Hungary Tourism Report Q2 2009

Tourism Overview The most recent data confirm our view of a weak outlook for foreign visitors in 2008, with arrivals totalling just under 31mn in the first nine months of 2008, up just 0.3% year-on-year (y-o-y), representing a slight improvement on H108 which recorded a 2% decline y-o-y. Out of the top four source markets, the number of arrivals from Romania were unchanged y-o-y but visitors from Slovakia and Germany increased 4% and 2% y-o-y respectively, while arrivals from Austria declined slightly. Overall, arrivals from Europe were largely unchanged compared with the same period in 2007, although visitors from the EU were up favourably y-o-y (with continuing strong growth in arrivals from the Czech Republic and Poland). The number of Hungarian travellers abroad, meanwhile, was up just 1.3% y-o-y in the period January to September 2008.

Forecast Scenario Although BMI expects slight negative growth in foreign visitor arrivals to Hungary in 2008, the outturn for this year is likely to be somewhat worse (down 3% y-o-y). This is strongly influenced by economic conditions in major source markets, with a sharp slowdown expected in economic growth in both Romania and Slovakia, while the outlook for the eurozone (which accounted for 58% of visitors in 2007) is poor, resulting in a relatively sharp negative impact on foreign arrivals to Hungary in the short term.

However, mild recovery in growth of foreign visitor arrivals is likely to occur from 2010.

Hospitality After a poor outturn in both 2006 and 2007, almost complete annual data record further disappointment in the hospitality sector in 2008. In the period January to November 2008, the total number of nights spent in all accommodation establishments were down 1.4% compared with the equivalent period of 2007 to over 18.8mn. Tourist nights by international visitors, which amounted to about 9.5mn, declined by 2.2% y-o-y, while nights by domestic residents fell 0.5% y-o-y. With regard to key source markets, the number of nights by German and Austrian tourists declined over the eleven-month period by 10.5% and 3.7% yo- y respectively. Two other major source markets, Italy and the US, also both recorded negative growth in tourist nights (down around 11% and 10.4% y-o-y respectively). Contrary to the above trends, tourist nights accounted for by the UK were up 2.7% y-o-y (although in the month of November there was a massive fall of over 34% y-o-y). The average occupancy rate of hotel rooms was 49.8%, with 56.1% occupancy in four-star hotels and 62.4% in five-star hotels.

Budapest Ferihegy International Airport Reflecting weakness in the tourism sector, the largest airport in Hungary, Budapest Ferihegy International Airport, served a total of over 8.4mn passengers in 2008, a fall of 1.8% compared with the previous year. Indeed, in December, passenger numbers declined almost 10% y-o-y, but traffic was significantly affected by a two-week strike, with airlines forced to cancel numerous flights. The number of passengers travelling with traditional airlines was nearly 5.8mn in 2008, which was roughly the same as a year earlier. Low-cost carriers however, transported just over 2mn passengers, down 6% on 2007.

Wizz Air From February 2009, Hungarian low-cost carrier Wizz Air entered the Czech market by opening six new routes operated from Prague International Airport.