THE EXAMINATION OF THE RELATIONSHIP BETWEEN TOURISM AND

COMPETITIVENESS IN HUNGARY REGARDING THE IMPACTS OF THE

GLOBAL ECONOMIC CRISIS

J.KÁPOSZTA and [Link]

Institute of Regional Economics and Rural Development,
Faculty of Economics and Social Sciences, Szent István University
H-2100 Gödöllő, Hungary

KEYWORDS: economic crisis, crisis management, tourism, tourism tendencies,

economic competitiveness
RUNNING HEAD: The major correlations between tourism and competitiveness

ABSTRACT

In our study we are dealing with tourism as one of the national economic sectors and
its relations with the economic competitiveness regarding the economic crisis.
According to the estimates of WTO, tourism produces approx. 10 % of the GDP
globally. According to several studies, in Hungary it accounts for about 5% of the GDP,
although in the case of certain regions it has even more significant role. In gerenal,
tourism has become more and more significant in the past decade both globally and
nationally until the crisis occured. Based on the long-term predictions, the rising trend
will continue in the future: its economic role will strengthen, resulting in the
improvement of the economic competitiveness. However, due to the unstable global
economic situation, the increase in tourism significantly slowed down last year. The
crisis had and still has worldwide influence, which can be clearly seen in the tourism
sector as well. Trends, habits and demands are changing, but the people are ready to
give up a lot of things due to compromises, but not the travelling. Domestic trips may
come to the frontline, resulting the increase in the contribution to GDP and improving
the economic competitiveness.

INTRODUCTION

Based on the history, we can state that economic crises facilitate developement, since
they require serious efforts and cooperation. Moreover, the responses to the short-term
crises may be linked to the proposals for long-term problems.
They can strengthen the structure of the whole tourism industry which can have
positive effects on the economic competitiveness of Hungary. The financial collision
and the global economic recession made the situation of tourism more difficult, which
moderate the consumption both in short- and middle-terms. The crisis has negative
impacts on not only private people but on businesses. According to their difficult
economic situation, the number of business trips and conferences has also significantly
dropped. The general tendency in the holiday tourism is that foreign trips to close
destinations and domestic trips are becoming more and more popular. The duration of
stay and the money spent on trips reduce. In order to reduce the costs, the passengers
buy fewer services, while they insist on high quality.

The crisis has less influence on luxury trips, the demand for such trips is further
increasing. As mentioned in the abstract, the number of foreign holiday trips increased
by an average 7% annually between 2004 and 2007 (Manfred, 2007). However, it halted
in the second half of 2008 and this trend is expected to continue in 2009. In yr-on-yr
comparison, the international tourism declined by 8% in the first quarter of 2009.
Between January and March, 269 million tourists traveled abroad worldwide, which is
22 million fewer than in the same period of 2008. The crisis had rapid impact on
Hungary’s tourism, similarly to other industries. The number of both domestic and
foreign tourists has dropped, still we can benefit from this situation. Due to natural,
gastronomical and cultural endowments of Hungary, it can be a perfect place for
leasure-time activities. Based on the abovementioned, due to the income spent in the
country’s territory, economic growth and improved competitiveness are expected.

MATERIALS AND METHODS

The aim of the study is to examine the changes in Hungary’s tourism due to the new
situation, paying special attention to the change in the number of foreign visitors and
consumer demands. We have based our research primarily on the database of the CSO
available for 2008 and 2009. We present the changes in tourism on charts and graphs as
well. In addition, with the help of a SWOT analysis, we show how the competitiveness
has changed in Hungary, with special attention to the tendencies of tourism. Due to a lot
of natural beauties, spas, touristical attractions and busy cultural life, as well as its
developing infrastructure and reviving spa culture, Hungary is attracting increasingly
high number of foreigners. Castles, historical places, museums, cultural, archeological
and folk inheritage welcome the visitors here. Therefore we wanted to examine the
number of foreign visitors to Hungary.

Hungary has long been among those receiving countries where there is a price-value
balance and where attractive travel offers and services wait for the visitors. In our
opinion, tourism responds to the changed possibilities and requirements relatively fast
(Villányi et al., 2007). In the Table below we can see the distribution of the foreign
visitors according to continents:

Table 1.
The distribution of foreigners visiting to Hungary

2005 2006 2007 2008

FROM
WHICH Thousand people
CONTINENT
Europe 37649 40008 41471 38553
Asia 344 348 373 368
Africa 17 20 22 21
America 490 521 533 549
 Australia 54 66 68 63
Total 38554 40963 42399 39554

Source: CSO, own designing, 2009.

The Table above well displays the share of visitors between 2005 and 2008. In 2005,
38.5 million people visited Hungary, while in 2008 this figure was 1 million higher.
Although we need to add that in the years between we could observe continuous rise,
so the data for 2008 is about 7% lower than that of 2007. Despite of this, the economic
competitiveness data reflect that the tourism still has favourable influence on the
economy, since the money spent within the country borders can be returned into the
economy, boosting its development (Magyar Turizmus Zrt., 2008) . 98% of the foreign
visitors came from Europe, 83% from the European Union, while 70% from the
neighbouring countries. 85% of those who crossed the Hungarian borders from the
neighbouring countries came from Romania, Slovakia and Austria. As we mentioned
earlier, in 2008 there was a decrease in the number of foreign visitors compared to
2007. The figure in 2008 was 39.5 million, while that of 2007 was 42 million, therefore
we can observe a halt in the continuous annual increase of 3–7%.

After examining the number of foreign visitors, we also need to examine the duration
of their stay. It would be interesting to see if there is coherence between the duration of
stay and the money spent, the quality and quantity of services taken. According to a
recent survey by Eurobarometer, due to the economic crisis only one in six Europeans
goes on holiday this year, and one-third state that the economic crisis has influenced
their summer plans. However, those who go on holiday, travel for only shorter periods
and especially in the pre- or post-season.

The signs of the crisis could alraedy be clearly seen both in the 2007 and 2008
touristical data, because we can see the shift towards the short-term holidays. The
number of visitors coming for only one day has been slowly increasing since 2006,
while that of those who come for 4 or more days has been decreasing. The number of
those who come for 1-3 days fell in 2007 by 7%, but the decline was not significant,
because their number started to rise again in 2008.

Figure 1.

The distribution of tourists visiting to Hungary according to the duration of stay

 70000

60000

50000
2006
40000
2007
30000
2008
20000

10000

0
Visitors for one day Visitors spending 1- Visitors spending
3 nights more than 4 nights

Source: CSO, own designing, 2009.

We considered it important to examine how the crisis had influenced the duration of
the foreigners’ stay in Hungary. On the Table above we can clearly see that between
July and September 2008, the tourists preferred longer trips. Compared to this, there
were only a few who visited our country for 1-3 days. Athough, after the crisis, this
figure dramatically decreased and it started to increase again in the second quarter of
2009, reaching only the 50% of the previous figure. Among those who came for more
than one day, the duration of the short trips rose by 0.2%, while that of the longer trips
dropped by 1%. The average duration was 2.5 days.

Due to the seasonal character of our tourism, both the number of visitors and the
duration are the highest in summer – in the third quarter. 36% of the foreigners arrive in
that period with 34% of those who come for more than one day. Obviously, the high
figures of the third quarter can be considered the tendencies of the peak season as well.
At the end of 2007, Hungary joined the Schengen zone, resulting in the free border
crossings among the countries and the abolishment of the border control on the borders
with Austria, Slovakia and Slovenia. Passengers coming from or going to any Schengen
countries have not been controlled at Ferihegy either since 1 April 2008. Opening the
abovementioned borders has clearly boosted the traffic.

As it was mentioned in our introduction, the Hungarian touristical regions are

various from several aspects, e.g. the quantity and quality of the touristical services and
the related competitiveness. In general, in those regions where there is a wide range of
touristical services, the GDP values are higher as well. Therefore, the spatial
competitiveness shows also favourable picture in those NUTS II regions.

In Hungary there are nine touristical regions with their own individual touristical
supply. These regions are as follows: North Hungary Region, Tisza Lake Region, North
Great Plain Region, South Great Plain Region, Budapest-Middle Danube Region,
Middle Transdanubia Region, West Transdanubia Region, South Transdanubia Region,
Balaton.
 The regions are defined on the basis of Act 4/2000. (II. 2.) by the Ministry of
Economy, defnining nine regions instead of the former eight. The territory of the
regions differ from that of the other administration units e.g. county, statistical sub-
regions, holiday district and that of the statistical regions defined by the Act 1996. XXI
as well. We had to create them because the European Union primarily supports the
development of the regions and created a statistical system called NUTS system. In
Hungary there were two aspects considered when creating the regions: the borders of
the counties must match those of the regions and the population of each region would be
nearly the same.
Figure 2.
Touristical regions of Hungary

Source: [Link]
Hungary_colour.png

Our most important sending markets had various representations in the different
touristical regions. At Lake Balaton and Budapest-Middle Danube Region the Austrian
and French visitors contributed to the positive balance, while in West Transdanubia
Region the number of Italian, Austrian and American visitors increased sharply. In the
other regions, there was only slight increase in the traffic from the different markets. At
Lake Balaton, the number of German and American tourists has dropped, while in
Budapest-Middle Danube Region that of the Dutch, Polish, British, German, Romanian,
Spanish and American visitors had the same tendency. In North- and South Great Plain
Regions the Romanian, in North Hungary Region the Polish, in Middle Transdanubia
Region the British and the German, in West Transdanubia the German and Romanian
tourists spent far fewer nights here than earlier. The nights spent by tourists at Lake
Balaton and in Budapest between January and December 2008 were 2 and 3% lower
than one year before, regardless that the number of visitors to Lake Balaton showed
decrease only.
The touristical traffic exceeded that of the same period of the previous year in
West Transdanubia, North Great Plain Region and South Great Plain Region. The
share of foreigners in the total number of visitors in the first three months of 2009
represented 42.4%, while in the nights spent, their share was 47.6%. The incoming
tourism was determining primarily in Budapest-Middle Danube Region Region, where
the foreigners represented three-fourth of the guest nigths.
Figure 3.

The share of foreigners who spent minimum one night in a Hungarian region, 2008

Source: CSO, own editing, 2009.

We found it interesting that the rate of nights spent by foreigners was much higher in
West Transdanubia Region (39.8%), at Lake Balaton (36.4%) and in Middle
Transdanubia Region (34.6%) than in the other regions. It is in close correlation with
the spatial competitiveness, since apart from the competitiveness figures of Central-
Hungary, the competitiveness indicators were the highest in these three reions in the
past few years.

The number of nights spent by foreigners shows high territorial concentration.

More than eight-tenth of the foreign nights were registered in the three most popular
regions between January and March 2009: in Budapest-Middle Danube Region
(62.6%), in West Transdanubia Region (11.7%) and at Lake Balaton (11.5%). However,
there is a remarkable and unbelievable decline in the second quarter of 2009. While at
the end of 2008, 43% of the tourists coming for more than one day spent their leasure
time in Budapest, this figure decreased at the beginning of 2009, reaching only 9.5% in
the second quarter. The same dramatic decline could be observed at Lake Balaton, from
5.3% to 1.9%. The “competition” in the second quarter of 2009 was “won” by Middle
Transdanubia Region, South Great Plain Region, West Transdanubia Region and North
Great Plain Region.

The current unfavourable effects influence mainly the competitiveness of

Budapest. One of the reasons is that most of the business trips concentrate on the
capital. Companies either book for shorter periods due to cost-savings or cancel
their bookings. On the other hand, under more difficult circumstances the number of
shorter trips in the off-season decreases (e.g. sightseeing) and the internal demand
cannot offset the decline in the number of foreigners in the capital.

Those who come for more than one day – with an average duration of 7.1 days –
came mostly from Germany and Austria. The number of visitors has slightly increased
from both countries compared to the same period of 2008. The number of tourists
coming for one day rose by 7%, out of which 40% was just traveling through Hungary.
The rate of daily shoppers is also high (37%), rising to one and a half times higher rate
in one year compared to the previous year. Most of the people who come for one day
and who are not from the neighbouring countries just travel through our country and
those coming from Bulgaria and France all just travel through. Out of the neighbouring
countries, the highest rate of those who travel through is from Romania (71%). The
most people came from Austria and Slovakia with touristical purposes.

In 2008, foreigners spent 97.4 million days in Hungary all together. Days spent by
those who came for one day – which represents one-third of the total number of days –
was almost unchanged compared to the data of 2007. The Figure below shows that their
expenses have increased significantly. They spent 90 million HUF more than in 2007
despite of the fact that there was not any change in the number of visitors, which has a
very favourable impact on our economy. Despite of the crisis more people visited our
country for one day in the first half of 2009 than in the same period of 2008, and their
expenses exceeded the data of January-June of the previous year with HUF 44 million.
The cost per capita per day in 2004 was HUF 8,900, rising to HUF 10,500 to 2008. That
figure is HUF 12,800 in the first quarter of 2009.
Figure 4.
The number of people staying for one day and their expenses

350000

300000

250000 2004

200000 2005
2006
150000
2007
100000 2008

50000

0
Share Expenses

Source: CSO, own designing, 2009.

The case of those who come for more days is the similar to that of those coming for
one day. In 2008, the number and the share of those who came for 1-3 days decreased,
but their expenses are in reverse correlation with it. According to the data fewer people
wished to spend some time in the country, but those who have come, spent almost HUF
20 million more than in 2007(Nagy and Tóth, 2008). Comapring these data with the
 actual year we can state that though far fewer tourists arrived between January and
June in 2009 and such low figures could not be observed in any quarters of 2008, they
spent even far more on the services. In addition to the analysis of the CSO data, we
have also prepared the SWOT analysis of the Hungarian tourism industry, thus we can
have quality factors added to the quantitative features to find out and define the
fundamental correlations.
Table 2.

Strengths Weaknesses

 Central location in Europe  High seasonal concentration

 Widespread touristical investment  The country is not really well-known,
opportunities lack of image
 Various touristical attractions  Lack of client-oriented approach,
 Lake Balaton is the biggest sweet short-term profit maximalization
water lake of Central-Europe, suitable  Inapprorpiate utilization of cultural
for family holiday and sports values
 Budapest is a unique metropolis  Inappropriate infrastructure
 Medical factors for touristical  Shortages in environmental culture
purposes, the leading thermal water  Lack of complex products and
supply of Europe services
 Individual gastronomy  Lack of language skills
 Architecture, rich cultural heritage  High territorial concentration
 Traditional craftsworks, art life (Budapest, Balaton)
 Bridge between cultures  Lack of necessary development funds
Opportunities Threats

 Targeted development policy  Lagging behind in sustainable

 Strengthening role of World development
Heritages and national parks on the  Occuring of terrorism
touristical markets  Influence of cultures on one another
 Expanding demand for new, special  Worsening price/values rate
touristical attractions and events  Fashion-oriented character of the
 Increasing need for guaranteed holiday travels’ market
program supply
 Continous development of the role of
IT and internet
 Expansion of the creative incentive-
demand
 Increasing number of health
touristical investments and programs
 Increasing role of air transportation
Source: own research, 2007.

After carrying out the analysis, it can be stated that tourism is one of the most
dynamically developing driving force in the world. Spectacular and successful
developments have been carried out in the sector in Hungary recently. The single
European internal market, the ever-increasing competition in tourism, the changing
consumer demands and the traveling forms all justify that the development of tourism
must be done consciously and along definite objectives.

RESULTS

Taking part in tourism has several benefits. Based on our research we can highlight
the followings.
 It is good to our health (going on trips, going to wellness spas, taking massage
etc.). Basically it may increase the years of our lives lived healthy (unfortunately
most of the Hungarians suffer from severe locomotor, rheumatic and neurotical
diseases, although we have a lot of thermal water which can be used for medical
purposes);
 It facilitates the gaining of new information, e.g. languages or our own culture
and the adoption of other cultures;
 It has significant role in forming the approaches of new generations
(friendliness, hospitality, tolerance);
 If it is done right, it maked more income, it creates and maintain jobs, thus it
increases the standard of living.

Based on our research we can characterize the status of the national tourism with
the following thoughts: Regarding the money spent by one tourist we are in the middle
of Europe, reflected by the competitiveness ranks related to tourism as well. We lag
behind our possibilities, which is due to the lack of high quality and complex services
and the inappropriate price/value rate, especially in the countryside. The territorial
concentration is quite high; Budapest and the Balaton region represent almost 50% of
the performance of the tourism. It needs to be highlighted that the seasonal
concentration is very high. There are only few attractions that are suitable for making
the season longer, so the peak season is very short making the touristical service
providers maximalize their profits.

Furthermore, according to us, we need to focus on quality-oriented behaviour, so

that the acknowledged and high quality as well as the physical and communication
access may come to the frontline instead of the price-competition and so that the major
competition factor among the competitors could be the supply of attractive additional
services. The sector must provide safe existence and attractive perspective for both
the entrepreneurs and employees, the rentability of businesses must improve to take the
enterprises aiming at short-term profits away from the market. We need to distinguish
those destinations and services that form our activity to become environmentally
conscious. Due to the development primarily of the health tourism, cultural, natural
and landscape attractions as well as congress tourism, Hungary may become even
more well-known and preferred destination in the coming 8-10 years.
Overall, we have come to the point that the touristical regions cannot be handled in
their current structure in long-terms, because they are based on the county borders. The
destinations should be dealt with according to their endowments in their own
natural unit. Regarding the preferred destinations, the international market position of
Budapest has to be maintained, while in the case of Balaton, the aim is to form it to
the largest multi-seasonal leasure center of the country in the next decade. Based
on the abovementioned, we have drawn up a few recommendations to improve the
competitiveness of the touristical regions:

 It would be recommended to focus on the domestic market and the

neighbouring countries as well, targeting our resources and marketing actions
to the these countries more than earlier;
 A more moderate and maintaining marketing is necessary on farther markets;
 It would be important to take advantage of the benefits of transit traffic; to
create the service background along the highways and motorways;
 In order to receive visitors, we need accomodation supply that meets the
market demand. It is important that the territorial distribution of
accommodation and catering places must match that of the touristical
attractions, i.e. to cretate complex touristical supply. The quality of the famous
Hungarian hospitality must reflect its fame and friendly and reliable places must
serve both the tourists and the local population;
 Meeting the EU’s subsidiarity principle, the objective is that the funds and the
decision-making levels must be at those levels where the touristical tasks are
carried out in the most efficient way.

DISCUSSION

Summerizing the abovementioned we can state that the crisis has worldwide impact
and this can be established by the touristic tendencies as well. The trends, the habits
and the demands have changed, but the volume of the income originating from
tourism has not changed in Hungary. Therefore, tourism still has positive influence
on competitiveness. In our opinion, today’s world money has a very determining role
and the increase in the figures might be due to the decrease in the costs. But the case
could even be worse if people did not think in a way as they do nowadays. The are
ready to make compromise, to give up a lot of things, but the demand for travels, for
relaxing and for new experience is still in all of them and it will not change.

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[Link]
Hungary_colour.png
download: 09. szeptember 2009.