At the Aria Hotel, a 52-room music-themed establishment a few doors down from the US Embassy on Tržiště street, lodgers can eat their lunches off of Rosenthal plates featuring the caricatures of such legends as Jimi Hendrix and Johnny Cash created by Josef Blecha. They get a loaner iPod loaded with thousands of tunes at check-in, and a music library will fill in any gaps should they need to customise their soundtrack while staying in, say, the Elvis Presley room. It’s amenities like these that helped the Aria earn the Tripadvisor Travelers’ Choice award for 2009 as the best luxury hotel in the world, and it’s awards like that that help bring in faces – especially in lean times in the trade.
Occupancy at Prague’s five-star hotels was down 18% for the first quarter of 2009 from the same period last year, four-stars have seen an 8% drop, and pensions have dipped 6.5%. The capital city – which has more hotel rooms than nearby Vienna, for example – is struggling to bring tourists in this year during the financial crisis, which has caused some establishments to drastically cut rates. The problem with such price wars is that hotels use short-term tactics instead of employing long-run strategies, and a shoddy stay will not only turn guests off to the place they’ve booked, but perhaps to the city itself.
At Aria on a recent afternoon, US businessmen milled around in the lobby, another American caught a cab, and a Canadian couple was checking in. Petra Daliborová, the hotel’s marketing and PR manager, says the bulk of the clientele comes from across the Atlantic, something she attributes to the location near the embassy and to positive coverage in the North American press. Still, she says, times are tough: “We feel it.”
‘Trying to steal business is not a long-term solution’
According to CzechTourism’s Markéta Chaloupková, four- and five-star hotels appeared resilient last year, at the start of the crisis, but their numbers have fallen sharply in the first quarter of 2009. And that’s when the prices began to fall. Nobody interviewed for this article would name names when referring to competitors that had significantly cut their rates, but clearly almost everyone considered the practice to be treachery.
“What many people don’t want to do is cut costs, because we have to optimise,” said Michal Chour, general manager of the Radisson SAS Alcron Hotel on Štěpánská street. Hotels that go that route, in his opinion, are taking the wrong bait and using poor practices to compete. “You try to steal business from everybody else, which works for two months or less – until the other side wakes up,” he said. “It’s not an individual fight. Trying to steal business is not a long-term solution.”
At a recent “tourism summit” organised by BlueEvents, industry professionals looked at the issue. Four- and five-star hotels rather than lower-level lodging are facing the biggest problems, according to BlueEvents’s Barbora Krásná, but engaging in price wars simply hurts their brands and bottom lines. “What is evident is that they are in crisis,” she said, adding that price wars only make the problem worse. It “is killing them”, she added. “People want more than low prices.”
Still, hotels can’t ignore the tough times. “The price factor has definitely become the main factor to keep the business going during the global economic crisis, but cost control, efficiency and the productivity of our staff are further elements we concentrate on,” said Dana Tomášová, marketing and PR manager of andel’s Hotel and Suites and the angelo Hotel Prague, four-star establishments in Smíchov. She wouldn’t specify strategies employed by her hotels, saying just that the group is working on innovative sales and marketing ideas. She also wouldn’t point out competitors’ poor practices, but she said she was aware of them.
Overall, the occupancy to in Prague is expected to drop to below 50%, according to an estimate by Mag Consulting and reported by ČTK, a significant drop from 2008’s 55.4%.
And the prognosis is not good. “The crisis in tourism, the first signs of which already showed up in statistics for the second quarter of 2008, will extend until at least the end of 2010,” Mag director Jaromír Beránek told the news service. “We can expect that smaller and midsize hotels won’t resist such pressure and will have to close down,” he added.
It seems that many in the industry anticipate this culling effect. “I don’t think everybody on the market is going to sustain,” the Radisson’s Chour said. “Everybody’s losing. The strong performers will become stronger, the average performers will become weaker, and the ones which have been bad will not be around anymore.”
The Aria, for example, is doing well enough for now, but as an independent hotel it doesn’t have funding from an office elsewhere in Europe or in the United States, so it needs to stay strong through the crisis. “It’s much harder if you know that you don’t have any backup, so we have to do the best to have the money to run this hotel,” Daliborová said.
And even if things pick up again after next year, the hotel industry could be set back even after the tourists return. “It takes approximately five years to stabilise rates, according to the experience of our hotel colleagues from abroad,” Tomášová said. “On the other hand, the principles of the market economy might cause that the small independent hotels will not survive and their business will be overtaken by international well-established hotel corporations like our Vienna International Hotels & Resorts and others.”
