Europe -  Prague, Czech Republic

Prague is the country’s industrial, political and financial centre and is  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, underwent significant renovation and modernisation in 2017 and is currently expanding with a new 5,000 m² exhibition hall (due for completion in 2022). 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. MICE statistics for 2018 were not yet available at the time of writing.   

The city has seen strong growth in visitation over the past 10 years. In 2008, Prague had approximately 4.6 million visitors that stayed for 12.2 million bednights. In 2018, the number of arrivals had grown to 7.9 million and bednights to 18.3 million. The only year when visitor numbers dipped was in 2009 following the financial crisis, but by 2010 the city had already fully recovered. While visitation growth in 2018 was not quite as strong as the previous three years (which each grew by more than half a million visitors), it still grew by a respectable 3.2% over 2017. However, average lengths of stay were somewhat shorter, resulting in weaker bednight growth of only 1.1%.

While visitation recovered quickly from the financial crisis, the impact on hotel performance was unfortunately 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. Rates in 2018 saw very modest growth, particularly in local currency due to exchange rate fluctuations.

Although rates are still far below their pre-crisis peaks (particularly once adjusted for inflation) and the strong growth of the last few years has begun to somewhat plateau, there are a number of reasons to be optimistic. Occupancy levels remain high (despite a small drop in 2018 from the 2017 peak) which should allow for hotels to begin focusing revenue management efforts on increasing rates. 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 modest pipeline of new supply, result in a generally positive outlook for the Prague hotel market. Overall, Prague 2018 hotel values increased by 5.8% in terms of euro (3.2% in local currency) compared to 2017.    

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
[email protected]
  • +44 20 7878 7722 (w)
Magali Castells
[email protected]
  • +44 20 7878-7710 (w)
  • +44 7 850205149 (m)