The hotel property market always was somehow out of line and, since it is different from the market of commercial properties or offices, banks and property developers were somewhat cautious even a decade ago. However, the trend has changed and interest in the hotel market is growing not only in Hungary but the whole region.
Recent years have witnessed rollercoaster changes on the Hungarian hotel market. The level of hotel investments increased from 450 million euros in 2005 to 835 million in one year - and that figure does not even include smaller developments. Then in 2007 the huge impetus came to a halt and the beginning of this year even saw a slow down. On the one hand, many new rooms were launched on the market while, on the other, the sector suffered from the difficulties of the Hungarian and more generally the European economy. "We expect the trend to change at the beginning of 2010 and the market to go up again," says Sasha Golubovich, Cushman & Wakefield Hungary's associate director of hospitality.
Notwithstanding a slow down here or there, investor appetite is not diminishing and the banks are also happy to lend to hotels, despite the property market credit crisis. This year's example of Vienna well shows how quickly trends can turn around - average hotel room prices increased from 116.5 euros in 2007 to 134.6 due to the European football championship. The most important factor in the case of a hotel is its location. The nearer it is to the centre, the sights and the heart of a city, the more likely visitors - and investors - would choose it. If a fine old building is found in a central location, it is a winner. Yet since the supply of these is limited, companies are looking for other possibilities. Austria's Warimpex, for example, is building 20 hotels in Hungary in the next five years, the majority by converting B-category office buildings. The Austrians are among the largest investors in Hungary, alongside the Germans, Italians, Israelis, British and Irish. Since there are problems on the Spanish market, Iberian investors tend to look for somewhere to invest their capital in this region. The slogan is: "Flight to Quality" - emphasis is increasingly on special locations and superior buildings.
The hotel market in the region's large cities falls into two large groups: there are the so-called 'mature' markets which are stable, where supply and demand are more or less balanced. Budapest and Prague are examples. 'Developing' markets belong to the other category and include Bucharest and Belgrade, where the pointer of the scales is still seeking equilibrium. The great promises of the future, primarily in the 4-star category, include the big cities of former Yugoslavia, then Bulgaria and - since football has been mentioned - Kiev. However, it is a big question regarding Kiev how worthwhile it is to initiate huge investments for a two-week event, namely the next European Football Championship. Even large cities like Sydney and Athens could not utilise their entire Olympic hotel capacity, so after the Games many hotels were converted into apartments.
As regards the Hungarian hotel market, the capital is still the main focus, though interest has recently increased in Lake Balaton and Visegrád - investors like to follow holidaymakers. Hotels using wellness and thermal spa facilities are also often in the limelight, and that will be increasingly so in the future. People stay at hotels for one of two reasons, holiday or business.
The ratio of the two is an important indicator of hotel occupancy, since the sustainable utilisation indicator depends on a balance between them. The ratio in Budapest is 70 to 30 in favour of holidaymakers, in Prague 60 to 40. As for Warsaw, only 10 per cent of visitors go to the Polish capital as tourists and hence the weekend occupancy of hotel rooms is much lower. A genuine, large conference centre would mean a great deal for Budapest. One exists, but only on paper, despite the fact that the city can be easily reached and has excellent facilities - and not only according to local patriots.
At present those coming to Budapest either for holiday or business can choose from among 16,000 hotel rooms, including 3,600 with 5-star and 6,600 with 4-star quality. By 2010, 3,200 new hotel rooms are expected to be on the market and experts reckon that will satisfy needs for some time. Apartment hotels is what the Hungarian capital largely lacks. The beautifully renewed luxury Boscolo hotel aims to fill this gap with its 145-apartment building being constructed at Blaha Lujza Square, which similarly to the 'mother hotel' promises a landmark contemporary design. With its price tag of 38 million euros, it represents this year's largest investment on the Hungarian market.