Europe -  Prague, Czech Republic

Prague is the country’s industrial, political and financial centre and it is also an important gateway to Central and Eastern Europe. The city reportedly generates more than 20% of the country’s total GDP, and approximately a fifth of all investment in the Czech Republic takes place in the city’s territory. Prague is considered to be predominantly a leisure destination, but increased business activity and meetings, conferences and events over the last few years are indications of its improving international profile and the further development of the commercial segment. Concerted efforts to create an efficient tourism promotion programme are being made by the Prague and Czech tourist boards, which are currently on small budgets and not operating jointly. Hoteliers and tourism industry players agree that coordination between the public and the private sector is challenging and a clear marketing strategy for Prague as a destination is missing. Prague is an established weekend-break destination, but the city needs to offer more in terms of events, arts and culture to increase repeat visitation to the city. Prague also has a reputation for being a cheap destination. Cheap beer, affordable hotels and a high proportion of discount airlines servicing the city make it an attractive destination for stag parties, and although the city does have a plethora of historic and cultural attractions, it generally lacks the high-end shopping and culinary experiences that tend to attract luxury tourists.

In addition to being an affordable leisure destination, Prague continues to expand its reputation as an important MICE city. The number of events held in the city peaked to its highest level in 2016 at 4,400, and although 2017 fell back to 4,100, more than half a million visitors still flocked to the city as participants. With 85% of these events being held in hotels, the outlook for this segment is positive. The KCP, Prague’s main convention centre, is currently undergoing an extensive refurbishment and modernisation. The renovation is much needed and would provide a further boost to the MICE market, but it should also be noted that delays to the works could result in a softening of this segment in the short to medium term.  

The city has seen strong growth in visitation over the past 10 years. In 2006, Prague had approximately 4.1 million visitors that stayed for 11.3 million bednights. In 2017, the number of arrivals had grown to 7.7 million and bednights to 18 million. This also represents excellent growth over 2016, with arrivals increasing by 7.4% and bednights by 7.5%. The only year when visitor numbers dipped was in 2009 following the financial crisis, but by 2010 the city had already fully recovered. Unfortunately, the impact of the financial crisis on hotel performance was much stronger and more prolonged. The crisis hit at a time of severe oversupply in the city and led to hotel occupancies dropping from around 70% in 2007 to below 60% in 2009. Although strong demand growth allowed occupancies to recover by 2014 and continue to grow, surpassing 80% for the first time in 2017, average rates have remained below their pre-crisis peaks. Hotels in the city were quick to reduce rates to combat the low occupancy levels, and it has proven a challenge to raise them again, despite strong demand.

However, there are a number of reasons to be optimistic. The high occupancies of the past three years should allow for hotels to begin focusing revenue management efforts on increasing rates, which indeed they did in 2017, achieving rate growth of almost 5%. The renovation of the KCP will have a positive impact on the MICE market once completed. Ongoing infrastructure improvements, including the recently opened Blanka Tunnel as well as the planned addition of a second runway at Vaclav Havel Airport Prague, will smooth the arrival and departure experience of the city as well as relieve congestion in the city centre. These factors, combined with a relatively small pipeline of new supply, result in a generally positive outlook for the Prague hotel market. 

Change In Value For Market: (€Euro)

Legend
Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

Prague RevPAR Change (€Euro)

Prague RevPAR (€Euro)

For more information, please contact:

Sophie Perret, MRICS, MBA
sperret@hvs.com
  • +44 20 7878 7722 (w)
Simon Hulten
shulten@hvs.com
  • +44 020 7878-7775 (w)