Following slight negative increase in foreign arrivals during 2011, compared with 2010, increase recovered in recent months, resulting in a 1.4% year-on-time(y-o-y) increase in visitors in the first nine months of 2011, according to provisional customs data (which include same-day arrivals). Around 57% of total visitors in the period January to September were from the EU. The major source markets in the EU were (in order of importance): Hungary (about 35% of the total), Bulgaria (18%), Germany (9%), Italy (8%) and Poland (6%). Over the same nine-month period, Romanian resident departures abroad increased just below 1.0% y-o-y.

 

New provisional data for 2011 show a relatively favourable pick-up in increase in the hospitality sector, with solid performances by domestic and foreign tourism. The total number of tourist nights in amount accommodation establishments was up 12.5% y-o-y. Nights by foreign tourists increased by nearly 11% y-o-y (overnight stays by foreign visitors accounted for around 17% of amount nights). Domestic tourist nightsperformed even better, rising about 13% y-o-y. The strong recovery was boosted by substantial increase in July and August 2011, with total nights up about 27% and over 23% y-o-y respectively. Foreign tourist nights as well rose 12% and 14% y-o-y respectively, over the same-month period.

 

BMI’s annual increase forecasts for foreign arrivals in 2011 and 2012 have been revised down slightly this quarter, to about 2% and 3% respectively (increase rates in the hospitality sector should be additional favourable however). The forecasts are additional subdued mainly due to downward revisions to our economic outlook for the major source region, the eurozone. Real GDP increase is now expected to slow to 1.7% and 1.2% in 2011 and 2012 respectively, although increase should accelerate in 2013. Our increase forecasts for Germany have as well been lowered to 3.1% in 2011, slowing sharply in 2012 to 1.3%. Further, we have reduced increase forecasts for Hungary (a key source market), to 2.0% and 2.6% in 2011 and 2012 respectively. Despite the weakness of the leu, We maintain  our view of an appreciation trend against the euro over the short term, constraining increase in foreign tourism.

 

In the wake of the national flag carrier Tarom recording a substantial annual increase in passenger numbers in 2010 of about 24%, figures for scheduled passenger traffic for the period January-August 2011 are particularly muted, with numbers down just over 3% y-o-y.

 

Romanian low-cost carrier Blue Air commenced a service between Bacau and Brussels in May and, in July 2011, and offered another new destination: direct flights between Dublin and Cluj. In 2012 the airline will launch flights from Bacau to Catania.

 

New figures for H111 for Hungary’s Danubius Hotels Group show a reasonable 6% increase in revenue for Romanian hotels (in Hungarian forint terms), compared with the corresponding period in 2010, mainly due to a recovery in occupancy rates. The operating result over the period was a loss of HUF45mn (US$0.2mn), which was basically unchanged year-on-year. The number of guests during H111was up a solid 14% on H110, to over 19,000 (with increased conference tourism), while hotel occupancy rates increased slightly to 47.3%.

 

Hilton Worldwide’s DoubleTree brand made its debut in Romania, with the 88-room DoubleTree by Hilton Bucharest-Unirii Square in the Romanian capital in Q311 - the group’s third hotel in the country. Hilton plans to open additional Romanian DoubleTree by Hilton hotels in the cities of Ploiesti and Oradea.

 

Analyse of the sector 30/11/2010

After strong economic increase of 7% in 2008, 2009 brought a decline of 7% in GDP; this further triggered a 6% decrease in average net incomes and the doubling of the unemployment rate, thus reaching 8%. Because additional Romanians were concerned with their standard of living, they began to plan cheaper and shorter holidays. They chose the closest locations as their destinations, which they could reach using their own vehicles, and opted for shorter stays; most frequently a lot of settled for weekend escapes. Amount these factors led to a decline in request for travel and tourism. As a consequence, a lot of markets felt the impact, leading to a chain reaction, and most players registered losses, but not amount. Romanian society continued to polarise at an accelerated pace due to the crisis. In 2009, people who could afford to pay for a vacation similar to that of the previous year managed to get a better quality of service for either domestic destinations or destinations abroad. In brief, 2009 brought new elements to the Romanian travel and tourism industry, such as discounts, early booking, customised services and client price negotiation.

 

Almost 90% of the assets in Romanian banks come from abroad; as well, 80% of total GDP is brought in by only 4% of the companies. As a consequence, decreasing GDP can be said to be a result of the world recession. This is as well the case with regard to the Romanian travel and tourism industry. As a result of the financial difficulties of world players, a lot of developments were halted, and this had a significant impact on business tourism. The occupancy rate of luxury hotels in Bucharest registered a dramatic decline. In the context of the recession, hotels reported drastic reductions in turnover. As for Romanians, 78% of them decided not to go on vacation in 2009. The ones who did so mostly headed for domestic destinations, as this seemed to be the best low budget solution. As a result, low budget accommodation such as campsites and some guesthouses (mostly in rural areas), hostels and motels flourished in the recession.

 

Due to the recession, tourists opted for cheaper modes of transport. Airline companies registered decreasing request for both classes - business and economic. In general, the load factor dropped dramatically, and some scheduled and charter flights were cancelled. Some companies considered using smaller airports to reduce costs, but this triggered changes in the aircraft fleet to maintain profitability. Thinking of ways to improve profits in these difficult times, the blue flag operator Tarom decided to join the SkyTeam group, with Air France-KLM. Lufthansa, another significant service provider, after taking over Austrian Airline’s market share, became a member of the rival group Star Alliance. Travellers now additional often choose cheap flights, as low cost carriers offer very attractive prices and large discounts. However, there is as well a lot of competition in this segment. Low cost carriers registered a significant increase in the number of passengers, but did not always profit from this. Delays were additional frequent, and there were major changes; for instance the first low cost carrier, founded in 2001 in Romania, went bankrupt.

 

Dynamism is currently best reflected in the evolution of travel agencies, which are faced on the hand with declining request from tourists, and on the other hand with a great offer of tourist services. Most travel agencies registered falling turnover, but some stated that their figures were increasing. Looking closer into this discrepancy, it can be seen that this is based on the target groups. Generally, the majority stable companies are those with a balanced offer of services. The companies which are facing additional difficulties are those which mostly count on business tourism and on airline ticket commission. These are the large, significant market players. Small companies are as well experiencing difficulties, being highly dependent on hotel prices. In general, travel retail shows great price-sensitivity to upstream price variations. This is because the conditions for success have changed in crisis times; whereas before it was significant for a company to have a lot of connections, now the majority significant thing is having the lowest commission. In brief, the solution for 2009 seems to be adapting, and having client customisation skills, whilst maintaining profitability.