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Sample Travel and Tourism Market Research Report
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Overview
Discover the latest market trends and uncover sources of future market growth for the Travel and Tourism industry in Hungary with research from Euromonitor's team of in-country analysts.
Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.
If you're in the Travel and Tourism industry in Hungary, our research will save you time and money while empowering you to make informed, profitable decisions.
When you purchase this report, you also get the data and the content from these category reports in Hungary for free:
The Travel and Tourism in Hungary market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation
- Historic volumes and values, company and brand market shares
- Five year forecasts (of market share, market trends, market growth)
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- What is the market size of Travel and Tourism in Hungary?
- What are the major brands in Hungary?
- What are the major brands in Hungary?
Why buy this report?
- Gain competitive intelligence about market leaders
- Track key industry trends, opportunities and threats
- Inform your marketing, brand, strategy and market development, sales and supply functions
This industry report originates from Passport, our Travel And Tourism market research database.
Each report is delivered with the following components:
Report: PDF and Word
Market statistics: Excel workbook
Sample Analysis
EXECUTIVE SUMMARY
First signs of revival in travel demand in 2010
After a significant drop in the number of trips and in tourism expenditure in 2009 in all directions, foreign travellers packed their suitcases again in 2010 and travelled more to Hungary. At the same time, domestic and outbound tourism still declined. The economic environment in EU countries started to slowly recover, which is where the main source countries of Hungary’s inbound tourism industry are located, while Hungarians were motivated by the change in government in 2010 from left to right wing. Travel industry dynamics are not expected to reach pre-crisis levels immediately, but growth is already powered by the awakening of MICE tourism, which usually anticipates the moves of the leisure segment.
Frequency and duration of holidays remains low
Only a small portion, at 34%, of Hungarians took a holiday in 2010, a trend valid even before the crisis and continuously decreasing since 2006, when the figure was 43%. According to the survey of the Central Statistics Office, Hungarians mention financial constraints (48% of the population), health problems (21%) and lack of time due to responsibilities at work (10%) as key reasons for not travelling. The situation deteriorated following the onset of the recession, as Hungarians in general did not feel good about going on holiday in the middle of the crisis. However, there are significant regional differences in travel demand among the population. The economic performance of a region significantly influences travel demand, as does the level of education, age, household income and wealth (possession of second home, car, etc).
Hungary as tourism destination looking for new positioning
By joining the EU, Hungary lost its air of mystery as a communist landscape and became friendlier, less dangerous and therefore the number of individual travellers grew. After the crisis, Hungary’s key theme became “low prices” in tourism, which is dangerous because a cheap image is difficult to change in the medium term. Accommodation prices decreased considerably in 2009, while occupancy rates did not improve. According to the Hungarian Hotel Association, Budapest is lagging behind other CEE (Central and Eastern Europe) destinations in terms of hotel occupancy rates, revPAR and ADR, although other countries experienced more severe declines due to the crisis. Budapest leads in terms of price/quality ratio, but there is room for development in terms of cleanliness/tidiness, the language skills of people working in tourism and the level of public infrastructure (eg parking places, traffic jams, etc). The National Tourist Office therefore has the mission to convert Hungary’s image into an exciting, versatile destination offering personal and tailor-made holidays, instead of mass tourism.
More direct distribution in tourism services
The crisis intensified the competition among travel retailers and tourism services providers, such as hotels and transportation companies. This trend was provoked by hotels and airlines themselves, who contacted potential customers directly through electronic or personal channels after the crisis, and made them direct offers at a lower price. Travel retailers are also threatened by online aggregators of different tourism services, making it much easier and faster for travellers to find the cheapest/most interesting options, and to compare the offers of several providers.
Growing role of local initiatives in tourism development
The Hungarian National Tourist Office is pursuing a policy of decentralisation of tourism-related planning, decision making and marketing to local tourism organisations as of 2009. Initiated by the European Union, and executed under the umbrella of the New Hungary Development Plan, this is an important step towards fostering tourism initiatives with the participation of local people and businesses, which are closest to destinations and know the local environment well. In the medium term, the plan is to develop independent regional tourism brands which can even compete with each other, thereby improving Hungary’s touristic offering. The idea is to have an integrated but differentiated tourism strategy in place in the different regions, which is also easier to communicate and sell to potential travellers.Key Trends and Developments
Lower prices the first answer to the recession
Hungary’s first answer to the recession in 2009 was to position its tourism-related products and services as among the cheapest in the region. As tourism demand started to fall, hotels and travel retailers faced significant overcapacity and launched several promotions to minimise potential losses. This led to a downward price spiral, first of all in the hotels category, but travel retailers also suffered from a lack of custom, while they had previously booked too many places on their organised tours and charter flights.
Current Impact
Although the price/quality ratio of tourism products and services in Hungary improved as a result of heavy discounts, it is difficult to raise prices again back to pre-crisis levels, as travel demand recovers. Cost efficiency became a key priority in the hotels, travel retail, air transportation and car rental categories, but in spite of this, the profitability of many of them deteriorated. Operators were forced to run leaner operations, fine-tune their business strategies (eg become specialists instead of generalists), better target their services and communication, and cooperate more with other players (eg in terms of the booking of charter flight capacity among travel retailers).
Outlook
The industry would need joint efforts to slowly start raising prices in order to improve profitability and the cash flow of operators, especially in the hotels category. In order to do this, players will have to justify the price increases, for example by improvements in the quality of their services, more creative product offers, or value-added services to customers. Only companies with a well thought out, consistent and long-term strategy will be able to operate successfully in the market, as the crisis proved that impressive short-term results are often fragile.
Future Impact
The Hungarian National Tourist Office (Magyar Turizmus Zrt) is working hard to promote Hungary as an attractive, not just cheap, destination. As such, it seeks to bind together Hungary’s natural and unique capabilities with potential demand in growing segments (such as medical tourism) and organise thematic programmes to attract travellers back to Hungary again and again (eg 2010 was the Year of the Festivals). These activities, combined with industry players’ more fine-tuned and conscious business strategies, are expected to help Hungarian tourism to start healthy growth again in the near future.
National Tourist Office focuses on domestic and nearby inbound visitors
Hungary’s National Tourist Office is responsible for the image and marketing of the country, disposing of a HuF5 billion budget annually. It started to focus its efforts and resources on a few specific target settings as of 2009, in order to support the fast recovery of the country’s tourism industry. It opted to concentrate on domestic tourism and on origin countries closer to Hungary, as time and financial constraints pushed travellers towards shorter and less expensive trips. The efficient use of resources (financial, human, etc) within the Tourist Office became ever more important, especially in terms of country-specific advertising, expenditure on media and promotions. The more focused thinking was also expressed by the continuation of the so-called ‘thematic years’ programme, originally launched in 2006. Within this, all activities and promotions in the given year are centred around one specific topic. 2009 was, for example, the Year of Cultural Tourism, 2010 was the Year of the Festivals, while 2011 will be the Year of Health Tourism.
Current Impact
As part of its new strategy to boost the tourism industry, the National Tourist Office started to address some of the long-lived drawbacks of Hungarian tourism as of 2010. In order to smooth out the strongly seasonal touristic demand in the country for example, it launched a winter promotion project (Budapest Winter Invitation), where various tourism-related service providers were advertised online and off with their specific winter programmes. To offer more complex attractions to potential inbound visitors and make them stay longer, the Tourist Office started cooperating with other CEE countries’ tourism boards and tourism service providers. A so-called Air Marketing Fund was established to promote air transportation into Hungary and help airlines in their promotional activity to attract more visitors; this is designed to have a beneficial effect on the state of tourism in general in the country.
Outlook
The decentralisation of planning and decision making to regional/local tourism organisations is an important step towards facilitating local initiatives in the future. The new setup is expected to be the start of a more professional, integrated and efficient era in the organisation and marketing of Hungarian tourism. Inhabitants, investors and tourism experts, who live in the very heart of touristic destinations, are able to make better decisions regarding the organic development of attractions/services and about investments within the local tourism industry. In the medium term, more integrated and efficient product development and marketing activities are expected to be the result of the so-called Local Destination Management (‘Turisztikai Desztináció Menedzsment’ or TDM) system. At the same time, the integration of the National Tourist Office is to be considered by the new government as of 2011, which could influence the fulfilment of these plans. The Tourist Office would be united with the Agricultural Marketing Centrum and the Hungarian Investment and Trade Development Agency (ITDH), in order to streamline the functions of the three organisations and take care of parallel activities in one centralised organisation.
Future Impact
The success of the National Tourist Office’s strategy will in the long term largely depends on the economic performance of Hungary, CEE and Europe in general, which are the key targets for inbound tourism into Hungary. As soon as disposable incomes of the populations of these countries start to rise and people become more optimistic regarding their personal prospects, they will begin to travel more and go on holidays more often. The general trend of more controlled tourism spending is beneficial for Hungary, as it is currently one of the cheapest touristic destinations in the region, offering the best price/quality ratio in many cases.
Impending stricter regulation of travel retailers
According to new regulations in the pipeline in Hungary, travel retailers should pay higher guarantees in the future in order to better protect travellers in the case of bankruptcy and to stop agencies from disappearing with customers’ booking fees. The change was prompted by the existence of several players with unstable financial backgrounds even before the crisis, whose situation was aggravated by the crisis, and by the bankruptcy of medium-sized travel retailer 5 Kontinens in June 2009, where customers only received back 20% of their payments.
Current Impact
The new regulation would affect most agencies in the charter package holiday segment. These pay today 20% of their charter revenues or at least HuF20 million into guarantees. With the new regulation, this ratio would be raised to 25% or at least HuF100 million. In the case of non-charter activities, the rate of the guarantee would also be raised from the current level of 12% of revenue or at least HuF5 million. It would change to 15% or at least HuF7 million if the travel agent’s revenue is below HuF50 million, the rate of the guarantee would be 18% or at least HuF10 million if the revenue falls between HuF50 and HuF100 million, and above this revenue level, the rate would be 20%.
Outlook
According to industry representatives, the new regulation would bring smaller agencies close to bankruptcy, as these would not be able to provide such high guarantees. In addition, it would also lead to general price increases in the travel retail category, even in the case of larger players, to accommodate the increased fixed costs. Operators claim that stricter licensing rules and closer control of the travel retail industry would be more efficient in protecting customers. For example, it is possible in Hungary to establish a travel agency in the name of the same owners, on the same location, and without any time gap, even if the former company went bankrupt due to mismanagement by the same people.
Future Impact
Regulators are expected to decide on the new regulation with a holistic view, aiming to improve the industry with integrated measures for the long term, and not only raise the rate of the guarantees. On the other hand, travel retail is a capital-intensive business after all, which was proved by the crisis as well. For example, a strong financial background would be a necessary requirement for players if they want to participate in the package holiday category, as here they have to run the risk of not being able to sell enough places. Similarly the possible risk of heavy exchange rate fluctuations should be borne or covered by travel retailers, as it cannot be shifted over to travellers entirely.
Holiday cheque system under reconstruction
Domestic tourism has been boosted significantly by the holiday cheque system in past years, given by companies to employees as a tax-free benefit. Cheques affected positively the general wellbeing of the population, because they motivated people to take time off and go on holiday. On top of the benefits to employers, employees and domestic tourism, issued but unused cheques are distributed free among the poorest segments of society, who otherwise could never afford to go on holiday. However, there are several drawbacks to this system. First, the cheques are paper-based, thus highly perishable. Second, the cheques started to have a “second market”, as those who wanted to have cash instead sold them to intermediaries who would trade with them for a certain fee. Third, it is quite expensive to produce the paper cheques including security features, arrange the back office administration and physical distribution every month to employers, when employees would receive them (cheques are subject to 6-7% additional costs paid to the issuer and controller of the system, Nemzeti Üdülési Alapítvány). The high popularity of holiday cheques decreased as of 2010, when their tax exemption was annulled and a 25% tax was levied on them, so employers lost interest in giving this benefit to employees.
Current Impact
Due to the disadvantages and the recent unfavourable change in taxation, the government is planning to convert the paper cheques to a payment card, called the Széchenyi recreation card, and to modify its destination. The plan is that employers transfer a maximum of 10% of salary to the recreation card, which would not be exempt from tax, but the company could deduct all or part of this benefit from their company tax at the end of every business year. The government is also planning to raise the maximum holiday cheque per capita allowance from the current HuF72,500 per year to HuF100,000, and to channel the use of cheques towards recreational and preventative health measures.
Outlook
The new system would be much easier to control and also considerably cheaper to run and maintain. However, providers of tourism and recreational services would have to enable card acceptance in their premises, ie they would incur part of the cost. Providers who do not accept cards currently, which are very common in the countryside, would be excluded from the system. On the other hand, the administration of the card payments would be much faster than in the case of paper cheques, thus providers would receive the value of the payment much sooner than is the case with the current system.
Future Impact
Recreational cards are expected to be introduced from 2012, but this also depends on the state and the performance of the Hungarian economy until then. The new system is cheaper but not free, so GDP should grow by at least 3% to be able to finance the card according to plans. There is, as yet, no solution to maintaining the contribution to lower socio-economic groups through granted but unused benefits. All in all, the increased level of the contribution and the new recreational focus would certainly be beneficial to Hungarian tourism and to the population as well.
Changing competitive landscape for travel retailers
Until recently, tour operators selling package holidays tried to independently fill charter planes from their own customers. However, they gradually came to enter into cooperation with each other, and booked the planes together, in order to achieve better capacity rates. With the onset of the recession, however, some of the medium-sized and larger tour operators were forced to withdraw completely from the charter category, for example Quaestor Utazásszervezo Kft in 2008, Tensi (Tensi Tours Kft) in 2009 and TUI (Magyar TUI Utazásszervezo Kft) in 2010. They opted to sell charter package holidays as the intermediaries of other tour operators, or distribute their own packages to other players’ customers, after finding the right mix of destinations with their cooperative partners.
Current Impact
Thanks to the recession, travel retailers are realising the benefits of cooperation, contrary to the past when they fought with each other for travellers. There are no ‘prestige trips’ any more, ie agencies do not sell certain destination trips just because their competitor has also such a product in its catalogue. Operators have started to focus their business on a few destinations, or on specific customer segments (these two options often go together); they become professionals and develop travel products with the best price/quality ratio in those specific areas. Specialist players can contribute well to each other’s product portfolios and cross-sell each other’s high-quality packages to their own customers, without harming the other’s business.
Outlook
The category is expected to develop further in the direction of specialisation, as it is quite expensive for travel retailers to maintain a long list of destinations in the long term. While players want to continue providing high-quality professional services to their customers, they are being forced by falling prices and by their shrinking profitability to streamline their businesses.
Future Impact
The travel retail category is transforming into a two-pole structure in the long term. Large generalist players, such as Ibusz Rt and NUR Neckermann Kft, will succeed in the future due to their high volume of travellers/bookings, and they will achieve considerable volume discounts from their business partners. These have wide national physical distribution networks and a large group of third party agents, and will focus on the maintenance of high volume to feed this network. Smaller travel retailers will specialise more and look for profitable niches/target segments, but will also try to differentiate themselves and preferably rely on more than one product area. These will have small, lean, flexible organisations, occasionally also applying innovative online solutions/operations.
Growing demand for the cheapest and most expensive trips
Price became an even more important determinant of leisure travellers’ holiday choices following the crisis. Demand was split between very cheap trips (below HuF80,000) and very expensive ones (HuF200,000-240 000), while trips priced between these two ranges could hardly be sold, according to the largest travel retail agencies in Hungary.
Current Impact
The disappearance of the middle segments is a negative trend for travel retail operators, as they used to be the key targets of travel agents. These players have to change their strategies and find new profitable segments with growth potential if they do not want to enter into a dangerous period of price competition. Unfortunately, many Hungarians still believe in unrealistically priced leisure offers and do not consider the stability and viability of the travel retailers behind them. It is considered a trend to hunt for the cheapest available offers and Hungarians spare no effort in doing so.
Outlook
Smart players will research, segment and target the Hungarian travelling population to find profitable and economically sustainable customer niches open to travel retailer services. For example Green Travel Kft, a specialist in Turkish holiday destinations, is targeting upper/middle-class families with small children, who know exactly what they want from a holiday, would like to plan their travel well in advance, are capable of booking the trip at least one month in advance and are willing to pay for quality and security. Another player, Quaestor, specialises in sports, event trips and exotic holidays to higher-income groups. This is a very small but very profitable niche, willing to pay, for example, for visiting special events such as a match of their favourite football team in the UK or Germany, or to watch tennis live at the US Open.
Future Impact
It is questionable if a very narrow specialisation can be viable within a small market like Hungary in the long term. It is difficult to run a highly specialised travel retail business profitably, based on just a couple of destinations, as well as due to the seasonal nature of the travel business. Since the crisis, growing numbers of operators have been studying the needs of their customers or potential customers thoroughly, and a possible successful future strategy for travel retailers could also be to concentrate on certain customer segments with high potential, and not on specific destinations. Travel retailers should seriously consider their grade of specialisation and try to find more than one leg to stand on, in order to stabilise their businesses.
Hungary offers favourable prices in the region
After the crisis, Hungary’s key focus became low prices in tourism, which is dangerous because a cheap image is difficult to change in the medium term. Travel accommodation prices decreased considerably in 2009, while occupancy rates did not improve. The situation is particularly acute given that Hungary was already one of the cheapest destinations in the region even before the crisis.
Current Impact
According to the Hungarian Hotel Association, Budapest is lagging behind other CEE destinations in terms of hotel occupancy rates, revPAR or ADR, although other countries experienced even more severe declines due to the crisis. Although Budapest leads the region in terms of price/quality ratio, there is some room for development in terms of cleanliness/tidiness, the language skills of people working in tourism and the level of public infrastructure (eg parking places, traffic jams, etc).
Outlook
It is apparent that low prices alone do not attract more visitors to a country, even in the middle of a recession. In the medium term, slow increases in price will be inevitable, as profitability of tourism service providers in Hungary will seriously deteriorate, especially in the travel accommodation category. In this case investments into infrastructure, as well as the development of human capital and services would stop, and Hungary would fall behind the region at a time when travellers are becoming particularly sensitive to quality and reasonable price/quality ratios.
Future Impact
The National Tourist Office has the mission to convert Hungary’s image into an exciting, versatile destination offering personal and tailor-made holidays, instead of mass tourism. However, to break free of the cheap image and positioning, concerted efforts by tourism categories (such as hotels) would also be needed. This includes starting to moderately raise prices again to an economically sustainable level, which should in parallel also be justified by the level and quality of services.
