HVS market snapshot: Prague

This market snapshot is part of a series of articles that HVS produces on key hotel sectors across Europe. In writing these articles we combine the expertise of HVS with STR Global data for each market. Our analysis is based on data for a sample of 74 mainly branded properties as provided by STR Global.

Highlights include:

• Following a dip in economic growth in 2009, the Czech Republic’s economy showed modest signs of recovery in 2010 with GDP growth of 2.7%. According to the Economic Intelligence Unit’s April 2012 forecast, GDP is expected to have grown by 1.7% in 2011 and will continue to grow into 2012 and 2013 by 0.2% and 1.9%, respectively;
• Prague, the capital of the Czech Republic, attracted more than 5.1 million visitor arrivals and 13.2 million bednights in 2011, representing an 8% (visitor arrivals) and 9% (bednights) increase on 2010. The majority of these were generated from international visitors, which accounted for 86% of total arrivals and 90% of total bednights;
• The main international source markets for Prague in terms of arrivals are Germany (15% of international arrivals in 2011), Russia (9%) and the UK (6%);
• Prague’s Ruzyne International Airport has recorded significant increases in passenger numbers over the past ten years with a compound annual growth rate of 6.2%; the majority of demand is generated by international arrivals;
• The meeting, incentive, conference and exhibition (MICE) sector was impacted by the economic crisis, with the number of meetings and events held in the city declining in 2010. Figures for 2011 are unavailable at present, but as tourism has increased it is likely that the number of meetings and events has following suit;
• The hotel performance figures for the 12 months to February 2012 show Prague’s hotel market is recovering from the economic crisis, with occupancy and average rate both growing. As a result, revenue per available room (RevPAR) saw growth in both euro and Czech koruna terms; growth was largely led by increases in occupancy;
• Prague has seen a number of hotels enter the market over recent years, leading to a large growth in hotel rooms. Development has now slowed, giving the city a chance to absorb the new additions to supply;
• Prague’s hotel investment market has been significantly impacted by the economic crisis and has remained generally unremarkable over the past few years. Only two transactions have taken place since 2010: the InterContinental Prague and the ibis Praha Karlin;
• As per the annual HVS Hotel Valuation Index (HVI), Prague ended 2011 with values of around €166,000 or CZK4,100,000 per room for an international branded, four-star, city centre property representing increases of 4% and 1% in euro and Czech koruna respectively.

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