The View 9

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FAVOURABLE KPIS CONTRIBUTE TO RISING INVESTOR APPETITE Based on STR’s available database, key performance indicators advanced further in Hungary and particularly amongst Budapest hotels, giving another lift to the overall attractiveness of this asset class in a CEE perspective. Budapest grew most rapidly amongst the more established tourism destinations by these measures, although other CEE cities coming from a much lower bases managed to record double-digit expansions in terms of prices and revenues. Despite positive tourism statistics seen over the past year, occupancy rates followed different dynamics across CEE markets. Prague took back the lead from Budapest and saw its overall occupancy rate reach 79.3% (+0.6pp y/y), as the Hungarian capital decreased 0.6pp from the peak measured in the preceding year and currently registers occupancy at 78.3%.

However, Budapest remained by far the most desirable destination and saw seven of its ten most significant sending countries register expansion in the annual number of travellers sent, particularly the V4 countries which stood for dynamic growth of 7.7% y/y. Sweden and Finland led the Nordics to a sharp decline (-8.2% y/y) in tourists sent to Budapest in 2019, whilst German-speaking countries also took a back seat and were less active in visiting the Hungarian capital than over the preceding year. The opening of new flight routes to the Far East resulted in measurably higher interest from Asia (+5.8%), where non-core countries showed greater activity than ever, whilst the number of Chinese visitors fell slightly (-0.4%). In 2019, the overall passenger traffic of the national airport reached a new record (more than 16 million) after a near double- digit increase and is on pace to hit 20 million by 2023, counting with a modest +6% per annum. The government’s commitment to further boost the domestic tourism industry was apparent in 2019 as well. As part of a wide range of tax cuts due by 2020, the VAT rate for tourist accommodation services will be reduced from 18% to 5%, thereby aiming to reinvigorate nationwide tourism and create space for measurable quality improvements in hotel services in the following years.