Modest growth and good news on the hotel market

The Hungarian office of Colliers International has published its latest Hotel Market Report, which states, that in 2010, the number of guests and guest nights grew by nearly 2% in Hungary compared to the previous year.

“Primarily hotels benefited from the rise in guest numbers, with growth of around 6% overall, and within this, higher-category four and five-star units fared best, registering growth of around 15%.” – said Ákos Balla, Director of Valuation & Advisory Services and Research at Colliers International Hungary.

The rise in tourism nights was mainly due to returning foreign guests, while the number of domestic guests was essentially stagnant. Primarily Budapest profited from this, where the proportion of foreign guests is generally high; the number of guest nights increased by 5% here.
Due to the low demand, the number of guest nights at Lake Balaton fell by 5–8% both among domestic and foreign guest; wellness hotels (mainly due to an increase in capacity) were the only ones able to register a notable increase.

Another positive development is the increase in the number of conferences held in Hungary, based on data from the first three quarters of the year. The number of international conferences was 40% higher than in the same period of the previous year, and although it remained below the base of 2008, there was an increase in the number of attendees.

Hotel room rates fell in every category, by 5–8%. On the other hand, occupancy increased by an average 2 percentage points. The tendency remains that higher-category hotels reach higher occupancy rates. This meant occupancy rates of 60%, 50% and 39% in 5-, 4- and 3-star hotels respectively.
Hungary’s EU presidency will in all certainty have a positive effect on the occupancy of Budapest hotels this year, but it should be noted that this will only last for six months, and that significant supply appeared in the capital in recent years. Taking these into account, as well as the expected positive effects of new personal income tax rules, Colliers International continues to expect a moderate improvement in the main tourism indicators.

Concerning developments, the report states that 8 new four-star hotels opened in 2010, adding more than 1,000 new rooms to supply. On one hand, it is positive that Budapest’s hotel supply is expanding with new quality units, but the increase in tourism has not kept pace with this supply, therefore strong price competition and relatively low occupancy is still expected in this segment.

“Rural hotel developments continue to be driven by EU funds. In 2010, several such hotels were opened, primarily near popular bathing resorts, and we expect this trend to continue in the next 1–2 years as well. Based on preliminary announcements, we expect 6 new hotels (around 400 rooms) to be opened in Budapest in 2011, including 3-, 4-, and 5-star hotels, as well as an apartment hotel. Meanwhile, the number of new rooms is showing a decline from year to year, and we expect that by 2012 new supply will dry up, as financing has disappeared from the market in the last few years. Based on the experiences of financers, the financing of hotel properties and developments will remain one of the riskiest areas, which will keep the number of new developments low for years to come.” – summarized Ákos Balla.