Tourism and Business Travel Driving Hotel Occupancy

BBJ: What are your expectations for the 2023 business year?

Stephan Interthal: As we are already halfway into the year, I can say that our expectations after the third and fourth quarters of 2022 were already quite ambitious; so were our budget numbers for this year. It is very likely that we will over-achieve our expectations and show a performance at year-end over and above the budget, and definitely over and above that of 2019 [the last full year before the pandemic]. Therefore, all in all, 2023 will be a successful year from the revenue side. On the other hand, we are also realizing that the costs of doing business are increasing significantly year-on-year, putting pressure on our margins.

BBJ: Does the ongoing war in Ukraine have a dampening effect on any parts of the market?

SI: It pains me to say that the Ukrainian war, as we are here today, has no dampening effect on the market anymore. Sadly, it has become normal, so we have to deal with that reality. I would assume that there are limitations in some markets, and there is also limited demand for Mice [meeting, incentives, conferences and exhibitions] business. We have lost the entire Russian market, which was very solid (not substantial, but very solid), as a consequence of the Ukrainian war. Moreover, due to COVID-19 and its aftermath, we still have not seen the Chinese market coming back. So, there is some dampening effect, but, on the other hand, we can gladly say that we are showing a serious increase in other markets, such as Israel and the United Kingdom. The United States is also back; not at the same level as before the coronavirus and the war, but it is back. Overall, we have no complaints, but, of course, from humanity’s point of view, we wish the Ukrainian war would be over tomorrow. There is no question about that.

BBJ: In which sector (tourism, business, MICE) do you see the most growth right now? How do you expect this to change, if at all?

SI: The biggest growth is definitely in tourism and business. Mice is not growing, and I don’t think it will grow back to its level before coronavirus. I think larger meetings with 150 or more participants will be more selective or even more digital in the future, with business intelligence, etc. On the other hand, we have leisure groups. Budapest and Hungary, as a whole, are very attractive leisure destinations. There is very good value for money, as it is perceived that every euro is worth 1.5 here in Hungary. I see the tourism sector as growing. Business may not be growing, but it is positive and solid. Notably, Mice has not grown for quite some time. We are not concentrating on volume but on stable occupancy with a very good average rate, eliciting a nice RGI [Revenue Generating Index] or RevPAR [revenue per available room] in the future, possibly in the next two-to-three years.

BBJ: How much of a problem does staff recruitment and retention pose?

SI: I have been asked this question for years. We are all dealing with and working in a limited labor market. We are in a very employee-friendly environment, so people can change jobs tomorrow. However, relating this to Kempinski, I can say that we experience a high degree of loyalty and dedication from our staff. In fact, we have many returners. When we rebounded after COVID-19, we had a nice recovery, and I think our loyalty towards our team, having retained 150 employees during the entire coronavirus period, has paid off in the end. Finding and retaining employees is a difficult and critical situation, but we deal with it. We have reason to be concerned but no reason to complain.

BBJ: How happy are you with the promotion of Budapest as a destination and the support for your industry, in general, from the authorities?

SI: I attended the general assembly of the Hungarian Hotel Association a few weeks ago, and I saw the presentation of the deputy CEO of the Hungarian Tourism Agency. Honestly, I did not know about the many initiatives and activities the agency has rolled out or is about to roll out on the destination, Budapest, Hungary, the countryside, and various regions. I was really impressed, along with the other 300 participants, with what is planned to happen or what is already going on. Understandably, we had some breaks during the pandemic and the war, and there were a lot of personnel changes within the agency. I now have the feeling that they have a plan, and they clearly see the rollout of destination marketing. Budapest is the main destination, but there is also a focus on different regions because Hungary has more to offer than just Budapest and Balaton.

This article was first published in the Budapest Business Journal print issue of June 30, 2023.