Hoteliers swim upstream
Written by: Klára Smolová
Photo: Petr Poliak
While the Czech Republic is struggling with a slump in foreign visitors, accommodation capacities are still growing. There are still some niches in the market, but in the tough fight for clients, hoteliers are finding an improved promotional campaign is key.
AT THE END of January, the World Tourism Organization (WTO), announced the results of the travel industry for 2002. Forecasts of a crisis didn’t materialize as the number of international border arrivals recorded a growth of 3.1% compared with 2001, with central and eastern Europe seeing an increase of 3.9%. However, this growth did not relate to all regions, as Poland and the Czech Republic recorded a decline of over 5%. According to the Czech Travel & Tourism Center, 4.6 million foreign tourists visited the Czech Republic last year, which is 400,000 less than in 2001. Another drop is expected for this year. There are differing opinions as to why less tourists are coming to the Czech Republic – some insist that it is a consequence of such global problems as the economic recession and the political situation in the Middle East (which is affecting all destinations, not only this country), while others say that Prague, and thus the whole country, undervalued its promotion abroad and lacks any coherent marketing strategy for the future.
Not resting on any laurels
After the iron curtain fell, the Czech Republic became the gateway to an unknown and mysterious eastern Europe, which was seen as a chance to taste forbidden fruit without having to exert much effort. However, after 13 years this euphoria has faded away and it has become necessary to do something to promote the country. “Prague has not done anything on a regular basis to promote itself abroad. There is no strategy for how to present the city,” complains Martin Ykema, general director of Novotel, part of the Accor Hotels chain. He adds that along with the economic recession, last year’s floods and the recent war, Prague’s poor accessibility can be seen as another detrimental factor. “Flying to Prague is more expensive than to other destinations,” Ykema points out. Likewise, the basic highway network is not yet finished, and those considering train travel are discouraged by the poor quality of the railways.
However, most hoteliers agree that Prague has huge potential. “Prague is a well concealed secret; a fascinating city that is worth a visit. But people have to learn about it,” says René Beauchamp, general director of the five-star Four Seasons hotel, which was hit heavily by last year’s floods, and which will open its doors again on 28 June after extensive reconstruction. According to Josef Santin, general director of the Diplomat hotel, it is necessary to penetrate the public conciousness. “You may have an excellent product, but if nobody knows about it then it means nothing. Today there are many beautiful tourist destinations, yet people choose places they have learned something about,” says Santin.
Recently local hoteliers, together with the American Chamber of Commerce, initiated a meeting with Prague’s Lord Mayor Pavel Bém to propose the preparation of a strategic plan to increase promotion of Prague abroad. “We have to compete with other cities such as Budapest and Warsaw and not with each other (hoteliers),” notes Ykema. However, some hoteliers are skeptical about cooperation with City Hall. “I am not convinced that the magistrate will really do anything. They know that they need tourists, but for now we are only exchanging ideas. When talk swings to money, things will change,” Santin avers. His worries are probably justified. Councillor Igor Němec, who is in charge of the travel industry for City Hall, is of the opinion that Prague’s presentation abroad is sufficient. “Prague is the seventh most visited city in Europe. Vienna is in tenth position,” Němec points out. He notes that Prague is presented mainly at travel industry trade fairs. “In the first three months of this year, we went to trade fairs in Lyon and Bratislava, and we won first prize for the most impressive exhibit at both of them,” he boasts. He was not informed about the hoteliers’ meeting with Bém. Allegedly, Prague is not planning any special action. “Prague’s budget for the travel industry is only 20 million crowns,” he adds.
In the meantime, everyone must fend for themselves in order to compensate for losses. At the present time, the average occupancy in hotels is around 50%, while the usual figure would be about 70%. “Some hotels started slashing prices, but this is very unhealthy, and their behavior is often close to unethical,” says Ykema. After decreasing prices, it is very hard to increase them, and such a situation hurts the whole market. “Statistics prove that slashing prices has a negative influence on new investors, for example,” he adds. It is also a fact that such hotels take guests away from others. “Hotels focused on tourists have decreased their prices, and therefore we are losing customers because they go for cheaper offers,” complains Regina Sieberová, general director of the Sieber Hotel, which focuses mainly on business clientele. In order to balance the given situation, Sieber Hotel turned its marketing activities towards Czech companies with headquarters outside of Prague and guests from Europe who don’t have to travel too far.
Most hotels chose this path due to recent events that have discouraged people from traveling overseas. For the Hilton hotel, whose priority is usually North America, intensifying its marketing in European countries was a must. Hotels oriented toward conference tourism or business travelers have chosen a strategy of special offers. The Diplomat created packages of conference services not only for foreign, but also domestic companies. “It is a lot easier to differentiate the prices in this area without creating a dangerous precedent by reducing them. We also strengthened our sales team and tried to bring an offer that was precisely targeted,” Santin explains.
It is possible to attract local clients by offering additional services: restaurants, fitness centers and other activities. Klaus Pilz, general director of the Crowne Plaza hotel (formerly the International hotel) in the Prague residential area of Podbaba, is planning to open a garden next to the restaurant in which there will be a barbecue. “We also have a playground for children, so people who don’t want to cook at home and want to spend a pleasant afternoon outside can come here on the weekends,” says Pilz, adding that twice a month the hotel organizes classical music concerts in its congress hall that are open to the public. The Four Seasons’ Beauchamp also assumes that his hotel’s local advertisement will mainly be focused on its Allegro restaurant, which was declared one of the best in Prague a year ago.
Regardless of the difficulties of the travel industry, last year the capacity of hotels reached almost a half million beds and this year over 10,000 more should be added, states the Czech Travel & Tourism Center in its regular iNFO-bulletin. However, most of the newcomers are narrowly specialized on a specific type of clientele. They include so-called design and boutique hotels or small luxury hotels (see sidebar on page 42) that are filling a niche in the market. Residences for mid- and long-term stays are a very specific segment that is not yet saturated.
Early this year, the local scene was enriched by Hotel Juliš, which focuses on short- and mid-term stays. It is operated by the Swedish firm City Apartments, which has its background in Scandinavian countries. “We want to focus above all on corporate clients, but we have started with traditional hotel guests prior to establishing a customer base,” explains Jan Doškář, hotel manager. He points out that their biggest advantage is locality and the prices for accomodation, which are half the price of similar residential facilities. But those often offer real apartments made up of several rooms, which is not the case with Hotel Juliš.
In the coming months, other newcomers will shuffle the deck with lodging capacities – the luxury boutique hotel Aria (see sidebar on page 40), part of the American network HK Hotels, will have 52 rooms and the five-star Grand hotel Boscolo, part of Italian network Boscolo Hotels, will have 148 rooms and conference capacity for 400 people. They are both located in the center of the city and will focus on more demanding clients. The Orco Group is also stepping in with a luxurious project. In the spring of next year, it intends to begin operations in a five-star residence named Pachtův Palác, with the ambition to compete with the current number one, Four Seasons.
Most hoteliers claim this development helps to weed out the competition. “There is still room for competition here, which will contribute to the improvement of Prague’s image abroad, and everyone will profit from it,” insists Beauchamp. He says that Prague was long known as a destination for backpackers, but today it is necessary to promote the possibilities for sophisticated dining and shopping. Santin has a similar opinion: “These hotels will attract completely different people to Prague, which is beneficial.”
|One day in, next day out
In 1999 ČSL held a tender for building a hotel in the center of terminal North. Development firm ECM Airport Center submitted the best bid but, according to ČSL spokeswoman Anna Kovaříková, failed to provide evidence that it had sufficient finances to secure the construction. Ondřej Buršík, ECM’s project manager, says that in 2001 ČSL terminated the agreement citing financial reasons. However, he adds that at the time, ECM had an agreement with Živnostenská banka, which promised to finance the project. According to Buršík, the company has already invested about CZK 100 million into the project and is determined to bring it to completion. ECM filed a lawsuit against the airport administration. The State Construction Office stopped the construction procedure for the area until a court ruling on the issue.
|A celebration of history and music
FREQUENT WORLD travelers probably know the famous Library Hotel in New York, or at least one of the three other thematic hotels run by HK Hotels: The Casablanca Hotel (Moroccan style); The Hotel Giraffe (art deco); and The Hotel Elysée (French countryside). Their fifth hotel will be opened in August of this year, this time in the heart of Europe – Prague.
|Targeting specific travelers
The trend towards hotels with “added aesthetic value” is fully recognizable in Prague. During the past two years, three large design hotels have opened in Prague: Holiday Inn Congress Center, Anděl’s hotel and Hotel Josef. They are doing quite well, despite the fact that many are still trying to build a regular client base in the face of a decrease in foreign visitors to this country. This is expected to change following EU accession. “If we look at the first quarter of 2003, the average occupancy rate was 62.5%,” says Manfred Tobolka, Hotel Josef’s general director. The situation is similar at the Holiday Inn Congress Center, where occupancy was 60%: “Our main advantage is that the hotel is located right next to the congress center. This is extremely important to business clients, as they don’t have to spend hours traveling around the city,” says Michaela Veselá, sales and marketing manager.
|Fringe hotels may suffer
Hotels outside Prague are partially dependent on how the situation with the hotel business is developing in the capital. Milan Pavelka, sales and marketing manager of Orea Hotels, says that while the travel business is down due to the Iraqi crisis, international hotel chains in Prague can afford dumping prices that steals business from others outside of the capital. Orea is the largest hotel chain in the Czech Republic, operating 26 hotels all over the country – four-star category Orea Hotels Exclusive, three-star Orea Hotels Classic and lower category Orea Hotels Tourist. Only one of them – hotel Pyramida – is located in Prague.