Hungary Tourism Report Q3 2009

Tourism Overview Final data for 2008 show an increase in foreign visitor arrivals of just 0.4% year-on-year (y-o-y) to around 39.3mn (representing a continuing slowdown in growth of arrivals over the last four years). Of the top four source markets, the number of arrivals from Romania were up some 1% y-o-y, while visitors from Slovakia and Germany increased 4.3% and 1.4% y-o-y respectively, but arrivals from Austria declined nearly 2% on 2007. Overall, visitors from the EU were up a reasonable 2.5% y-o-y (with buoyant growth in arrivals from Poland, up 18% y-o-y, and the Czech Republic, increasing nearly 17% y-o-y). Early indications from the hospitality sector, however, suggest that the tourism sector is in for a major downturn in 2009.

Hospitality Data for 2008 records a disappointing year in the hospitality sector. The total number of nights spent in all accommodation establishments last year were down 1.5% compared with 2007 to around 19.8mn. Tourist nights by international visitors, which amounted to about 9.9mn, declined by 2.3% y-o-y. With regard to the key source market, Germany, and following relatively large falls in recent years, the number of nights by German tourists declined a further sizeable 10.4% y-o-y. The second largest source market, Austria, recorded a decline in tourist nights of a more modest 3.3% on the previous year. Two other major source markets, Italy and the US, also both recorded negative growth in tourist nights (down 11.2% and 10.4% y-o-y respectively). Tourist nights accounted for by the UK, on the other hand, were up a marginal 0.5% y-o-y, although in the last two months of 2008 there were massive falls of about 30% y-o-y in tourist nights by UK arrivals. The average occupancy rate of hotel rooms was 48.5%, with 54.7% occupancy in four-star hotels and 61% in five-star hotels. The most recent hospitality sector data for the first two months of 2009 suggest a major downturn is in the offing. The number of nights spent in all accommodation establishments declined nearly 11% y-o-y, with tourist nights accounted for by international visitors falling more than14% compared with the same period in 2008.

Forecast Scenario This quarter, BMI has revised down its forecast for foreign visitor arrivals to Hungary in 2009, with negative growth of 8% y-o-y now expected. Recession in both Romania and Slovakia, and the eurozone (which accounted for nearly 83% of visitors in 2008), will have a sharp negative impact on foreign arrivals to Hungary in the short term. Moreover, the economic downturn in major source markets is also likely to outweigh any benefits to Hungary (for the tourism sector) from further weakness in the Hungarian forint against the euro. Mild recovery in growth of foreign arrivals is likely to occur from 2010, however.

Malv Hungarian Airlines In order to improve the capitalisation and solvency of the national flag carrier, Malv Hungarian Airlines, Russian owners AirBridge will ensure a HUF3bn capital injection for the airline. This is in the wake of Malv having to delay wage payments earlier in the year, which it blamed on deteriorating economic conditions in Hungary and the global financial crisis Wizz Air Hungarian low-cost airline Wizz Air carried 5.8mn passengers in 2008, a near 40% increase y-o-y (following a similar annual rise in the previous year). According to the privately-held company, it recorded an operating profit for the third consecutive year in 2008. Despite an industry downturn, Wizz Air aims to achieve robust growth in passenger numbers in 2009.