Europe -  Budapest

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Budapest is the capital of Hungary and the 15th largest city in the EU by population. The city traditionally had a strong industrial focus, but has since become a major centre for banking, finance, real estate and accountancy. Budapest is home to almost 400,000 companies, including the first foreign office of the China Investment Promotion Agency (CIPA) and the European Institute of Innovation and Technology (EIT). Major multinational firms with headquarters in the city include the Fortune 500 company Mol Hungarian Oil & Gas, OTP Bank Group, Magyar Telekom and many others. Budapest is also a cultural and historic centre, which makes it very leisure oriented, with well-known monuments such as St Stephen’s Basilica, the Hungarian Parliament Building, Buda Castle, the Chain Bridge and the Opera House. As such, the city has gained international recognition as a ‘must-see’ destination in Europe, which translated into phenomenal performance for hotels in the years pre-pandemic.

The city has welcomed an ever-growing number of arrivals, both transient passengers and cargo aircraft; this has been largely possible given the new routes now offered by many low-cost airlines travelling to Budapest. Overall arrivals achieved a compound annual growth rate (CAGR) of 7% between 2009 and 2019, almost doubling in that period, reaching 4.6 million arrivals in 2019. Prior to the pandemic, the combination of hotel performance and airport arrival levels made Budapest outperform regional competitors such as Vienna, Prague, Bratislava and Warsaw in terms of growth. Since its recovery from the 2009 downturn, Budapest’s hotel market enjoyed constant year-on-year RevPAR growth at an almost double-figure compound annual rate in local currency (2010-19), with 2014 and 2015 standing out as particularly successful years. During the pandemic, hotels faced lengthy closures and Hungary’s borders remained closed for tourism for prolonged periods. In 2021, marketwide occupancy remained below 50% throughout the year. Average rates across the market saw a slight recovery in 2021, resulting in an increase in RevPAR of more than 60%. In 2022, Budapest’s marketwide occupancy more than doubled compared to the previous year, and the average rate increased by more than 10%; however, the RevPAR remained some 25% below the pre-pandemic level, in 2019 prices, as the market struggled to attract some of its key source markets owing to the war in Ukraine.

Budapest’s pipeline is substantial, with approximately 4,100 rooms due to enter the market in the next few years, or around 16% of the current supply. Several luxury brands are expected to come the market, including the 162-room W Budapest (July 2023) and the 108-room St. Regis Budapest (February 2024). It is expected that internationally branded hotels in the luxury and lifestyle categories will further boost Budapest’s standing as a destination in the near future.

There was little hotel transaction data in Budapest in 2020, with the most relevant being the sale of the Sofitel Chain Bridge by Starwood Capital to Indotek (price undisclosed) and the NH NY Palace and NH NY Residence sold as part of a European portfolio of eight hotels (allocated sales price per key of €410,000 for each hotel). In 2021, transactional activity shrunk further to only one hotel, the 50-room Escala Hotel & Suites, for an undisclosed sum. The only two transactions in 2022 included the sale of the 130-room ibis Styles Budapest City in September and the 234-room Hotel Gellert in December, with sales prices of both hotels being undisclosed.

Overall, our HVI analysis indicates a value increase of 5.4% (around 15.0% in local currency owing to the weakening of the Hungarian forint against the euro) per key in Budapest in 2022 compared to 2021 – values per room in euro remain 13% below the 2019 values for this market. The dependence on international demand sources such as the USA and Russia and a substantial pipeline might continue to slow the speed of recovery for this market in the year ahead. However, market fundamentals in Budapest are strong, and we remain confident in the city’s ability to continue to recover in the coming years.

Change In Value For Market: (€Euro)

Legend
Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: More than -10%

For more information, please contact:

Sophie Perret, MRICS, MBA
Managing Director
[email protected]
  • +44 0 2078787722 (w)
  • +44 0 7725781037 (m)