Continued political unrest and deepening financial crisis, plunge Hungary’s luxury market into chaos
Continued political unrest, following months of demonstrations against the changes in the Constitution implemented by the current government, coupled with a deep financial crisis have climaxed last week in the collapse of Malev, Hungary’s national airline, almost 66 years in operation. In an unprecedented situation in an E.U. country, the local and EU authorities have done little to prevent this dramatic outcome (compared to Alitalia’s case 2 years ago) which will result in a drop in tourism and a hike in airline tickets. Already, flight tickets to / from Budapest have become 20% more expensive, most regional airlines taking advantage of the complete grounding of Malev’s fleet.
New York and Beijing used to be the most profitable and most important routes from the point of view of wealthy travellers to Budapest, which has been seeing occupancy rates and average nightly room rates drop by at least 10% since the beginning of this year, the most affected being the luxury hospitality sector which has an oversupply. InterContinental and Four Seasons were last year sold for at least 50% of their value 5 years ago and other hotels are said to be for sale, especially in the capital of Budapest and the resort towns of Bük and Sárvár.
Roberto Cavalli, Emporio Armani, Fidji (Christian Dior) are among the luxury stores which closed in 2011. Market sources indicate a similar outcome for D&G and Escada among other possible closures this year. Hungary has been the worst performing luxury market for Louis Vuitton, Gucci and Burberry in Central Europe for the past 2 years.