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"1989 was a dream come true. But life is more complicated"

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Gyula Harbula, circa 1989.

Gyula Harbula in 2004.

After 15 years of change Hungary is focusing on the future

Gyula Harbula, Hungarian hotel manager, speaks in Budapest with EBRD press officer Axel Reiserer.

It may be a measure of how much the last 15 years have changed Hungary’s national psyche. Once renowned for loudly exclaiming égeszségünkre (“cheers!”) and smashing their glasses of delicious pálinka when celebrating, Hungarians these days display a distinctively business-like attitude. Coping with the challenges and opportunities of a thriving market economy has left little room for excessive partying. Sobriety is the new cool in a country which used to lead the world in cirrhosis of the liver.

Even the 15th anniversary of the end of communist rule hardly evokes any sentiments. The country would much rather face the future than poke at its past. Not that the Hungarians have no reason to be proud of their contribution to the end of communism: It was here that the Iron Curtain was first dismantled, in August 1989, and exit permits were issued to tens of thousands of East German citizens. This was the death knell for the geriatric regime in East Berlin. However, amidst a government crisis in Budapest this particular anniversary passed barely noticed, despite a high-level “thank you” visit by Germany’s chancellor Gerhard Schröder.

For Gyula Harbula, CEO of hotel operator Accor-Pannonia, the mood of industrious concentration is entirely appropriate: “1989 was a dream come true. It was a very exciting period in politics and business, when we regained our liberty and freedom. But life is more complicated.” While acknowledging the enormous progress Hungary has made since then Harbula also points out that much remains to be done: “I do not think we are a modern society yet. We sometimes lack flexibility, and our education and training systems are sometimes insufficient.”

Harbula joined the company he now heads in 1965. At the time, Hungary was attempting its first, cautious steps towards reform of socialist doctrine, introducing elements of competition. So it happened that Pannonia, founded in the late 1940s to focus purely on operating restaurants, after the communist takeover and nationalisation of private enterprises, ventured into the hotel business in 1966 on government instructions.

The idea was to create a competitor to the then monopolist HungarHotels. Pannonia began with hotels in the Lake Balaton region, later adding lodging in Budapest. The company expanded in the early 1980s, when Austria extended soft loans to Hungary in exchange for facilitating travel between the two countries. When communist rule ended in 1989, Pannonia operated 43 hotels, 100 restaurants and bars and had 4,500 employees.

Today the company runs 22 hotels with 1,500 staff.

Between these two figures lies the story of comprehensive change which so many other companies and their employees had to master in Central and Eastern Europe in the past 15 years. In the early 1990s Pannonia sold its restaurants and smaller hotels to private investors, before it was privatised in 1993. The French hotel giant Accor bought 51 per cent and created an investment holding company, with partners including the EBRD, which today holds 99 per cent in the re-named Accor-Pannonia.

The new partners brought in capital – but also insisted on completely new management and technical systems. All the hotels were refurbished. “Today we have the same standards and productivity as competitors in the West,” says Harbula.

Despite intense competition in the Hungarian tourism business, the restructuring bore fruit. In 1994 the company reported results before tax of HUF400 million – in 2001 the results were more than 12 times higher with HUF5 billion. After a worldwide crisis in tourism precipitated by 9/11 the company is now back on track, successfully targeting individual and business travellers rather than tour groups.

The EBRD, as a shareholder, has played an important role in the restructuring of the company, Harbula says: “The Bank has always been very active and brought new views and approaches. Taking a long-term view, the EBRD gives a company room for development.”

Looking back over the past 15 years, Harbula admits that adapting to the rules of a market economy has not always been easy. “But in Hungary, at least we were not unprepared. Even in the period of darkness we always maintained private entrepreneurship – at least on a small scale. Hungarians have a strong sense for entrepreneurship,” he says. “We were very optimistic in 1989 and I think most people are very happy with the changes. But life has become more complicated. Competition means that there is much more pressure. Our dreams were perhaps faster than reality.”

And Harbula´s dream for the new Hungary? “Twenty years ago I dreamt of the freedom to travel to Austria for two weeks. Now my dream is that we will achieve in 25 years what Austria has become in 50 – a stable democracy with a high standard of living, a strong economy and a clean environment.”

2 November 2004