The significant appreciation of the Hungarian currency, the forint by more than 10%, which began after the April parliamentary elections, poses a serious challenge to the Hungarian hotel industry: while the euro was trading above HUF 400 last summer, the exchange rate is now hovering around HUF 350. Executives at both Danubius Hotels and Hunguest Plc. warn that the exchange rate change is drastically reducing hotel profits, as revenues in euros are falling while wages and other costs are incurred in forints, according to the financial portal portfolio.hu.
The forint’s appreciation well over 10% is significantly worsening operating conditions, even though Budapest is currently a very popular destination. “The forint’s current appreciation is clearly a negative development for the hotel industry,” Danubius Hotels CEO Balázs Kovács said in response to a query from portfolio.hu.
It has a dramatic impact on hotel profitability, meaning that hotel profits are falling sharply, Balázs Kovács emphasized. “The situation is further complicated by the fact that the market cannot keep pace with an exchange rate change of this magnitude by raising prices overnight, while wages – the largest cost component – are denominated in forints. The strong forint therefore poses a serious competitive disadvantage for any company that generates a significant portion of its revenue from foreign guests or in euros,” the Danubius Hotels CEO pointed out.
The CEO of another major domestic hotel chain, Hunguest Plc., was also less than enthusiastic about the strong forint. According to CEO Ádám Détári-Szabó, however, the impact of the euro exchange rate on the hotel industry is clearly multifaceted.
“Although a stronger forint can indeed help keep costs in check for euro-denominated purchases – such as certain raw materials, energy, or equipment – the situation is different on the revenue side and in terms of market competition,” he told the financial portal.
Exchange rate fluctuations affect the perceived price level for foreign visitors and can make domestic travel a more attractive alternative to vacations abroad, the CEO of Hunguest Plc explained. Overall, he views this as a factor that simultaneously has a positive impact on business conditions by reducing costs and intensifying competition.
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