Hotel Development: Budapest is on the up

Establishing shot of Budapest
960 523 Hamish Kilburn
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HVS has released a new report on the hotel sector in the Hungarian city of Budapest, which highlights the strong recovery the city’s hotels have seen on the back of increased visitor numbers…

A report published by HVS suggests that Budapest, with big name hotel groups planning to open over the next three years, is on the rise when it comes to hotel development.

The capital city of Hungary and the ninth-largest city in the EU, with close to 1.7 million inhabitants in 2018, Budapest traditionally had a strong industrial focus, but has since shifted to the service industries including banking, finance and real estate. The city is also a cultural and historic centre, with several renowned monuments including UNESCO World Heritage sites such as the Buda Castle district and the banks of the Danube. The city is also filled with various museums, parks, squares and a variety of restaurants and bars, making it the perfect weekend destination.

Hotel performance

During the economic crisis (2008-10), hotels experienced drops in visitation. To remain competitive they reduced rates, resulting in price wars. However, the market has recovered strongly, with hotel performance continuously improving, making Budapest one of the fastest-growing hotel markets in Central Europe. The increased arrivals to the city provide a positive outlook for average rate and occupancy growth, already evident in 2016 and 2017, with above-average RevPAR growth in the market.

Hotel Supply

The report mentioned that Hungary has seen continued growth in hotel supply since 2010. As of December 2017, the country had 1,094 hotels providing some 151,000 beds, approximately 35 per cent of which are in Budapest.

Owing to the positive trend in visitor arrivals and the strong trading performance of hotels, there has been increased interest in the city from developers and operators. Several of the world’s leading hotel brands, including Four Seasons, Ritz-Carlton, Kempinski, InterContinental, Hilton, Marriott and Sofitel, are already represented in Budapest. Within the next three years, Hyatt, as well as Marriott’s W and Luxury Collection brands, are also due to open, which will further boost the draw of the Budapest market. Several other proposed new hotels are also in the pipeline; however, we would also note that construction costs have risen sharply and hence some of these projects might not materialise.

Overview

The outlook for visitation to Budapest remains positive, with an expected continued increase in arrivals to the city. The recent boost in hotel performance is one of the main reasons behind the growing interest from investors, developers and operators in the market. Although RevPAR levels remain somewhat lower compared to other European cities, the development and increased offer of five-star properties is expected to help increase average rates in the market.

Hamish Kilburn / 24.09.2018

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