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This paper presents the characteristics of tourism development at Lake Balaton, Hungary, with special emphasis on the physical environment, and discusses how the residents' and the tourists' perceptions of the physical impacts of tourism development affect the sustainability of tourism in the region. The methodology used to gather information on tourism's physical impacts included structured interviews with residents and tourists, unstructured interviews with the representatives of the tourist industry, a Delphi survey and a Tourism Impact Matrix. The research shows that due to the characteristics of tourism development in the region, only a certain form of mass tourism can be sustained, though in a better managed way. Both residents and tourists perceived both positive and negative impacts of tourism development – economic benefits being considered as the most significant impacts of tourism by residents. Even though local people could also identify unfavourable impacts of tourism, the support for the expansion of the tourism industry was strong. Thus regional organisations have to deal with managing the impacts of tourism and changing the local population's short-term approach at the same time.
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