SPECIAL REPORT

from Budapest Business Journal 2815

by Business Publishing Services Kft.

SOCIALITE

Special Report 3 Tourism www.bbj.hu Budapest Business Journal | July 31 – September 3, 2020

MTÜ Head: ‘If There are Guests, There is Everything’

Zoltán Guller, CEO of the Hungarian Tourism Agency (MTÜ) talks to the Budapest Business Journal about the devastating impact of COVID-19 on the industry, the steps it has taken, and his hopes for the future.

ZSÓFIA VÉGH Zoltán Guller

Zoltán Guller: The tourism sector in Hungary has been doing excellently, setting new records every year since 2010. Last year saw the best performance yet. In the first two months of this year the effect of the coronavirus has not yet been felt. Based on the data we were expecting a promising year; it looked that 2020 was going to be the best year in the history of tourism in Hungary, which held true until the middle of March, when the coronavirus broke out in Hungary.

Once it appeared, the Hungarian tourism and hospitality sector practically ceased to exist in as much as 60 days. A large number of hotels and spas were temporarily closed, visits to most attractions were suspended, and travel arrangement services basically stopped. Most of the restaurants were also forced to impose downtime; those that remained open reorganized their operations as consumption on the spot was not viable at the time.

Air traffic also stopped, the borders were closed. In fact, this period in our lives was about survival. We have unprecedented, challenging months behind us as the sector, which accounts for 13% of GDP and provides a livelihood for 400,000 people, got in a critical situation overnight, with a virtual nullifying of turnover and, with that, revenue. Tourism is typically a field of small- and medium-sized enterprises, with around 175,000 businesses operating in the sector accounting for a tenth of the national economy, so the livelihoods of many families have been jeopardized by the spread of the virus in Europe. ZG: The epidemic is affecting the sector in very many ways: trends, travel habits are changing, the whole of tourism is being transformed. It is quite obvious that when we are traveling, we are considering completely different aspects than before. Based on the surveys of the Hungarian Tourism Agency, domestic guests’ willingness to travel is constantly improving, people [do] want to go on holiday, more and more people are getting away from it, and there is more demand for active leisure time everywhere.

When making decisions on travel, the role of safety has increased and has been given more priority. Not only in this sector, of course, but in many areas of life; this period has brought about changes in mindset. What is clear already is that businesses had to adapt quickly and take an innovative approach to this situation. Many have switched to contactless payment, contactless check-in. Many new ideas have found their place in the market. We can say that if we only look at digital developments, in a few months we have jumped 10 years ahead in time.

BBJ: What do you expect from this season now compared to last year and your expectations prior to the epidemic?

ZG: Thanks to the operation of the National Tourist Information Center (NTAK), we can get an instant snapshot of how the sector is doing. It has managed to weather those two critical months thanks to government measures, and a cautious reopening began in early May. Today, in rural Hungary, compared to the same period last year, we see almost a similar number of domestic tourists. In some settlements, Hungarians spend even more than a year earlier.

Looking at the country as a whole, occupancy data reached the figures of January-February prior to the declaration of the emergency. It is fair to add, though, that this is usually the lowest period in tourism. It is important to emphasize that, in the course of a few weeks, Hungarian tourists alone set the average occupancy rate of the country’s accommodation at almost 30%, which I think is worth mentioning in any case.

What’s even more important is that the number of guests, guest nights and spending is also increasing every day. As of July 1, flights have been resumed in large numbers. First, it is domestic travel that is going to gradually rebuild, then foreign guests will start to return slowly. We trust that the domestic market will save tourism this year. Based on the data available, we have every chance to believe so.

BBJ: What steps have been taken so far to help the sector? What else are you planning?

ZG: Since the outbreak of the epidemic, the Hungarian Tourism Agency has been discussing possible solutions with trade organizations and listening to their recommendations; we have prepared a proposal with a consultancy that included the necessary and sufficient measures to keep businesses alive. The Hungarian government was one of the first to announce an action plan to support tourism and hospitality with tax and contribution reductions, tax exemptions, preferential credit facilities, a credit moratorium, an increased and low-tax SZÉP-card framework, the abolition of public land use fees and the introduction of kurzarbeit [shorttime working, a less extreme version of furlough schemes].

The first steps in crisis management were aimed at keeping businesses alive, bridging a difficult financial situation and retaining jobs. Now that we can count on a large number of domestic tourists, and foreigners whose number is growing constantly, the process is clear; the number of guests and guest nights is increasing day by day, and the spending by tourists is also increasing. In the recently launched Economic Protection Operational Council (Gazdaságvédelmi Operatív Törzs), under the leadership of the Minister of Finance, we are now working on reducing tax as well as

BBJ: How has the coronavirus epidemic affected the tourism sector?

BBJ: How have travel habits changed as a result of the epidemic?

administrative burdens. “From the National Tourist Information Center, we can see that the number of bookings is growing dynamically, so there is a chance that the revenues of the summer season will not only reach but also exceed last year’s results. I believe that a quick and effective response is the key to success.”

BBJ: When will the sector recover from the virus?

ZG: Tourism is a very fortunate sector as it may have been hit quickly by the crisis, but it is also recovering from it quickly. From NTAK, we can see that the number of bookings is growing dynamically, so there is a chance that the revenues of the summer season will not only reach but also exceed last year’s results. I believe that a quick and effective response is the key to success. In order to relaunch tourism, instead of initiating austerity measures, the government helped it recover from the crisis by cutting taxes and continuing developments, thus helping businesses through this difficult period. After all, in tourism, if there are guests, then there is everything.

Tourism Sector Rides out Initial Downturn, but Many Businesses Face Tough Future

July gave initial signs of a revival in Hungary’s tourism sector after the collapse caused by the onset of the coronavirus pandemic in March: the month saw first outings of open-topped buses in Budapest, while hotels at domestic resorts reported strong demand. But with Budapest hotel bookings for August at less than 10% of 2019 levels, the shortterm outlook remains bleak.

KESTER EDDY

Life for those in Hungarian hospitality sector remains “very difficult”, despite looser restrictions on foreign visitors since June, Tamás Flesch, president of the Hungarian Hotel and Restaurant Association, tells the Budapest Business Journal.

“July was a little bit better because of the Formula 1 [Grand Prix race], but the general occupancy of hotels in Budapest which are open is less than 10%,” he says.

Not only that, but the red-yellowgreen country-of-origin classification system introduced by the government to make entry restrictions more understandable to travelers seems to have resonated with potential visitors in an unexpected way.

“We were getting reservations from abroad, not many, but some, but after this red-yellow-green system was introduced, reservations stopped immediately, in a minute!” he says.

Moreover, the “booking window”, the period when visitors book rooms in advance of their stay, has shrunk from between two weeks and three months to between 24-48 hours.

While this might feel more spontaneous and exciting for the visitors, it makes planning for hoteliers, who need to prepare staff and supplies, far more difficult.

“Now it’s Thursday, and you decide to go to Budapest tomorrow or Saturday. This is especially true for younger visitors traveling by car. It’s incredible!” Flesch says.

“Generally, the countryside is OK at the moment. Sopron is suffering, but Lake Balaton and Lake Velence are very good. Eger and [spa town] Hajdúszoboszló are also fine.”

Bright Spot

The one clear bright spot in the sector is the recovery of provincial tourism, with a recent survey by OTP Mobil and Groupama Insurance finding more than two-thirds of respondents were preparing for a domestic vacation.

This is in part a natural response as Hungarians shy away from neighboring countries such as Austria and Croatia, in part encouraged by a strong government marketing campaign dubbed #itissafeathome.

“Generally, the countryside is OK at the moment. Sopron is suffering, but Lake Balaton and Lake Velence are very good. Eger and [spa town] Hajdúszoboszló are also fine,” Flesch said, although he stressed that foreign tourists, who are bigger spenders, remain a significant missing element.

The experience of Danubius Hotels, which with 14 properties in Hungary is one of the largest hospitality chains in the country, largely mirrors Flesch’s analysis.

Following a complete, unavoidable shutdown throughout Hungary on April 1, the company began opening its four provincial hotels at the end of May, Balázs Kovács, Danubius chief executive tells the BBJ.

“Domestic demand showed more rapid growth, which is why we opened our countryside hotels first. Guest numbers are currently significantly higher compared to the capital, with occupancy rates at between 80-90%,” he says.

Indeed, guest-nights in Danubius’ Balatonfüred units near Lake Balaton are better in the coming two months than in 2019, enabling the company to transfer some staff from Budapest to meet demand.

Capital Caution

Given the dearth of foreign visitors, Danubius has been far more cautious reopening its Budapest operations, starting with the Helia in June and the downtown Erzsébet in mid-July.

That caution appears to have paid off, with occupancy rates at between 30-40%, well above Flesch’s estimates for the current capital norm.

Danubius is moving to reopen the Hotel Gellért on August 7, along with the Hilton Budapest (in the Castle District), Radisson Blu Béke Hotel and Astoria in September.

Tamás Flesch

But despite this ambitious plan, Kovács admits that revenues this year are likely to be 60-70% down on 2019.

Naturally, the poor occupancy rates have led to a corresponding drop in room rates (Flesch estimates a 50% reduction in this key performance indicator), which in turn means excellent price deals for more adventurous tourists willing to travel in these uncertain times.

Balázs Kovács

The four-star Hotel Moments, a short walk from the Szent István Bazilika on Andrássy út and run by Flesch’s company, Continental, is offering a 10% discount on overnight prices, with further giveaways for longer stays.

But with a number of government support schemes closing at the end of June, Flesch says the industry’s troubles are far from over.

“In March, hotels were optimistic, assuming they could close until September, then reopen and with 25-30% occupancy, break even for the year,” says Flesch.

This meant they retained, typically, 60-70% of staff, albeit on reduced salaries. But with no vaccine expected until the end of the year at the earliest, at best the sector is now facing a further eight months with minimal revenues until Easter 2021.

“As we see the situation at the moment, we’ll have to fire people, for sure. We will have to decide within a few weeks,” Flesch warns. “We were quite happy with the [government] help until the end of June, and we know also that the government has a maximum capacity to help. But anyway, now, especially in Budapest, we need help.”

Stricter Hygiene Measures Increase Costs but Essential ‘for Proper Hotel Service’

The COVID-19 pandemic has prompted all responsible hoteliers to introduce stricter hygiene regimes to protect both guests and staff from the risk of infection.

Typically, measures include more intensive cleaning and disinfection of all public and staff areas, the installation of hand sanitizers and additional spacing between tables.

At Danubius Hotels, the new “Safe Stay” policy also includes special hygiene treatment of serving utensils, and safe serving of food.

“We have discontinued the breakfast buffet and now have waiters serving the chosen food,” says Balázs Kovács, Danubius Hotels CEO, adding “In the background, less visible to guests, food is prepared by the kitchen staff wearing masks, gloves and protective clothing, in accordance with the strictest hygiene standards.”

Danubius now employs Safety Specialists to answer questions, and offers guests handouts to understand the new protective regime. Children learn key safety principles through a game in play areas, where special attention is given to the disinfection of toys. Staff, too, enjoy enhanced safety protocols. All employees have attended an in-house hygiene training course based on international standards, and are tested for COVID19 prior to starting work.

Such measures inevitably bring higher costs, Kovács admits, but he says they are essential “for proper hotel services now, when guests are fundamentally concerned with safety.”

Hajdúszoboszló

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