Because of soaring inflation and extreme food prices, Hungarian hotels’ operating costs are getting much higher. Due to the energy crisis, many hotels had to close, so the supply is shrinking while demand stagnates. It is still unknown how long the situation might remain like this. In the current economic situation, the will to travel could decrease significantly.
Many hotels could not keep up with the rising energy costs and had to close down either temporarily or permanently. The shutdowns range from small guesthouses in the countryside to the largest hotels in the country. The crisis does not have mercy on anyone. This move was expected as the utility costs of some hotels had risen by about fivefold in some cases. Even the luckier ones have to pay three to four times more this winter, reports G7.hu.
Balázs Kovács, the director of Hotel Danubius said that normally, the energy costs of a hotel are around 4-5 percent of the income. Since the start of the energy crisis, this grew to about 15-20 percent. But the rising energy costs are just part of the problem. Food also got more expensive by about 25-30 percent. While at the same time, labour costs had risen by about 10 percent. The problem is further exacerbated by the fact that in the hotel industry, workers do not earn much.
As of now, about every fourth hotel might shut down. Hotels are faced with a choice: they either shut down or try to transfer the costs to the guests. Most hotels are still waiting for the holiday season to be over, so they can shut down for the winter. However, experts say that this was just the smaller closing wave and there will be another bigger one. If most hotels close for the winter, that means the remaining ones have to raise their prices both because of the rising demand and to transfer the utility costs to the customers.
In the past months, guests could have experienced higher prices. In euro, the prices increased by about 10 percent, while in forint they have increased by about 20-25 percent. The countryside has experienced an even higher increase as most guests are domestic ones. Hotel managers agree that about a 25-30 percent increase in prices would be necessary to cope with the rising costs. But this raises the question of whether guests will be willing to pay or not. Software analysis shows that a 15 percent increase would not mean any change in demand. However, this is based on current trends and the time could come when demand falls drastically.