Hungarian hotel industrytransformed by the energy crisis


Tourism can also be seen as a general indicator of the economic situation: it is often one of the first industries to show signs in a crisis. In the present difficult situation those hotels can survive, which have also used the sources of funds available in the past few years for modernization and energy modernization. The more anachronistic hotels, which are in a precarious financial state, can get into a difficult situation, which may lead to a reduced supply. As a result of the situation, the sector-specific labour shortage may also decline, or it can even disappear.

The past two years of international and national tourism can be characterised as a real roller coaster: following the coronavirus outbreak in 2020, life practically stopped in all over the world for months, and then, in 2021 and the first half of 2022, tourism began to increase significantly compared to the low base of 2020.0. The momentum of this may even last until the end of the year, but at the same time, the downturn can be already predicted, the war situation, the weakening economic prospects, the increasing inflation and the rising costs of living will all lead to the decrease of the disposable incomes, whereas the sector is exactly based on the disposable incomes.

That is why tourism is the first industry that is hit by the crisis. It is equally true for individual and corporate tourism, considering that the disposable income of companies will also decline, accordingly, the MICE segment will be affected, as well. The energy prices going out of control as well as the continuously increasing labour costs constitute an additional burden, and they all damage the profitability of the hotels, hereby taking many to the limit of operation. It is not hard to recognize that the whole Hungarian tourism industry is facing a particularly difficult time. However, it is also true that not everybody is affected by the escalating crisis equally.

Firstly, it is most probably the rural, more anachronistic typically three-star hotels that may feel the recession. On one hand, because their core audience may run out of income for travel first, and on the other hand, these houses already work with a lower profit rate, which is going to be “consumed” by the rising energy and labour costs.Those hotels are in a particularly disadvantaged position, whose energy contract signed typically for 1 to 2 years is about to expire these days, and therefore, they shall calculate with a higher price. Those hotels are in a particularly disadvantaged position, whose energy contracts, typically for 1-2 years, have recently expired, therefore they need to calculate the higher price.

Wellness hotels are hit by the increasing overhead costs the most, considering that the wellness divisions have considerable energy consumption. A lot of houses will not be able to make enough money for the increased energy costs, as a result of which a large number of closures are to be expected. Several articles have already been written on the first cases in this topic. However, those hotels are in a somehow more favourable position, who have used the available funds, the Kisfaludy programme in the past few years well, and they have realized an investment aiming at energy modernisation.

As a result of the outlined processes, a significant transformation may begin on the Hungarian hotel market. It is expected that the older, unmodernized and less energy-efficient hotels will get into a difficult situation, which will lead to a decrease in supply, but also, to a general quality improvement, considering that the more modern hotels with a more solid business basis are going to survive. It is an interesting impact that, due to the closures, the oversupply of labour is to appear on the market, which has been unprecedented in the past 8 to 10 years. The sector has been characterised by a continuous labour shortage for years, and now, it is going to be easier to find employees for positions, which have almost been considered mission impossible previously.

On the other hand, wages will still continue to increase, which, along with the rising energy costs, will force the industry to increase prices. The survival of each hotel will depend on optimizing the level of price the guests are willing to pay and that can ensure their economical operation alongside the rising cost levels. However, the surviving hotels will definitely be production units with low profitability in the future.

Any help or support can be life-saving for the sector in the present situation. An industry-specific solution could be the reinforcement of the SZÉP card use, whether with more favourable taxation or with the increase of the available amount. SZÉP card has been an important tool to support Hungarian tourism before, and it could also be used now in the present situation to help the industry.

Naturally, not even the hotels of BDPST Group can avoid the sectorial difficulties, however, we have made a number of steps that can mitigate the adverse effects of the crisis. Considering that a significant part of our hotels consists of houses that have been renovated within a few years or that are being renovated right now, we are in a better position than the average in relation to energy efficiency. In addition, it was a key priority for BDPST Group to keep its employees even during the coronavirus pandemic, therefore, we are less affected by the challenges of the labour market and the shortage of labour now. We can react to the market challenges more quickly and flexibly than the bigger chains, thus, we hope to escape the economic turbulences to be expected stronger in spite of the tough external environment.