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. The city 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, OTB 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 most recent years following the recession in 2008/09.

The city has welcomed an ever-growing number of arrivals, both of 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 increased at a compound annual growth rate of 7% between 2009 to 2019, or almost doubled in that period, reaching 4.6 million arrivals in 2019. The combination of hotel performance and airport arrival levels has meant Budapest has been outperforming regional competitors such as Vienna, Prague, Bratislava and Warsaw, in terms of growth in recent years. Ever since its recovery from the 2009 downturn, Budapest’s hotel market has 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 shut for tourism for prolonged periods of time. In 2021 marketwide occupancies remained below 50% throughout the year.  The average rates across the market did see a slight recovery in 2021, resulting in an increase of RevPAR of above 60%, year-on-year.

The pipeline is substantial, with approximately 4,300 rooms due to enter the market in the next couple of years, or around 17% of the current supply. Several luxury brands are expected to come the market, including the 152-room Almanac Budapest (May 2022), the 162-room W Budapest (March 2023) and the 108-room St. Regis Hungary (January 2024).

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, the transactional activity shrunk further with only one hotel transacting, the 50-room Escala Hotel & Suits, for an undisclosed sum.

As reported in our 2022 European Hotel Valuation Index, Budapest hotel values recovered slightly, by 2.8% in euro terms, in 2021. In local currency, hotel values experienced a decline of around 6.5% due to the appreciation of Hungarian forint against euro. The dependence on international demand and a substantial pipeline might continue to  slow the speed of recovery for this market. However, market fundamentals in Budapest are strong, and we remain positive on the ability of the city to bounce back 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

[email protected]
  • +44 20 7878 7722 (w)
Nikola Miljković

[email protected]
  • +44 20 7878-7724 (w)
  • +44 7 593572865 (m)
Mathilde De Bona

[email protected]