As the explosion of deluxe hotels would indicate, the tourism industry is attracting a wealthier caliber of traveler with each season.

No one has been following this encouraging development more closely than Károly Szombati, who got into the hotel business right after the change of systems, on the ground floor as it were.

Charles, as the 33-year-old calls himself, owns the Hotel Charles, a one-time budget inn whose sparsely furnished rooms gave backpacking guests their money's worth.

But lately the business on District XI's Hegyalja út has gone up-market.

"I'm re-investing every penny I can and this year business is better than ever with an occupancy rate of over 70 %," said Szombati, who started the inn under the name Charles Apartments in 1991.

He said that he makes a humble profit letting out the rooms, which measure 30-40 sqm each. With breakfast, they fetch DEM 120 ($54) per day double occupancy or DEM 100 ($45) for a single.

"This year I received the three-star hotel category rating and this week I've just installed a giant neon sign above the main entrance," he said.

Szombati said that his long-term plan was to have a chain of Charles Hotels, though he is in no rush.

"This is my hobby and Work," he said, remembering back to the days in 1990 when he still worked as an employee and receptionist at a small panzió high in the Buda hills.

"That was the most exciting period as there was a big void in the market and a great demand for small apartments and inexpensive accommodation," he said.

Pensions were few and very popular with backpackers who were swarming from every corner of the globe to see the newly declared democratic state.

These days, the back-packers have given way to a new group of visitors who demand more comfort and are willing to pay for it.

"We are serving a new niche market of managers and executives," Szombati said, adding that he's gaining new revenues through corporate agreements.

Szombati made a point of always spoiling his guests from the very beginning in 1991.

He went out of his way for his guests, even providing them bus tickets so that they would not get fined by the BKV public transport inspectors.

Szombati began the business by renting a 30 sqm bachelor flat in the Socialist-era building and subletting to guests.

Soon he had secured four apartments and had guests seeking him out after hearing word-of-mouth praise for the "Charles' apartments".

Business was booming, allowing Szombati to give up his job and dedicate himself full-time to the new enterprise.

By and by, he persuaded the owners of most of the apartments in the building to sell out.

"So far I have managed to acquire 72 of the 100 apartments in this building and the restaurant downstairs," Szombati said.

The remaining 28 owners may take some time to move out, maybe as long as 15 years, Szombati guessed.

"I'm not surprised, most of the owners still here are elderly and enjoy the security, clean corridors and stairwell and the 24-hour main entrance reception service just like all our guests," he added.

Once he acquires all the apartments, Szombati will be able to do major restructuring and refurbishing. But he's managing to develop the business in other ways.

"We are now completing a small business center next to the entrance and this will be simply equipped with two computers and fax machine," he said.

He also offers bicycle rental, a small side business that Szombati provides as a convenience to his guests. He also said it draws visitors from other hotels.

Szombati said that he had to fully renovate the restaurant as the new guests were demanding more than simple Hungarian meals with live Gypsy band music.

The restaurant has a traditional Hungarian name, János, after Szombati's father, but the food is more Western-style and the live band has been replaced with soft recorded music, on the guests' request, Szombati said.