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Czech Republic Accelerated recovery

Hotels
According to Cushman & Wakefield analysis, after a period when the Prague hotel market was lagging behind other European cities in terms of recovery from the impacts of the covid pandemics, all of its performance indicators increased significantly in 2023. The Prague hotel market proves its resilience and attractivity.

RevPAR ended 10 pct above the level recorded pre-covid in 2019, in December 2023 as much as 35 pct above December 2019. Occupancy reached 71 pct last year, in December 2023 returning to the level of December 2019 with 79 pct. The average daily rate was EUR 110 in 2023, 22 pct higher than the year before. The investment transactions volume grew by 68 pct year on year, reaching EUR 137 mln, and additional major deals are planned for 2024.

In the comparison of 30 top European hotel markets, last year Prague came close to the positions it held pre-covid: in terms of RevPAR, it returned to its original 21st place (from 24th place the year before), and in terms of occupancy it reached the 15th place (being 10th pre-covid and 25th in 2022). Its year-on-year growth of RevPAR was the second highest among the cities compared – while the European average amounted to 16 pct, in Prague it was 36 pct. This was partially due to the city’s low starting base, as Prague’s recovery did not kick in like it did in most other European markets in 2022. Reaching EUR 78 in 2023, Prague’s RevPAR was ahead of Warsaw and Bucharest.

The increase in RevPAR was primarily driven by ADR growth, supported by high inflation, strong leisure demand, limited hotel supply, and proximity to key source markets; and a notable 20 pct rise in occupancy in 2023 vs. 2022. Despite operational challenges leading to increasing costs, the revenues allowed Prague full-service branded properties to record an average gross operational profit margin at 49 pct of total revenue, ranking 3rd highest within the major European markets, and outperforming the key CEE capitals and Vienna.
Sevda Cadir, Senior Hospitality Consultant, CEE & SEE, Cushman & Wakefield

More visitors from Asia, increased luxury capacities

Prague hotel occupancy also started nearing pre-covid levels in 2023: while it was at 78 pct in 2019, last year it reached 71 pct. The most successful month was December, with 79 pct occupancy being level with that of December 2019.

Limited airport activity had been a bottleneck to tourism in Prague for a long time – however, over 30 routes resumed operations in 2023, with additional lines expected to open in 2024. Passenger numbers should grow to 15.5 mln this year, a 12 pct increase vs. 2023, and only 13 pct below 2019.

Improved airport connections, especially with key Asian markets like Taiwan and South Korea, led to a 63 pct surge in Asian tourists compared to 2022. Additionally, Prague benefits from a luxury supply influx brought by hotels such as the Andaz or Almanac X. The upcoming opening of W Prague and Fairmont Golden Prague will further elevate the country’s hotel average daily rates.
David Nath, head of Hospitality, CEE & SEE, Cushman & Wakefield

Hotel investment recovery, interest from abroad

Hotel transaction volumes reached EUR 137 mln in 2023. While still significantly below the levels achieved in the record year of 2019, it is an increase by two thirds compared to 2022.

The Czech hotel investment volumes grew by 68 pct year on year, showcasing the growing appeal of the market which is returning to stability after covid-19 and the energy crisis, and despite the increased cost of financing and the ongoing challenges such as the war in Ukraine and economy slowdown. With a number of deals under way and to be completed in 2024, we are expecting an even higher volume of hotel transactions this year.
Magsud Rahmanov, head of Hotel Transactions, CEE & SEE, Cushman & Wakefield

In 2023, 9 hotels were transacted, with 78 pct of the volume directed to Prague, and 84 pct into the luxury and upscale categories. While in the past domestic investors had prevailed, last year 77 pct of the volume was transacted by pan-European and Asian investors. This illustrates that the Czech hotel market is reopening and attracting international capital.

Following the current decrease of the ČNB interest rate by 0.5 pct to the existing 6.25 pct, I expect a gradual recovery of the investment market. Despite facing the economic slowdown, mainly caused by higher inflation and interest rates, as well as geopolitical tensions, the Czech Republic has proven to be a resilient market.
David Nath, head of Hospitality, CEE & SEE, Cushman & Wakefield

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Edition 7 (290) July 2024

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