As a result of the Covid-19 pandemic, several sectors were hit hard worldwide. One of the industries that suffered the most is tourism, mainly international tourism, which came to a grinding halt as borders closed and stay-at-home orders were issued.
In order to understand the pandemic’s impact on the industry, the Hungarian Government’s actions and the future of this sector, we interviewed the Hungarian Tourism Agency to gain a better understanding of the past, present and future of the industry. This is part one of our five-part series. In our first part, we asked the agency to elaborate on the Government’s actions.
In light of the impacts of Covid-19, how do you plan to support companies and people employed in the industry?
Immediately when the epidemic broke out, the Hungarian Tourism Agency developed a package of proposals in consultation with professional organizations. This package of proposals included the necessary measures to keep businesses alive.
The first steps were aimed at keeping businesses alive, overcoming financial difficulties and retaining jobs.
The measures included the abolition of employers ‘contributions by 30 June 2020 and a significant reduction in employees’ contributions. As a further measure, it was not possible to terminate the lease agreements or to increase the rents.
Until the end of the year, the Government suspended the obligation to pay capital and interest on all loans for individuals and businesses until the date of notification, and introduced and made the “Kurzarbeit” option economically available to a wide range of tourism service providers. Additionally, businesses can apply for a 2-year, job-retaining loan, with an interest rate of only 0.1 percent, for a 9-month salary. Until 31 December 2020, no tourist tax will be payable.
As part of the economic protection action plan, the Government further strengthened the SZÉP card, which is the engine of domestic tourism. First halving the tax burden until 31 December 2020 and then extending it until 30 June 2021, while doubling the amount that can be topped up by the employer.
In addition to all these measures, the Széchenyi Card Program was expanded in September with a new loan scheme, which is only available to micro, small and medium-sized enterprises operating in the tourism sector. With the help of the Széchenyi Tourist Card, businesses get a free-use loan with zero interest rates. The loan can be applied for on extremely favorable terms, and it can be freely used, up to HUF 250 million (EUR 700 000), which can even be used for rent or operating costs. The funds available under the scheme contain HUF 100 billion (EUR 280 million), with 1-, 2- or 3-year long repayment periods.
Led by the Minister of Finance, the Agency is currently working in the Economic Protection Operative Unit (Operatív Törzs) to reduce administrative burdens as well instead of reducing the tax burdens only.
Even at the beginning of the second wave of the coronavirus epidemic, the Government took immediate steps to help the tourism sector. As part of this, it introduced tax and contribution rebates and made available a 50% wage subsidy. Tax and contribution rebates as well as wage subsidies also cover leisure and entertainment service providers. The condition for receiving the subsidies is that the employees are not laid off and the employees receive their pay. These measures were extended by the Government until the end of January 2021 and the measures were also extended to travel companies. Additionally, according to a new provision, tour operators only have to pay property insurance after 50 percent of the closed turnover in 2019. This is a huge help for smaller travel agencies to stay alive.
The Government has also decided that the measures may be extended if it is initiated by industry actors.
As the accommodation cannot accept tourists arriving for leisure purposes, the state will take over 80% of the loss of revenue after bookings for the accommodation registered at the National Tourist Information Center (until the 8th of November) for the period from the 11th November and 10th December. Disbursement will be made by 31 December at the latest. According to NTAK (https://ntak.hu/) data, almost 1 million (928 thousand) guest nights were recorded, so the measure affects more than 11 thousand companies.
VAT on food delivery has been reduced from 27% to 5% for the period during which restaurants are closed. It is up to each company to decide whether to reduce their prices or to spend this remaining amount on wages and operation.
The Hungarian Government’s support for tourism has so far amounted to around HUF 700 billion in total (over EUR 2 billion), which is also outstanding in international comparison. The Hungarian Tourism Agency also helped the tourism sector with development tenders and campaigns.
In part two, the Agency will further elaborate on the programmes and initiatives it started, to further develop the tourism industry and help tourism companies that are suffering from the Covid-19 pandemic.
In part two of our five-part series, we asked the Hungarian Tourism Agency (https://mtu.gov.hu/) to tell us more about the initiatives that it employs to help struggling businesses and improve the Hungarian tourism sector.
Economic relief for businesses and employees
According to KSH, the industry lost 51% of gross sales revenue between January and August this year, compared to the same period a year before.
How does your office, considering the input from the government, plan to manage the economic pain suffered by these businesses and employees?
Since March, the Hungarian Tourism Agency (https://www.linkedin.com/company/hungariantourismagency/?originalSubdomain=hu) and the Government have been working to put tourism back on the path of growth. Ongoing consultations were held with professional organizations on possible solutions, the results of which were the measures just listed. All this shows that a number of steps have been taken for the benefit of the sector and the businesses that work in it.
The Government of Hungary also helped the recovery from the crisis, by continuing developments, providing HUF 150 billion (approx.: EUR 420 million) under the Kisfaludy Program for the implementation of the last phase of the program, aimed at the complete renovation of accommodation facilities in Hungary.
As part of this, the Agency will provide HUF 85 billion (approx.: EUR 240 million) in support for the construction and renovation of hotels with more than 100 rooms in rural Hungary. As a result of the construction and development of 35 hotels, 1,500 new rooms will be created and 4,200 rooms will be refurbished. Additionally, the programme supported the renovation of 4 five-star hotels in the countryside. In addition to the HUF 85 billion (approx.: EUR 240 million) source, the entrepreneurs provide an additional HUF 85 billion (approx.: EUR 240 million) for the implementation of development projects, thus contributing a total of HUF 170 billion (approx.: EUR 480 million) to the development of domestic tourism.
In May, a call for the development of private accommodations and other accommodations was also published. A tender was announced with a budget of HUF 60 billion (approx.: EUR 170 million), from which the accommodation providers of rural Hungary received a subsidy of HUF 1 million (approx.: EUR 2800) per room. Almost 14,000 applications received HUF 45 billion (approx.: EUR 125 million) in funding within the framework, and the amount awarded was paid to the winners by the end of the summer.
In December 2019, a call for the development of slides was published with a budget of HUF 700 million (approx.: EUR 2 million). 6 development requests were received, and based on the proposals of professional evaluators, a positive decision was made for all grant applications, totaling HUF 441 million (approx.: EUR 1.25 million).
In the first three phases of the beach development program, 114 beaches in 63 settlements in Hungary were renewed for more than HUF 9.3 billion (approx.: EUR 25 million). Thanks to the third phase in 2020, 90 beaches received a total of HUF 3.06 billion (approx.: EUR 8.5 million) in support at Lake Balaton, the Danube Bend, the Tisza, Lake Tisza and Lake Velence. In August, the Agency also announced the fourth phase of the program with a budget of HUF 3 billion (approx.: EUR 8.5 million) to renew Hungary’s open-water beaches at Lake Balaton, along the Danube, the Tisza, Lake Tisza and Lake Venice by 2030. As a result of the fourth phase, developments can be implemented on more than 80 beaches by the summer of 2021, with an average of HUF 30 million (approx.: EUR 84 300) in support at some places. Within the framework of the program, the government has so far provided a total of nearly HUF 13 billion (approx.: EUR 36.5 million) in non-refundable domestic sources for the quality development of open-air beaches in Hungary.
A tender was launched in July 2020, as the next stage in the renewal process of the Tourinform network. With the help of the program, 22 Tourinform offices can be renewed with 100% financing, provided by the Hungarian Tourism Agency, in accordance with the new interior design image, from a total budget of HUF 450 million (approx.: EUR 1.25 million).
The Agency’s primary objective is to boost domestic traffic during the coronavirus emergency. Therefore, special program offers for rural tour guides will play an important role. The Agency does its best to keep the professionals on the field, which is why it announced the tender for them. As a result of it,129 applications received a total of HUF 101,780,000 (approx.: EUR 286 000).
Following and coordinating the activities of the Agency, the Government of Hungary supports Gypsy musicians with HUF 800 million (approx.: EUR 2.25 million), festival organizers receive HUF 700 million (approx.: EUR 2 million) to keep light music festivals alive, and folk musicians receive an additional HUF 200 million (approx.: EUR 560 000).
It is in the interest of all of us that as many service providers as possible continue to operate and that accommodations continue to be competitive players in the relaunched tourism in the future. As a result of the current measures, thousands of tourism companies will receive billions of forints in support, which will help to preserve jobs and keep the professionals working on the field.
In our next segment of the interview, we will ask the agency to elaborate on the pandemic’s impact on tourism in Budapest specifically and the Government’s plan to restart tourism after the pandemic.
Hungarian government plan to restart foreign tourism
KSH data also shows the tourism industry suffered substantially more in Budapest than other parts of the country. Does the government plan to implement Budapest specific relief packages to support these businesses and employees?
As a result of the coronavirus, Budapest lost the traffic generated by foreign tourists. The Hungarian Tourism Agency has been promoting domestic tourism since the spring, and when the epidemic situation allowed, it also tried to support the tourism sector with international campaigns and maintain interest in Hungary’s hidden treasures. During the summer, we ran campaigns like the “Budapest is waiting for you back!” (“Budapest visszavár!”) and the Budapest 365 Spice of Europe. The aim of the former was to position Budapest as a domestic destination, and the aim of the latter was to address foreigners (we wrote more about the partnership between the agency and Budapest here).
Budapest’s exposure to foreign tourists is 93% (we also noted in one of our articles that tourism has declined 96% in September 2020). There is no similar big city and capital in Western Europe that is comparable in this sense. In Vienna, the figure is only 80%, in Paris only 51%, in Rome 68%, in London 61%. Therefore, a change of model is needed, so domestic tourists are encouraged to go to restaurants, visit spas, and see different parts of the country. The next 12 months will definitely be about domestic tourism. In this, the Hungarian Tourism Agency can primarily help, by conducting domestic tourism promotion campaigns with all available means, promoting rural Hungary and Budapest. As long as the borders are closed, we will not have the opportunity to revive international tourism, but, as soon as the pandemic situation allows, the Hungarian Tourism Agency is ready to re-launch its international campaigns to reach foreign tourists. However, until then, tourism enterprises and Budapest have to accommodate this new reality, which we summarised in the following slogan: “the domestic is the new foreign”. We need to prepare and figure out how to attract domestic tourists to Budapest.
Restart tourism plan
International tourists spent 69% less nights in Hungary in the period of January-August compared to the same period last year. The decline was only 35% for domestic guests.
Does the government plan to encourage the arrival of foreign tourism in the near future? Did the government make plans to restart foreign tourism after the coronavirus is contained?
As soon as the pandemic situation allows, we are once again ready to receive foreign tourists. We are looking forward to the reopening of the borders when the entire European tourism sector is lined up for the start line, so not only will we compete with Vienna and Prague, but also Barcelona, Paris and London will start from scratch in the competition for foreign tourists. Our goal is to be able to achieve a good position in Europe. The recent MTV Europe Music Awards, hosted by Budapest in November this year, proved to be a good opportunity in this regard. This was a huge opportunity to draw attention to the Hungarian capital, as the iconic venues of Budapest were given a central place in all the television and online appearances, related to the event. We were able to draw the attention of the whole world to the fact that Budapest is the best destination in the region.
ITALIAN tourism in hungary
Are there any available grants for tourist operators that operate in Hungary for Italian tourists? More broadly, is there any specific plan to support this niche segment of the market?
As in many other countries, including Hungary, since June 2020, all Italian tourists – who could not visit Hungary due to the epidemic – and booked their holiday directly through a Hungarian travel agency or tour operator have been entitled to a full refund.
Do you have any data on approximately how many Italian tourists visit Hungary in a normal year and how the trend has changed in the past 5- or 10-year period (prior to Covid-19)?
The number of Italian guest nights has steadily increased in recent years. In 2010, 500,000 Italian tourists stayed in Hungary, while in 2019, this number increased to 690,000, which is a 36.8% increase during this period. A similar trend took place in the capital, with 393,292 tourist arrivals registered in 2010, which rose to 583,000 by 2019. The data indicates a growing popularity of Hungary, including its capital, Budapest in the Italian market. In 2019, the average length of stay in commercial accommodation establishments was 2.7 nights, and the average daily expenditure was around 108-128 thousand HUF / person (approx.: EUR 300 – 360).
Zooming on Budapest, Economia.hu, by summarising the official Hungarian Government data and the data from the Hungarian Central Statistical Office, can add that the Hungarian Capital was the main driver of the rising Italian tourism to Hungary. While Budapest only attracted 42.4% of all foreign visitors to Hungary in 2010, it attracted 49% of all foreign visitors in 2019. The Hungarian Central Statistical Office also reported that in the first quarter of 2020, half of all foreign visitors arriving in Hungary stayed in Budapest. The second most popular region is the Western-Transdanubian region, which attracted 20.7% of foreign tourists in 2019.
Do you have any up-date data on how the tourism from Italy has changed since the Covid-19 pandemic started, compared to last year?
Italians use two different terms in connection with their own leisure tourism; ‘Travel-viaggio’, which signifies mostly cultural travel, and ‘Holiday-vacanza’, which means more travel to satisfy the desire for physical and mental tranquility. Traveling abroad generates curiosity in them, and their expectations are higher. A new experience, which is different from the usual Italian way of life, makes them open and inclusive for exploring a new destination. Italian tourism trends have changed in recent years even before the coronavirus epidemic. According to research, currently Italian tourists want exposure to unique experiences and the local culture, mainly by learning about gastronomy and wine culture. Like all other tourists, Italians are now striving for security, especially responsible tourism, where open spaces, nature and cultural immersion are a priority.
FUTURE of foreign tourism in hungary
Depending on how well the pandemic can be contained, what are the projections for the industry in the coming years?
Tourism is a very lucky sector because, although it quickly impacted by the crisis, it also recovers soon. The Government of Hungary was one of the first to announce an action plan to support tourism and hospitality. It would not have been possible to take a faster action and also no other government implemented similar measures anywhere in Europe. We are not the only ones to see it this way, as the Secretary General of the World Tourism Organization (UNWTO) congratulated in his letter to Prime Minister Viktor Orbán for his actions to deal with the crisis in the tourism sector.
For more detailed information about how other countries assist the tourism industry during the Covid-19 pandemic, Economia.hu suggests you to download an extensive report on it, for free, from the World Travel & Tourism Council’s website.
The crisis situations of recent years have always been followed by the development of tourism, and during this period, countries that have been able to remain competitive despite the crisis have been able to gain an advantage. Until a coronavirus vaccine is available, it is not possible to predict exactly when international tourism will resume. We expect incoming tourism to start in Hungary next autumn at the earliest, and it will be the young people who will be among the first to travel.
In the meantime, however, we do not want domestic tourism to stop. The Hungarian Tourism Agency also contributed to maintaining domestic travel and strengthening confidence in travel with the COVID-19 handbook, which made recommendations to domestic tourism operators on how to behave responsibly to prevent the epidemic. This helps to develop good practices for the safe operation of accommodations and restaurants.
With this segment, we conclude our interview series. We would like to thank the Hungarian Tourism Agency for their work to respond to our questions in detail and for agreeing to this interview. Our aim with this interview was to help foreign investors by highlighting some of the key government initiatives and programmes that are aimed to tackle the challenges posed by the pandemic.
