The hospitality industry in Central and Eastern Europe has felt only a moderate impact from the Russian travel ban and relative proximity to Ukrainian battlefields, though some resorts traditionally relying on tourists from Russian and other former Soviet countries are under pressure.
Russia was a strong feeder market for Hungarian hotels, said Noémi Domokos, head of the Hungarian Hotel & Restaurant Association.
In 2019, Russians spent more than 664,000 nights at Hungarian hotels. Russian and Ukrainian guests mainly visited Budapest and the spa resorts of Hévíz and Hajdúszoboszló.
In addition to the absence of Russian and Ukrainian visitors is the lack of Western travelers, who are still worried about traveling to the region while the Russian war with Ukraine continues.
Citing her own organization's data, Domokos said in 2022 visitors to Hungary resulted in 9.4 million room nights, 65% more than in 2021 but 15.8% less than in 2019. In 2022, hotel occupancy in Hungary was 48%, average daily rate was 27,430 Hungarian forints ($81.05) and revenue per available room was 13,894 Hungarian forints.
Some European hoteliers are shrugging off the impact of the Russian travel ban on hotel demand.
Jindřich Křováček, sales and marketing director of Budapest-based Zeina Hotels, said the loss of Russian visitors was “hardly tangible since they never accounted for more than 4% of tourist flow.”
He said Zeina posted occupancy of 76.8% in full-year 2022, which was lower than his projected 88.2%, but that “higher ADR secured an excellent revenue.”
In the Czech Republic's capital of Prague, hotel occupancy reached 58.1% in 2022, more than double that of 2021, according to data from STR, CoStar’s hotel analytics division. Prague's hotel ADR last year was 101.20 euros ($111.19), a 33.2% increase from full-year 2021. RevPAR nearly tripled in 2022, reaching 58.80 euros, a rise of almost 200% from the year before.
The performance trends were similar in Budapest hotels, according to STR data. Hotel occupancy in the market reached 60.6% in 2022 versus 31.7% in the previous year, while ADR in Budapest was 107.70 euros, a 25.7% increase from full-year 2021. Budapest hotel RevPAR rose to 65.30 euros, which was an increase of 140% from 2021.
Sparse Spas
Certain markets in both the Czech Republic and Hungary were particularly popular among visitors from Russia and Ukraine, and hoteliers there said they have felt the sting of the crisis.
The Czech spa town of Karlovy Vary, also known as Carlsbad, is one of the most striking examples. Russians and Ukrainians have flocked to its resorts and allegedly healing waters since the 18th century.
But since the start of Russia's invasion of Ukraine in February 2022, Russians have been barred from entering the Czech Republic. Along with several other European countries, the Czech government extended restrictions even to Russian tourists with valid Schengen visas.
Statistics show that Russians now comprise only 1.2% of visitors to the Karlovy Vary Region and 4.5% of room nights.
In February, the mayor of Karlovy Vary, Andrea Pfeffer-Ferklová, a former general manager of the city’s luxury Grandhotel Pupp, voiced concern that some resorts might face closure due to the absence of Russians.
Kamila Mercová, general manager of the Carlsbad Plaza Hotel, agreed that the lack of Russian tourists has been significant.
“The Russian market was undoubtedly important for our hotel and the tourism industry in Karlovy Vary. The travel ban had a noticeable impact on our business,” Mercová said, adding hoteliers have gained demand from additional markets.
Some smaller spa resort markets in the Czech Republic, Hungary and Slovakia have also felt this blow, as has Baden-Baden in Germany, which is a bit more of an international market, Mercová said.
Tracking Toward Recovery
Although some resorts have experienced difficulty filling gaps in demand traditionally held by Russian tourists, the general picture of hotel recovery in Central Europe is positive, said Stefan Giesemann, managing director of hotels and hospitality for Central, Northern and Eastern Europe at JLL.
“The lift in global travel demand accelerated the recovery of hotel fundamentals despite the war in Ukraine and the rise in geopolitical tensions, which were particularly felt in Central Europe given its geographic proximity,” Giesemann said.
He added that while Hungary, Czech Republic and Slovakia tourist arrivals and hotel performance have not fully recovered, the numbers are strong and are on the right trajectory.
“When looking at Eastern Europe and specifically at RevPAR … the region has recovered by 85% compared to pre-COVID levels,” he said.
Giesemann said that even though leisure travelers will undoubtedly closely monitor the ongoing invasion of Ukraine, leisure tourists will continue visiting key gateway cities.
He added the expected return of Chinese tourists this year also will be an essential factor.
“China’s long-awaited reopening following three years of strict lockdowns will undoubtedly fuel even further growth and demand across Europe,” Giesemann said. “Formerly the world’s largest outbound tourism market, Chinese residents spent $254.6 billion on tourism in 2019, falling to just $105.7 billion in 2021. Historically, the Chinese have accounted for a significant proportion of tourists visiting Central Europe, so let’s watch this space.”
Inflation Bites
Domokos said inflation appears to be the biggest threat to Central Europe's hotels.
“The future remains very uncertain. It largely depends on guest traffic, prices and costs. Unfortunately, we can already see that due to inflation and the rising cost of living, people have less money for travel,” she said.
Giesemann said inflation is not always an evil, since, unlike other property sectors, hotels benefit from being able to modify rates daily and adjust pricing to account for fluctuations in inflation.
“When looking specifically at Central Europe, I don’t think that inflation will significantly impact tourist flow,” he said. “The major risk … will be how ongoing geopolitical tensions in the region play out. The key gateway cities will remain tourist hot spots and popular for long weekends among European travelers.”