Written by: Jasna Sýkorová
For the first time, a NATO summit will be hosted by a post-communist country. This is not only an honor with political and military significance, but also a chance for Prague’s business community to boost its global reputation.
LIKE ANY OTHER undertaking, the summit needs a budget. The Czech government approved CZK 800 million, an appropriate sum for such a mega-event. This money will be used to finance the convention, accompanying events, transport, and security. Other assets will flow from private subjects and embassies, because the two-day meeting will be accompanied by many social get-togethers. The delegates themselves pay for their transportation to the Czech Republic and their housing, which itself accounts for at least another CZK 100 million.
This “injection” and promotion for Prague makes Prague hoteliers happy. “I can see promotional spots on CNN for Vienna or Budapest, and our capital city has a handicap in these terms,” says Michal Chour, sales director for the Radisson SAS hotel. Furthermore, Prague hoteliers find themselves in a rather complicated situation this year. The first six months saw fewer tourists than last year visiting the Czech Republic, and then Prague was inundated by catastrophic floods. The Hilton, which was damaged by the waters, reopened in September, and the Inter.Continental should resume operation in the beginning of November. Some hotels, such as the Four Seasons, will unfortunately be unable to complete their repairs before the NATO summit opens.
According to Alexandr Vondra, the government’s commissioner for summit preparations, the summit provides great motivation for firms to restore their operations to normal. He says that global television networks will be steadily observing Prague for two days, this time in a context that is not catastrophic, which should help the travel industry here. In connection with the NATO summit, people frequently speak of positive indirect economic impacts – more tourists will come in the future, and Prague’s prestige as a convention-friendly city will rise. However, critics point out that there were similar expectations before the IMF meeting, which did not pan out.
One need not look for only indirect positive effects. The money that the state freed up for the convention budget will enter the economy directly. The amount that will be used for organization comes to CZK 340 million, and, according to Halka Kaiserová, spokeswoman for the NATO Summit Office (KSN), most of this figure will go to supplier firms. “There were forty tenders in all, and about 100 contracts have been signed,” Kaiserová says. Contracts were closed with firms with no competition in their fields (e.g., the Congress Center). Tenders were not required by law, because this is an event associated with state visits, Kaiserová adds.
Although KSN wants the entire process to be as transparent as possible, in two weeks it was unable to provide The Prague Tribune with a complete list of suppliers, or more detailed rules for tenders and controls. Although the names of the firms are not confidential, only a few names have been made public – the Congress Center will be equipped with Dell computers; Sanjiv Suri, owner of the catering firm Zátiší Group, will be in charge of catering, in cooperation with other restaurants and firms like Golem. Furniture for the convention will be provided by Alax, and VPU Deco, along with other firms, will be in charge of construction modifications. The Adecco agency is in charge of staffing, as it was for the IMF meeting.
Firms agree that references are more important to them than the job itself. The sheer number of firms restricts the budget, so suppliers often reduce their margins or provide their services free of charge in exchange for the prestige. One such example is the Import Volkswagen Group, the official summit partner that arranges for Škoda and Audi limousines, passenger cars, and minibuses. Not surprisingly, the convention also means unpleasant administrative tasks. “If we were to compare the enormous amount of work with the financial returns we will get for our services, we would not be involved in such an event,” says Jindřich Chytráček, sales director for the catering company Golem. His 250 employees will have to go through security screening, which means lots of extra administrative work. “For us, the biggest business lies in the references,” Chytráček explains.
Proof of fitness
The NATO summit has a final, but no less significant, business dimension – military. The security arranged will show whether the Czech Republic is an equal alliance partner. Additionally, there will be experts among the delegates who can appreciate the technologies used. Some of the hallway meetings will probably include military business. “There is some consideration being given to the Czech Republic becoming a part of a defensive nuclear umbrella. This would bring contracts for arms companies, as well as for the building of infrastructure – roads and missile silos,” notes a military technology expert who wishes to remain anonymous. “Additionally, the Czech army wants to reinforce its position as a trainer for armies of eastern countries that are NATO candidates. But western armies also like to rent our military facilities, such as Ralsko and Doupovské hory. So the NATO summit will be good advertising not only for the travel industry, but also for these ‘services’,” he adds.
Alexandr Vondra, the government commissioner for summit preparations, is known as a former dissident, the Charter 77 spokesman, and as the Czech ambassador to the US in the 1990s. Now he is in charge of coordinating the biggest convention in the history of the Czech Republic. He points out that the event’s success could have a positive influence on the entire country.
Like many others, you support the indirect effects of the NATO summit on the local economy. But after the IMF meeting there was no great increase in tourism or the convention industry. What makes the NATO summit different from that convention?
How did your office select the large number of suppliers?
Do you think that cooperation in the organization of the NATO will be a significant reference for firms in their future business activities?
Can the organization of the summit have an impact on winning military orders – such as the Czech Republic joining the defensive anti-nuclear umbrella?
|Hotels welcome prestige
Prague hoteliers, who will have to provide lodging for 2,500 to 3,000 delegates and about as many media representatives, are understandably gearing up for this November’s NATO summit. According to Arnošt Kareš, the lodging coordinator at the Prague NATO Summit Office, hotels that will house the delegates must meet the following criteria: a high standard of services provided by five-star hotels (delegates will be housed in most of Prague’s twelve hotels of this category); ability to adapt to the security system ensured by the interior ministry; and they must be as centrally located as possible. The hotels that house journalists must offer a broader price range for the services they provide, and they must also be accessible in terms of transport.
|Betting on long-term valueFOR THE NEARLY 100 firms that will service the summit’s various needs, the chance to take part in an event of such great international significance is extremely attractive. Their principal gain will be the prestige that can be of substantial help to them in future business activities.
Catering services will be provided by several firms. Zátiší Group will arrange dinners for heads of state. The company will have to be able to set up a kitchen from scratch in a given location in order to prepare food for about 800 people. “Prices are usually depressed at such events, and we will also have to make sizable investments,” says Sanjiv Suri, president of Zátiší Group. “We can use what we invest in in the future, but any talk of profit is nearly impossible. It is primarily a question of prestige for us.”
ProMoPro, a company that specializes in rental and service of convention technology, will play a large role ensuring services for the Prague Congress Center – from sound systems and interpreting technology to studio preparation. According to ProMoPro director Jaroslav Veselý, NATO representatives requested his firm on the basis of references from the IMF meeting. “We will enjoy the references for a long time. For example, when we tell a potential client that we made arrangements for the IMF meeting, there is in fact nothing else we need to say,” Veselý remarks.
Local firm Alax will handle the rental of furniture for the Prague Congress Center and other buildings in the area. “It is certainly a very interesting, large order. Our profit will not be as great as usual, but it was very important for us to win this contract with respect to references,” notes the company’s sales manager Miroslav Havel.
|Security: in the state’s hands
Alliance F-16 fighters in the sky, police snipers on rooftops, metal detectors at every turn, CIA and FBI agents checking rooms in five-star hotels and armored luxury limousines. This is no James Bond scenario, it is the reality for Prague this November.
|Out of the cityDURING THE SUMMIT, Prague residents should flock to the outskirts of the city for prime shopping. Within the framework of the so-called partnership project, the foreign affairs ministry has addressed hypermarkets in Zličín, Černý most, and others outside of Prague (in Liberec, České Budějovice, etc), asking them to offer substantial discounts and accompanying programs. Other firms, such as travel agencies, will probably come up with similar special promotions.
Some insurers (Allianz and Kooperativa) are also offering “NATO services”, as a supplement to property insurance (against civil damage). Contracts cannot be closed for only a short period of time.
|Attracting the conference crowd
While experts forecast promising development for Prague’s convention tourism, the Prague Congress Center (KCP), where the main part of the NATO summit will be held, is considered by many experts to be the black hole of state investments in Prague. Two years ago the city borrowed nearly CZK 3 billion for refurbishing the KCP in the leadup to the World Bank and IMF meeting, and last November the Prague city council threw in another CZK 500 million. In March the council approved an additional subsidy of CZK 80-100 million per year for the next six years, since the KCP is unable to pay off the refurbishment loan from its own funds. Director František Dušek points out that the NATO summit will probably not save the KCP either, as the organizers will pay only CZK 38 million in rent.