budapest in 2017, for example, should draw large crowds from abroad. “Television broadcasting adds to image building immensely. Platform diving, for instance, will take place with the Parliament building as a backdrop, which will be of huge marketing value by itself,” Niklai said. But other regular events such as the Formula 1 race and the Sziget Festival add their share to growth too. “During Sziget, not everybody sleeps in tents,” Niklai noted.

Apart from domestic tourists, foreigners have been more active than the year before as well. Certain countries stick out from the crowd, such as Poland from where 35% more visitors came in May than a year earlier. The northeast of the country, namely Nyíregyháza, the wine region around Tokaj, the wellness center at Hajdúszoboszló and Debrecen have in particular been attracting an increased number of travelers from abroad.

From amongst the Western countries, the United Kingdom and United States of America excelled in particular. “The dollar is strong, so European travelling for Americans is high on the agenda. The British, in turn, come to Budapest for two-to-three days typically, since the city is well connected with several airports used by budget airlines. The exchange rate of the pound might become an issue, though, since sterling has now weakened [post-Brexit]. But we still can offer great value for money,” Niklai said. Russia, on the other hand, has sent a lot less people to visit according to the latest figures. Perhaps the newly restored summer flights to the airport near Balaton will come to the rescue here.

Defying Airbnb

The hotel industry’s great performance is even more remarkable in light of the rise of sharing economy-based accommodation services like Airbnb. Some 20,000 hotel rooms now compete against as many as 8,000 places on Airbnb alone. Niklai says, however, that it’s good for Budapest as revenues are increasing as a result. He believes, though, that government regulation is long overdue in order to establish a level playing field.

Regardless of the challenge posed by the sharing economy, revenues in the hotel industry have also gone up, not only guest nights. The jump of 5.1% for May is regarded by some still a bit shy. Yet, experts warn that pushing up prices cannot happen overnight. It must be added that the hike for the first five months of the year was a lot more substantial, nearly hitting the 10% mark. “That is a wonderful result considering that last year’s base figure was already high,” Bierneth noted.

He believes that Hungarian tourism is markedly underpriced for its quality. “When the Hungarian Tourism Agency was established, we set the goal to significantly increase revenues, and not the number of guest nights, since we see that this is the area where we’ve got the most to do. We are confident that now that this year’s marketing budget has been doubled for next year, and with the help of EU and domestic development funds, we can achieve a radical positive change in terms of revenues.”