A real fever of development can be felt on Budapest`s four- and five-star hotel market these days, as builders finish high-standard hotels one after the other. Now, a new type of product is added to the mix: The capital city`s first “boutique` hotel opened its doors last August and now there will be a new market player in 2007, offering unique rooms - only in very small proportions, real estate magazine ReSource said in its latest issue.
High standard hotels are opening in Budapest one after the other and with unprecedented speed. Developers seem to have faith in the growing demand for high category hotels in Budapest and want to take part in the process. It is not, by any chance, a surprise that investors focus on the most frequented downtown areas when it comes to buying property, as location is one of the most important factors in this market. Curiously enough, gargantuan projects, spanning hundreds of rooms, are rarely successful and scarcely anybody considers them these days. Medium-sized or rather larger hotels do appear on the market, but these are being built on really varying locations.
The newest Budapest hotel is without doubt, the Hotel Atrium, which has opened on 16 March. Located near Blaha Lujza Square, at the crossroads of Csokonai and Népszínház streets, the building has 57 rooms. The central theme of the interior design was uniqueness. The developers consciously wanted to avoid the usual brown-beige-aubergine decor that most hotels sport. With special and really vivid colors applied throughout various points of the building: Young and fresh colors dominate.
On one hand, you might say, the target group is the foreign corporate business community who clearly comes to Hungary with business purposes. On the other hand, it is also individual tourists interested in sightseeing, says Judit Blandl, the general manager of developer, Mellow Mood Invest Kft.
She told Resource that they are also able to accommodate smaller groups. As for bookings, many questions yet remain open, as mid-March events may possibly influence the market. The influence of the October riots was felt in November and December and, what is more, those interested in Budapest and considering a visit even asked about the situation in the city at the international fairs in January. In the long run, a negative effect that hinders the tourism industry can result from a pejorative image of Budapest.
Despite that, the developers of Hotel Atrium are optimistic and count on many visitors also coming to the Hungarian capital in the future. “It is not easy to forecast the booking rate of the hotel as of yet, but we would certainly be satisfied with 70 % in the first year,` stated Blandl. She believes there is a good chance of that, as the demand for high standard, well-equipped hotels on the market is clear. Of course, the results of a unit are always strongly influenced by the number and quality of competitors and it cannot be said, in advance, to how the new four- and five-star hotels finished in 2007 and 2008 will reshape the Budapest market. Some crucial questions for all hotels, in the period to come, therefore are: Will they be able to bring enough guests? Attract new visitors to Budapest? Or will they have to cut the cake into more, smaller slices? If they cannot succeed, many market participants will have to accept the fact that their hotels will only be half booked.
Blandl believes that there are already too many hotel projects under way in Budapest these days. According to her, it is hard to find an explanation as to why developers start so many projects at the same time but, by all means, it is undeniable that the number of quality Budapest hotels has increased spectacularly in the past two years.
While the three-star hotel market became saturated years ago, the shortage of four- and five- star ones could be felt and, probably, that is the reason developers venture into so many new projects, Blandl proposes. She also believes that despite the current rush on, and the subsequent increase of rooms, new high-category hotels will also be needed in the future; still these projects are likely to lose some impetus.
The main challenge for downtown hotels is the area available as it is not easy to find a proper size construction sites in busy zones. It is usually lots between two buildings that can be utilized; therefore, the task is to shape hotels for as many guests as possible into very small areas, implementing a lot good ideas. In such cases, investors can realize of 60-80 room buildings. Bigger projects are rare.
However, a good example for this latter possibility is the Klotild Palota located on the Pest side of the Erzsébet Bridge. A 107-room hotel, it is soon to be Mellow Mood`s first five-star hotel in Budapest. The Vár Apartment House, although “only` four stars, will also be a curiosity: The “uniqueness` of the 24 room complex will be guaranteed by its location and the monumental features of the Úri street building itself.
Similarly, lots between two buildings are characteristics when it comes to boutique hotels. The first such unit, Boutique Hotel Zara, opened in Budapest in August 2006 and its greatest significant difference is, naturally, the size of the rooms. The description of “boutique` refers to the fact that the rooms are very small in size and the resulting lack of space does not allow for many services facilities. Apart from the restaurant, only a multifunctional conference room is available to the guests. Still, higher standards are a must.
For that very reason, the target group is more specific and it is easier to segment the possible circle of guests - says Erika Ladányi, manager of Boutique Hotel Zara, adding that they are targeting business people and individual tourists especially. The guests, mainly foreigners, spend and average 2.4 nights in the hotel, she added. That is logical, as those coming to Budapest merely for a business meeting or a weekend would hardly stay for longer than 2 nights. There are many such guests in downtown hotels, Ladányi comments.
Ladányi believes the key to downtown hotels` success is precisely their excellent location. In her experience, location is one of the greatest attractions of Hotel Zara, which situated at the corner of Váci and Só streets. Apart from that, of course design, the interior, and its uniqueness also attract the attention of many. And, of course, hospitality also matters. Although many hotels use the slogan “everything for the guests`, the realization of this is even more crucial in a smaller unit. Ladányi says that this goal has been achieved by the hotel at Fõvám square as, after its opening only two months ago, they are already receiving business people, as well as individual tourists, as second-time guests. A circle of regular customers is being formed, which is important, especially because there is no better marketing tool than word of mouth.
Boutique property features not only influence in the design, but also to some extent the price. In spite of that, room prices are first determined by location (i.e. the better area, the more exclusive neighborhood, than the higher cost per night). Of course, there are many other factors that influence the price; like energy costs and taxes and these external factors will certainly make Budapest hotel prices increase sooner or later. It will be necessary, as Ladányi explains, since Budapest prices currently lag well behind the other European cities like London, Paris or even Prague. Many think that our current prices are already too high and we could attract more guests to Budapest by reducing them. But that is not certain at all and we had better try and make Budapest hotel prices level with Vienna and Prague - warns Ladányi.
In theory, the present wave of new developments may affect prices negatively. But Erika Ladányi is optimistic and makes an example of Prague, where there are approximately 200 luxury hotels on the market at present. Taking into account that the Czech capital`s hotel market has had a roughly seven year head start compared to Budapest, where there are only a couple of real luxury hotels so far, we can assume that demand in the next period will be higher in Budapest too. However, it is also obvious that there will be a competition in which only those hotels that pay attention to quality and do their best to give something extra to the clients can prevail. Among smaller hotels, there will certainly be many who lose out in this competition.
Those who want to win will have to meet the market requirements. That is what the developer of Boutique Hotel Cosmo now takes into consideration while building its new Király street hotel, with its small rooms. Space must be well exploited in the gross 3,500 (net 2,500) square meter space in order to hold 51 rooms - said Nándor Tégely, the owner of Hotel Happy Day. All rooms are 24 square meters in size with one set of rooms that can be opened together. According to the plans, the four-star hotel will open this July.
As in most four-star hotels, the target group in this case is also business people coming to Budapest for official purposes. Apart from this crowd, young tourists, especially from the UK, Spain, and France are expected. These visitors can afford a four-star hotel and being in the heart of the city is a priority for them. Small rooms do not mean any lack of comfort, as clients will find quality equipment - assures Tégely, adding that the development of another hotel of the same quality in the capital city already figures into their longer term plans.
The current wave of projects will reshape the Budapest hotel market without doubt - affirms Tamás Flesch, the manager of Hotel Parliament, a 2,900 square meter, 65 room venue. Flesch thinks that hotels can survive the competition only if they do not specialize too much. In other words, hotels must be able to attract individual business people as well as whole conferences. They must be suitable for tourist groups as well as for individual guests. Flesch thinks it is possible that new hotels available for rent can enter the market as new participants and his belief is confirmed by another hotel`s current construction project, soon start on the Zichy Palace at Lõrinc Pap Square. From July 2007, an 80-room hotel will be developed here. According to Flesch, the question is not whether there will be enough guests, as the Budapest market has enough perspective customers. Rather, we should worry much more about whether we will have enough skilled professionals, with proper expertise, to operate the hotels to the required high standards.
Zita Holubár
www.portfolio.hu - 20 March 2007
