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News Release

Prague

Prague Hotels – Fierce competition blamed for stagnant room price despite increase in tourism arrivals                                                                                                                                                        


Prague, 21 March 2012 – “Currently, there are a total of 340 hotels in Prague, out of which 80% (268) are in the segment of three to five stars category and only 20% (72) in the economy/budget segment. Three-star hotels form a majority of the hotel stock in Prague, meaning 161 establishments and accounting for more than a third of the hotel properties in Prague. In terms of hotel rooms, Prague offers 26,350 hotel rooms, out of which more than half are in the upscale four- and five-star hotel segment,“ says Karel Klečka who specialises in hotel valuation at Jones Lang LaSalle Prague.

In the first decade of the 21st century (2000 – 2010), the Prague hotel market experienced a  tremendous amount of development. During this time, hotel supply in Prague increased by 7,000 rooms, most of them in the upscale segment. In last couple of years, fierce competition and challenging hotel trading conditions lead to the postponement of two luxury hotels (Sofitel and Ritz Carlton) to the Prague market. Whilst there were three new hotels (Clarion Hotel Prague City, NH Praha Radlická and Mood Hotel) opened in 2010, there were no new hotels opened in 2011. Recently, hotel development has been recovering. In 2012 Fusion Hotel*** has been open. There are 3 hotels under construction, of which two are anticipated to open in 2013 (Express by Holiday Inn***, Motel One**) and one in 2014 (NH City Centre****).    

Prague´s tourism industry is dominated by international visitors (80%). For hotels in the Czech regions, the visitor ratio is the opposite (80% Czechs, 20% International). As far as the Czech capital is concerned, Prague has been popular tourist destination for Germans, Russians, Italians, British and Americans. In 2011, bed nights from Italy and the UK declined by 2% and 14% respectively. In contrast bed nights from Germany, Russia and the USA rose by 11%, 60% and 2%, compared to 2010. Overall, the most dynamic growth was reported from emerging markets, primarily from Asia, with source markets such as China and South Korea posting double-digit growth rates in overnight stays. Other growing source markets are Brazil and Mexico.    
“Despite a growing number of foreigners visiting Prague, hotel rates remain relatively unchanged at the average level of 73 EUR/night. Fierce competition in the market is keeping average room rates well below 2008 levels (by 30% – 40%). On the contrary, occupancy increased from 62% in 2010 to 67% in 2011. As a result, room yield increased by 10% to 49 EUR/night, which is 5 EUR more than in 2010,“ says Karel Klečka from Jones Lang LaSalle and adds: “the highest occupancy is usually recorded in spring/early summer and in autumn when a lot of festivals and international events take place in Prague.“
”The Prague hotel market has bottomed out and investment sentiment is now firmly on an upward trajectory, with considerable opportunity for further growth. The largest issue being that there is still limited finance for the sector in the CEE region,” comments Angus Wade, Executive Vice President from Jones Lang LaSalle Hotels in London. Karel Klečka from the Prague office agrees: “the number of investors actively looking for hotels in Prague is very limited. Hotel investments clearly stand behind office and retail investment in terms of both transaction numbers and volumes. The latest hotel investment transactions were recorded in 2010 when two five-star hotels in the centre of Prague (the InterContinental hotel and the Mandarin Oriental hotel) changed ownership.”