Hotels in Prague have seen a gloomy season to date as supply continued to outstrip demand, industry researchers STR Global said that a general lack of demand and oversupply of hotels and apartments in Prague had driven the city’s performance indicators “deep into negative territory”. In the first half of 2009, foreign visitors to the Czech capital fell 10.8% year-on-year while occupancy fell 15.5%.
But the supply of four- and five-star hotels in the country as a whole has more than doubled since 2000, STR said. Average daily rates (ADR) fell by 17.9% year-on-year to €80.65 causing revPAR (revenue per available room) to fall 30.6% to €42.86.

‘The knee-jerk reaction to these two stimuli has been a dramatic decrease in rates’, explained Elizabeth Randall, managing director of STR Global, of the 17.9-percent decline in average daily rate for the year through July 2009. ‘The city’s hoteliers just doubled up on the pain as price cuts did not stimulate demand that wasn’t there’.

However, some improvement is on the horizon. ‘The slowing of the rate of decline for Prague’s year-on-year occupancy over the last few months has stalled the downward pressure on rates’, Randall said.

Prague’s struggles are particularly pronounced when compared with the rest of Europe. The market experienced a 30.6-percent decrease in year-to-date revenue per available room compared to last year; Europe as a whole posted a 20-percent decrease.

Prague also is selling itself short on rate. At €80.65, the market’s ADR was 14.4 percent lower than the rest of Europe, which had an average of €94.29, and 3.7 percent lower Eastern Europe*, which had an average of €83.79.

Other factors are also at play. The city has no dedicated marketing campaign for tourism. Furthermore, a poor meeting infrastructure makes it difficult to fill the city’s hotels with the thousands of guests that travel to such events in cities like Vienna, Frankfurt and Barcelona.

On the upside, the Czech Crown is currently trading at around CZK25.5 : €1, which is slightly weaker than the CZK29: €1 rates of 2008. Thus, the city’s attraction to euro-spending visitors should make for an improvement in its fortunes. ‘As the economies of feeder markets, particularly Germany, are showing signs of recovery, this should add some much needed impetus to the Prague market’, Randall said.

With an estimated 30,000 additional roomnights generated from Prague’s hosting of the presidency of the EU for the first six months of 2009, it is sobering to think how much worse it could have been.

About STR & STR Global:
For more than 20 years, STR has been the recognized leader for lodging industry benchmarking and research. STR and STR Global offer monthly, weekly, and daily STAR benchmarking reports to more than 38,000 hotel clients, representing over 5 million rooms worldwide. STR is headquartered in Hendersonville, Tennessee, and STR Global is based in London.