Hotel GMs Sound Market Warning

Hungary’s hotel industry faces a tough future, according to two of Budapest’s top five-star hotel managers, despite relatively positive news in the latest HotStats survey of European hotel chains.

The figures just released by TRI Hospitality Consulting are for April, and, for the third month in the row, contain some good news for Budapest.

Indeed, the Hungarian capital was one of just two cities to see average occupancy rise, the other being Paris.
“Our samples of chain hotels in Paris and Budapest were the only two to record an increase in demand compared with the same four-month period a year earlier; elsewhere, average occupancy fell,” said Jonathan Langston, managing director, TRI Hospitality Consulting. 

“Our sample of Budapest hotels recorded the greatest profit growth, albeit from a very low base in the four-month period a year earlier. 

“IBFC PAR [income before fixed charges shown per available room] rose by 29.5% to €25.68, which, in absolute terms, was the lowest in the survey.” 

But local hoteliers say the picture, looking forward, is less rosy.

“I think the market was strong for the first four months of the year,” said Adrian Ellis, general manager (GM) of the Corinthia Grand Hotel Royal, the biggest hotel in Hungary with 414 rooms.

“We showed good growth on last year’s results for all months January to April. The growth came largely from increased conference business and improved levels of individual leisure.

“However, this trend does not appear to be continuing, with some concerning trends emerging,” Ellis warned.

‘Softening’

Recent weeks had seen a “softening of the market,” with some big blue chip companies cancelling events as part of cost saving initiatives.

Ellis said he thought this softening would continue “for a few months, as we start to feel the pinch from the credit crunch seen in other parts of the world.”

He said hoteliers “still need to encourage the government to spend more on promoting the destination and to market Budapest as a destination for both tourism and for large events/conferences.”

While he believed that the eventual expansion of the airport will “open more doors for new markets,” he said hoteliers need to continue working together. 

“The Winter invasion [a hotel-driven campaign to draw tourists in, backed last year by the tourist board and MALÉV Hungarian Airlines] has been a very successful campaign over the last two years, and continues to drive incremental business to the city over the winter months. 

“Now we need to work together on promoting Budapest for conferences and conventions and we need to pool our ideas to create a platform from which we can promote the city for international events. 

That was a view wholly endorsed by Adrian Gray, GM of Le Meridien. “The reality is that when there is money invested in marketing, there is a return,” he said. 

He added that “There is also a need to protect the existing legitimate businesses, and for officials to back off penalizing and fining as a revenue stream, and ignoring those who are really breaking the rules.”

Gray said it was high time the authorities took action against “clubs and bars that are ripping off the tourists,” pointing out that it should be a sign to the government that action is needed when the web sites of foreign embassies warn their nationals against the dangers.

“The global economy’s weakness, the credit crunch and the strength of the forint should be a sign that more has to be done, as the situation is that our industry is at risk. In all surrounding countries the signs are there of a struggling economic future.”

Source: Budapest Sun