Q&A: The growth potential of the tourism sector in Central and Eastern Europe
Central and Eastern Europe (CEE) is home to 20% of the European Union’s population and has a GDP per capita growth rate almost double the EU average.
The CEECs have already reached an average level of wealth that makes holiday travel accessible to most, since 60% of the population travels at least once a year. Considering that around 80% of these trips are national or regional, for historical and financial reasons, it can be considered a rather closed market.
COVID has only amplified these trends, making the CEE domestic tourism industry one of the fastest growing segments of European tourism.
Szallas Group, one of the region’s leading national online travel agencies, recently released its comprehensive report on the CEE region. CEO József Szigetvári explains the purpose of the report and the potential for travel and tourism in the CEE region.
Can you start by telling us more about Szallas Group and the scope of your work?
Szallas.hu was founded in 2007 as a Hungarian OTA company, focusing on the needs of Hungarian tourists. With its national focus, strong customer service and strong brand, Szallas.hu has become the market leader for OTAs in the Hungarian hosting market. The market share of 15% in 2015 has doubled to reach 31% by 2021, surpassing all of its global competitors.
As our strategy proved successful in Hungary, in 2018 we started acquiring several online tourism companies with a similar culture and business strategy in the CEE region. These acquisitions gave the Szallas Group the largest local OTAs in Hungary, the Czech Republic, Romania and Poland with hosting partners in Croatia and Slovakia as well.
With more than 87,000 accommodation partners, 2.5 million guests accommodated each year and nearly one million annual reservations, the Szallas Group is the leader in the internal market of the EEC with a total annual transaction value of 180 millions of euros.
We are dedicated to growing the CEE tourism sector and believe that such comprehensive reports as the CEE Tourism Report 2022 help raise awareness of this growing market internationally.
This is the first time that the Szallas Group has published its full report on tourism in CEE 2022 – why did you think the time was right to produce this analysis?
We feel that after the COVID years, the regional tourism industry is going through significant structural changes. But having market sentiment is different from having facts based on data.
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So, in fall 2021, we partnered with NielsenIQ and conducted an online survey of over 5,000 people, consumers and hoteliers, in Hungary, Romania, Czech Republic, Poland and Croatia. Using the survey data, combined with statistics from regional tourism agencies and the Szallas Group’s own booking data, we were able to compile more information about the CEE tourism industry than ever before.
At the end of the COVID period, the Szallas Group reached a new level, becoming a major player in the region. And we believe that with success and size, comes responsibility. That’s why we’ve released the CEE Tourism Report 2022 and made it freely available to everyone in the industry.
What are the most important trends related to CEE tourism that stand out to you from the 30-page report?
The predominant impact of the COVID period is that customers have developed a stronger preference to book with accommodation providers that offer free cancellation options. Although in some areas with high demand, such as the Croatian coastline, hotel providers may maintain their strict cancellation policies, in most areas they have become more flexible to ensure higher occupancy.
A second important trend is the strong digitization of the industry on several levels. On the customer side, the rise in the share of bookings made through OTAs was similar to trends seen in other e-commerce sectors, but increased customer demand for online payment solutions has also shifted priorities. From a hotel perspective, the increased spread of channel managers and PMS in the region has also been spurred by government regulations in some countries. Additionally, the focus on digital solutions has been a clear response from hoteliers to rising costs and a lack of skilled labor. Thus, the COVID period has led to a leap in the digitization of the entire tourism industry in the CEECs.
And the third important trend to highlight could be the increasing importance of intra-regional travelers for CEE hoteliers. Due to COVID-era travel restrictions and the instability caused by Russia’s war on Ukraine, the number and share of global travelers has declined significantly in major tourist destinations such as Prague, Karlovy Vary, Budapest, Balaton and Krakow. With the absence of global tourists and the increase in the number of tourists from the CEE countries, the region has become even more self-sufficient. Local and regional tourism agencies have also started to focus more on promoting regional destinations for regional tourists.
You mention the instability caused by the war in Ukraine. Can you explain how this conflict has affected the tourism industry in the CEECs?
Since the start of the war, we have worked tirelessly to support refugees both as a business and as individuals. We share special accommodation listings on all of our OTA products to help refugees learn about free or discounted accommodation options.
In all countries, we are receiving higher booking numbers than 2019, and we expect 2022 to be a year with the highest booking value ever in our CEE domestic travel markets. It seems that domestic and even cross-border tourism from the CEECs will continue to grow. Although there is more instability and an increase in fuel prices, the desire of the 90 million citizens of Central and Eastern Europe to travel is undoubtedly still there. We see all the lessons of the COVID crisis extendable in EEC and in our industry to future crises to come. If long-distance travel is unsafe or expensive, local and regional tourism will grow even stronger than it otherwise would.
Why have local Szallas Group OTAs become so important, and why is the CEE region special in this respect?
Central and Eastern Europe is made up of several small countries with their local languages, local regulations and local financial systems.
One of the main advantages of local OTAs are the local, accessible and friendly call center agents who can be contacted for assistance even after booking. Thus, the call centers of local OTAs have become the number one expert support in the event of a problem concerning the reservation or accommodation. For example, during the COVID period, when regulations were almost impossible to follow, it was local OTAs, such as Szallas.hu or Hotel.cz, that provided the most accurate and easily accessible information on travel possibilities. .
Furthermore, in most Central and Eastern European countries, local governments consider tourism as a strategic industry. For this reason, there are several national payment solutions supported by the government, such as the SZÉP card in Hungary or the Tichet de Vacanță in Romania. These special payment solutions are not supported on global OTAs, so domestic OTAs may provide the best payment solution for EEC customers.
And thirdly, each country has its own history and patriotic citizens who have a positive leaning towards local brands more than the big global giants who may have great technical solutions but can also be considered a bit like the colonizers, dictating the terms .
What are the main trends shaping CEE tourism, for example with respect to dynamic packaging versus stand-alone components?
This trend is only beginning to increase, and at the moment we see it especially in the large hotel chains. There are many SEO players that make it difficult to get dynamic packaging. We expect this trend to be strong across the region over the next five years.
Right now, as our market research and report says, the top travel trends are ‘non-hotelization’ – that is, the rise of guesthouses and apartments isolated; the growing popularity of intra-regional travel; and the need for flexible accommodation booking and modification options, as well as appropriate hygiene measures (due to COVID). Hosts are trying to meet these needs by digitizing their ads, communications and payment solutions. We are also working on developments that make it easier for them to set up their payment solutions.
What are your plans and projects for the future?
Well, in addition to managing the huge volume of incoming bookings for all Szallas Groups products, we are hosting a free CEE 2022 Tourism Trends webinar on June 1st. We will join forces with the leaders of Google CEE, D-EDGE CEE and Previo to share data on the upcoming trends for the CEE tourism industry in 2022.
Register now for the Szallas Group webinar to learn more about its 2022 CEE Tourism Trends report.