Tourism Overview - Based on new data series, and following annual declines in foreign tourist arrivals (defined as nonresidents staying at least one night) in the period 2004 to 2007, the report estimates that there was a recovery in tourist arrivals last year, edging up a modest 2% year-on-year (y-o-y) to about 9.5mn arrivals. The most recent data are for Q109 and show a moderate increase in foreign visitor arrivals (including sameday visitors), although the number of foreign tourist arrivals has changed little, compared with the corresponding period in 2008. More comprehensive data from the hospitality sector for the first five months of 2009, however, show a sharp downturn in tourism.

Hospitality - After a disappointing year in the hospitality sector in 2008, latest data for the period January-May 2009 confirm a major slowdown. The number of nights spent in all accommodation establishments declined by over 12% y-o-y, with tourist nights accounted for by international visitors falling more than 14% compared with the same period in 2008. Nights by domestic residents also fell by nearly 10% y-o-y. Of the major source markets, the picture is broadly one of negative growth. Tourist nights by German arrivals were down about 14% y-o-y, while nights by Austrian tourists rose by 1.6% y-o-y. The decline in tourist nights by UK visitors continued to be very large, down 33% y-o-y (after major declines at the end of 2008), while nights by Italian tourists fell 3% compared with the corresponding period a year earlier.

French tourist nights, meanwhile, were down just 1% y-o-y but nights by visitors from the US declined 34% y-o-y. Unsurprisingly, the average occupancy rate of hotel rooms in the five-month period was also down sharply y-o-y to 37.8%.

The report forecasts a sizeable fall in foreign tourist arrivals this year. Clearly, recession in Hungary’s main source markets, Romania, Poland, Slovakia and the eurozone (which accounted for around 80% of tourist arrivals in 2008), will have a negative impact on the number foreign tourists in the short term. Moreover, the economic downturn in key markets is also likely to outweigh any benefits to Hungary (for the tourism sector) from further forecast short-term falls in the Hungarian forint against the euro. It is expected that the number of foreign tourist arrivals will broadly stabilise in 2010, although further weakness is anticipated over the longer term. This is partly due to the forecast strength of the forint (from 2011 onwards) undermining the competitiveness of the tourism sector. In line with our forecast of a deep recession in Hungary in 2009 and economic recovery only in 2011, we foresee negative growth in outbound Hungarian traveller numbers this year, with tourism numbers little changed in 2010 but picking up thereafter.