The Czech hotel market: Room for improvement
as rooms at four- and five-star hotels go for far cheaper than their Western European counterparts.
Prague's wild stag parties are giving way to more upscale visitors - both pleasure and business travelers - looking to stay in much more luxurious accommodations. The influx of visitors willing to spend lavishly has led to a boom in four- and five-star facilities. The competitive prices, however, are not what most guests are likely to remember.
March saw the opening of Clarion Congress Hotel Prague, a four-star hotel with meeting facilities in Prague's otherwise formerly industrial and working class Vysočany district. There are more high-end hotels set to open in the next two years, including ones under the aegis of famous hotel operators such as Rocco Forte & Family, Le Meridien and Sheraton, a brand of Starwood Hotels & Resorts Worldwide. The competition in the hotel segment might be good news for visitors seeking lower prices, but experts say those seeking luxury may be left unsatisfied.
Crowded market
In spite of the already tough competition for customers, more hotel companies are willing to enter the market. Some 12 four- and five-star hotels will be launched this year and a further three luxury hotels will be opened in 2009 in Prague, according to property consultancy and commercial real estate service provider Jones Lang LaSalle. Investments in the hotel industry top E100 (zł.346.5) million a year.
Even though the number of tourists to Prague has been rising, the increased competition has meant that hotel occupancy rates have been dropping since 2004. In 2007, the occupancy rate of all hotels decreased by 0.69 percent year-on-year, according to a report by Jones Lang LaSalle released in March. Almost 4,000 new rooms in all classes have been added since 2004, giving Prague a total of more than 23,200 rooms. Currently, some 11,000 hotel rooms in Prague, or 47 percent, are in four- and five-star facilities.
But luxury hotels have been winning tourists over their less-fancy rivals. While pensions and three-star hotels had only a 37.4-percent occupancy rate last year, four- and five-star hotels had 56.5 and 62 percent occupancy rates, respectively.
Many hotel operating companies have had to bide their time before entering the market since they could not find a suitable location. According to sources it was "pure despair" that made Sheraton locate its Sheraton Prague Charles Park Hotel (pictured) on itná, one of Prague's most traffic-congested and noisy streets. The hotel is scheduled to open Jan. 1, 2009. The Clarion Congress Hotel Prague, based in Vysočany, might also experience difficulties for being too far from the city, real estate experts say.
Many hotel firms have started seeking sites in secondary cities such as Ostrava, North Moravia; Brno, South Moravia; and Plzeň, West Bohemia, according to Alister McCutchion, executive vice president of Jones Lang LaSalle.
Not all stars are equal
Hoteliers say the number of stars does not correspond to the quality the customer actually gets. Although quality has improved a lot, especially in Prague, foreign customers might still sometimes be unpleasantly surprised.
The problem is mostly cultural, said Pavel Hlinka, president of the Czech Association of Hotels and Restaurants (AHR ČR). "A Czech cannot serve. He will not bow down, greet or smile," Hlinka told CBW.
The problem with stars signifying quality is been complicated by the fact that the local deluxe hotels have become considerably cheaper than their counterparts abroad. Recently, luxury hotel operator MaMaison Hotels & Apartments complained that since it launched in Prague it has met with enormous price dumping. MaMaison operates hotels in the Czech Republic, Slovakia, Hungary, Poland, Croatia and Russia.
AHR ČR's Hlinka admitted the situation has worsened, but said there is nothing the hotel association can do about it. "Although many critics say Prague is extremely expensive, that does not apply to the hotels. Commonly you can get four or five stars for the price of three stars. Practically, this means you can sometimes get a room for some E50 or E60 [zł.173-208]," Hlinka said, adding that such prices correspond with those of "an average dingy hotel in Bavaria."
But the trend of falling room rates seems to have bottomed out and reversed, according to the Jones Lang LaSalle report. After falling for several years, the average room rates went up 2.1 percent to around E110 (zł.381), and room yield improved by 1.3 percent to E75 (zł.260) in 2007. The report also predicts that occupancy rates will soon stabilize.
Short-sighted policies
In any case, the hoteliers are aware that the lower prices do not help to preserve the reputations of famous hotels. Jan Adámek, the president of the Prague Convention Bureau (PCB) said international hoteliers are hurting themselves with the price cuts, but foreign managers don't dare to institute prices that would be required to maintain the usual brand standards. "These [foreign managers] are usually people coming to Prague for two- or three-year assignments. The only thing they are interested in is earning their bonus, which depends on their performance [in keeping the hotel booked] and they absolutely do not care whether they destroy the local hotel market," he said.
Markéta ebková, marketing and PR manager of Hilton Prague and Hilton Old Town declined to compare the company's price policy in the Czech Republic with other European markets. "There are multiple price levels that depend on the type of room, time period and so on," she explained, adding that she was not sure "whether the company really wants to disseminate this type of information."
One out of every 10 foreign visitors to the Czech Republic stays in a five-star hotel. The capital saw slightly more than four million foreign tourists in 2007, an increase of 8.2 percent, according to the Czech Statistical Office, while nationwide there were 6.7 million tourists, a 3.8 percent increase.
In 2007, nine upscale hotels opened in Prague: eight four-star hotels and one five-star hotel, according to the Jones Lang LaSalle report, which added that foreign tourists make up almost 90 percent of all the guests at Prague hotels. The new hotels brought the totals up to 28 five-star hotels and 109 four-star hotels in the capital at the end of the year.
Adéla Vopeˇnková
This is an edited version of an article originally published in Czech Business Weekly.
