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Guests Return to Czech Hotels, Revenues are Lower

The recovery from the recession is beginning to have positive effects in the travel industry. In the first quarter of 2010, the largest Czech hotels attracted more guests than in 2009. The increase in demand is evident from information published today by the audit and advisory firm Deloitte. Hotel owners, however, were forced to significantly cut prices and, as a result, their revenues are much lower than in previous years.

“The economic recession had a significant impact on the hotel industry worldwide. There are, however, also other impacts that are even more difficult to predict than economic development: terrorism, the global pandemics in previous years, the eruption of the volcano in Iceland this year,” said David Batal, Audit Director in Deloitte.

The hotel occupancy rate in the Czech Republic increased year-on-year from 40.9% to 43.2% in the first quarter, while demand for accommodation increased year-on-year by 7.6% in the same period.

The average price per room decreased year-on-year by 17.2% to CZK 1,744 in the first quarter. In the first quarter of 2009, the average price exceeded CZK 2,000. The average revenue per available room (RevPAR), which is treated as a key indicator in the industry, decreased year-on-year by 12.5% to CZK 754. For comparison, the average revenue at the end of March 2005 was more than twice that amount (CZK 1,534).

“Prague is a typical example of a city where we cannot blame everything on the economic crisis.  One significant impact is the increase in the offer in the past years, specifically in the highest categories of hotels. In this context, it is necessary to consider the price elasticity of demand and ask whether a further decrease in prices will attract other customers and increase total revenues,” noted David Batal.

“Based on the indicators available, we anticipate better results in 2010 and in the following year. I expect, however, that we won’t reach our 2007 numbers for another 3 or 4 years,” said Václav Dvořák, Managing Director of the Gestin Holding, which operates the Hilton Prague Old Town hotel.

In other European countries, hotel managers are perhaps more satisfied than their Czech counterparts. In London, for example, RevPAR increased by 10.1% to GBP 94 in the first quarter together with a slight increase in the hotel occupancy rate to 76.2%.

www.deloitte.cz