Hungary is due to obtain membership in the European Union (EU) between 2003 and 2005 with membership to the EMU anticipated to follow two or three years after entry. The long-term growth of the Hungarian economy will, to a large extent, depend on the timing of the country’s entry into the EU.

Hungary is facing increasing competition from other regional tourist destinations such as the Czech Republic and Austria. This said, the country is keen to attract more high-spending tourists and has targeted key source markets to achieve this goal. Between 1995 and 1999, visitor numbers have declined by a compound annual rate of 11 percent.  The war in Kosovo was partly to blame during 1999, although visitor arrivals picked up in the second half of the year with tourism income accounting for approximately 11percent of GDP.

According to the Hungarian National Tourist Office (HNTO), Europe is the dominant source market, representing up to 95 percent of total arrivals to Hungary, with Austria, Germany, Slovakia and Romania being Hungary’s top four markets.

The Budapest hotel market is characterised by a large number of independent properties and a considerable number of internationally branded hotels. However, the Hungarian economy is in a process of transition. The timing and extent of supply additions to the hotel market is difficult to predict, and level of demand growth is also uncertain.

The following table shows a breakdown of room supply according to the Hungarian hotel grading system. The grading classification in Hungary is not in line with international standards. For example, the city’s Novotel and Ibis hotels are graded four and three star standard, whilst by international standards they are viewed as of three and two star standard.         
 

The positioning of Budapest as the fourth largest conference destination (ICCA Statistics) in Europe has been integral to the success of its tourist-based economy. With the exception of the Budapest Convention Centre, the majority of meeting/event space is provided by the city’s leading hotels, although these facilities are generally dated or tend only to cater for up to 400 delegates and therefore are considered inadequate for hosting large international events.

The Budapest Convention Centre (BCC) which is affiliated to the Novotel, is currently the largest conference facility in Budapest. Whilst the facility was recently improved and renovated in 1999, the venue still does not meet international expectations due to a lack of small meeting facilities and the ageing appearance of the centre. 

The majority of international conference and incentive event delegates in Budapest require first-class accommodation. Whilst many of the hotels’ conference facilities are able to cater for large groups, there is currently a requirement to share accommodation requirements across the broad competitive set during large events and exhibitions.

This said, with the growth of conference and congress business in the Budapest hotel market, hotels have rapidly sought to improve their conference and banqueting facilities and in many cases build extensions. A number of additional conference centre projects are also planned for the city.

After the fall of communism in the early 1990s, the growth in the number of conferences was mainly due to Hungary being a novel destination. Demand subsequently declined with the emergence of competitive facilities in neighbouring countries such as Vienna and Prague.

The Hungarian and Canadian developers, TriGranit and the Hungarian Treasury Asset Management have reached an agreement to develop a 5,000 seat Millennium City Centre congress centre on a 55,841m2 site which was originally designated for the World Expo in 1996. Under consideration are five hotels totalling 2,000 rooms, a casino and thermal spa and residential and office space. Costs for the project are estimated at US$550 million with the expected opening within four to five years.

Although detailed statistical information on the conference and exhibition market in Budapest and Hungary is often scarce and unreliable, further growth in international conference demand is anticipated with the development of the Millennium City Centre Convention Centre in 2004.

© 2000 Arthur Andersen.