The conference market has helped the Prague hotel market to recovery in 2000 and supply is set to grow
After three years of recession, the hotel market in Prague had a very good 2000. “The International Monetary Fund conference last September gave the city much publicity and brought it back on to conference organisers’ agenda,” explains Charles Human, director of hotel consultants HVS International.
According to Jones Lang LaSalle Hotels, the occupancy rate in 2000 rose to 75%, a 10-year high. Driven by the conference market, the average room rate rose almost 20% to Kc4,240 and room yields by a third, to Kc3,186. A cut in VAT from 22% to 5% also helped, since not all of the reduction was passed on to guests.
Conference demand is expected to continue boosting the market. Prague’s Congress Center has been refurbished and hotels have been investing in their facilities. However, the high levels of growth recorded last year are unlikely to be repeated.
The tourist trade is also growing, with individual travellers and leisure trips accounting for 40% of business. Prague’s status as a short-break destination is improving. The city can no longer accommodate tourist demand in the traditional summer period, so the season is being extended. This has helped improve the occupancy rate.
At the top end of the market, Prague now has 10 five-star hotels with around 2,840 rooms and 39 four-star hotels with another 5,470 rooms. There are also three four-star hotels under construction, which will add close to 600 rooms. And Human thinks there are good prospects further down the ratings. Prague, he points out, has a lot of three-star hotels, but they are not run by well-known chains. “There is still more room for a few strongly branded three-star hotels in this market,” he says.
Meanwhile, the supply pipeline is swelling. “There are another 1,250 rooms in various stages of planning but we do not expect that all of them are likely to proceed in the short term,” says Nick Marsh, executive vice president of investment sales at JLL Hotels. He expects that other international players, such as Starwood, Le Meridien, Crown Plaza, Hyatt and Sheraton will seek to enter the market. In the first quarter of this year, three new hotels opened their doors. The Four Seasons is Prague’s first true deluxe hotel, while French operator Accor inaugurated one each of its Ibis and Novotel brands.
Prague Investments’ new project
And on Prague’s Old Town Square, the five-star Ritz-Carlton U Sixtu is under way. The hotel will occupy a complex of 10 historic buildings and is scheduled to open in the summer of 2002. The €60m scheme is being developed by Prague Investments, which has established a reputation for refurbishing landmark buildings in Prague. Three phases will provide 144 rooms and the project also includes 1,500m2 of retail space.
Investment transactions in Prague have been few and far between, with only two high-profile deals in the past two years. In 2000, Hospitality Europe paid $63m for the 314-room Renaissance Prague Hotel and the adjacent Gestin Centre. The previous year, Strategic Hotel Capital Inc, which is backed by Goldman Sachs’ Whitehall Fund, Prudential of America and the Government of Singapore Investment Company, bought the five-star Inter-Continental for $103m. It has 36 rooms and 27 apartments.
“There was a lack of quality supply offered to the market in 2000. The strong trading conditions coupled with the improving economic and political situation over the medium term has meant that owners prefer to hold their assets in anticipation of further profit growth We expect this to change somewhat over the next couple of years as owners take advantage of international investor interest,” explains Nick Marsh.
To date, Austrian investors have made the running in the hotel market, but advisers expect that as Prague becomes a strategic investment destination, other foreign players, such as German funds and international hotel operators, will join in.
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Upper quality hotel market 1996-2000 |
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Occupancy rates reach a high of 75% |
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Year |
Average Occ-% |
Average revenue room |
Revenue daily per average |
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1996 |
66% |
$131 |
$86 |
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1997 |
72% |
$119 |
$86 |
|
1998 |
71% |
$107 |
$76 |
|
1999 |
69% |
$112 |
$77 |
|
2000 |
75% |
$114 |
$86 |
