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Czech Republic: Travel and tourism profile
(IndustryWire Via Thomson Dialog NewsEdge) FROM THE ECONOMIST INTELLIGENCE UNIT
Profile articles provide a concise overview of an industry in a particular country. They are designed to brief senior executives on key local players, on demand and consumption, and on supply and production.
2001(a)2002(a)2003(a)2004(a)2005(a)2006(b)International tourism, arrivals ('000)4,5795,1945,0766,0616,3366,637International tourism, departures ('000)2,6442,7334,4564,0314,3744,785International tourism, expenditure (US$ m)1,3881,5751,9292,2722,4122,594International tourism, receipts (US$m)3,1062,9413,5564,1724,6315,127Consumer expenditure: hotels & restaurants (US$ m)3,8414,7105,5366,4947,3408,309(a) Actual. (b) Economist Intelligence Unit estimates.Source: Economist Intelligence Unit.Overview
The Czech tourism industry experienced rapid growth in the 1990s and was one of the country's most important sectors by the middle of the decade. According to the World Travel and Tourism Council (WTTC), the tourist industry generated revenue of 2.1% of GDP in 2005. If unofficial dealings with tourists (such as private room rents) and the indirect impact of the sector are taken into account, its share rises to an estimated 13.2% of GDP in 2005, according to the WTTC. The tourism sector contributed a surplus to the current account in 2005 of Kc53.2bn (US$2.2bn), a year-on-year rise of over 8.8%. The travel and tourism industry directly and indirectly accounted for 517,160 jobs, or 12.2% of total employment in 2005, according to the WTTC.
Like most tourist destinations, the Czech Republic was affected by the global slowdown in travel resulting first from the US recession and the terrorist attacks of September 11th 2001, and then the effects of Severe Acute Respiratory Syndrome (SARS) and the Iraq war in 2003. However, the Czech tourism industry relies heavily on visitors from western Europe, who increasingly are choosing the Czech Republic as a destination rather than risking travel further afield. The number of arrivals fell in 2001 and again in 2003, before rebounding from 2004. International departures have begun to grow recently, as a strong currency has made outbound travel cheaper. Domestic travel remains an important component of the tourism industry and is expected to grow in the future.
Tourism infrastructure has witnessed significant investment in the past decade, with most international hotel chains now present in the country. The number of hotels in the capital, Prague, which is the main destination for tourists, has doubled from 200 in 2003 to reach 469. Modern hotels, abundant conference facilities and relatively attractive prices have helped Prague to become a major location for international conferences.
Transport infrastructure in the country is well developed by east European standards. The road network is the best in the region. Czech Airlines (CSA), the national carrier, connects the country with the rest of the world. New budget airlines, such as Ryanair (Ireland), SkyEurope (Slovakia) and easyJet (UK), have also sprouted up from the deregulation of EU airspace, reducing the costs of airline travel to Prague. Railways, however, remain a loss-making sector, ailing because of a strong trade union and its demands for pay and employment.
Demand
International arrivals generally began to decline after 2000, when they stood at 4.7m, but posted a strong recovery in 2004, when arrivals reached 6.1m. The number of arrivals continued to grow in 2005, albeit at a slower pace, to reach 6.3m. International tourist receipts in koruna terms have been rising steadily, reaching Kc110.9bn in 2005, a year-on-year rise of 3.5%, with the tourism balance posting a surplus of Kc53.2bn.
The number of foreign tourists staying at least one night in the Czech Republic rose by 4.5% year on year in 2005, to 6.3m, and the number of guest nights in accommodation for foreign guests rose by 3.2% year on year in 2005, to 19.6m. Over 85% of foreign guests at Czech hotels come from Europe; about 30% come from Germany alone. The UK, Poland, Italy, Slovakia, the Netherlands and France are also important sources of tourists. The average length of stay for foreigners was 4.3 days in 2005, up slightly from 4.1 in 2004. Of growing importance, especially to western border towns, is health tourism. Many Germans and Austrians have begun travelling to receive treatment by Czech dentists, who offer largely the same service as their Western counterparts but for a fraction of the price.
Solid rises in incomes over the past few years, coupled with an appreciating currency, have resulted in a rise in the number of Czechs travelling abroad. In 2005, 4.4m Czechs travelled abroad for at least an overnight stay, compared with 2.6m in 2000. By comparison, the number of Czechs going on holiday within the country for at least an overnight stay has remained static, at 5.6m in 2005, compared with 5.5m in 2000. The number of Czechs staying in hotel accommodation was 6m in 2005, a year-on-year decrease of just over 2%. The government is trying to promote domestic tourism and has launched a campaign to encourage Czechs to spend their holidays within the country rather than go abroad.
2001(a)2002(a)2003(a)2004(a)2005(a)2006(b)Nominal GDP (US$ bn)(c)61.875.391.4108.2124.0137.0Population (m)10.210.210.210.210.210.2GDP per head (US$ at PPP)14,56015,12515,92717,08318,68820,380Private consumption per head (US$)3,1053,7384,5575,2865,9346,664Number of households ('000)3,8283,817(b)3,804(b)3,792(b)3,785(b)3,774(a) Actual. (b) Economist Intelligence Unit estimates. (c) Not seasonally adjusted.Source: Economist Intelligence Unit.Pricing
ItemPrice (US$)% of monthly personal disposable incomeAffordability rankBusiness trip, typical daily cost632133.635 out of 58Hilton-type hotel, single room, one night incl breakfast (av)556117.339 out of 58Moderate hotel, single room, one night incl breakfast (av)26656.2337 out of 58One drink at bar of first-class hotel (av)19.234.0637 out of 58Note. Affordability rank: for each country the price of an item as a percentage of monthly personal disposable income is calculated. Countries are ranked according to these percentages. The most affordable country will have the lowest percentage and be ranked first.Supplytourism
Prague, with its rich cultural heritage, remains the country's main tourist attraction. Modern hotels, a conference centre and attractive prices have helped the capital to become a major location for international conferences. There have been attempts to lure visitors away from the capital to other areas, but the tourism infrastructure outside Prague is less well developed, and only around one-quarter of all incoming tourists venture to destinations outside the city. Among other destinations, the southern town of Cesky Krumlov is a favourite with German visitors, and Kutna Hora has lured travellers away from Prague (both towns are listed as World Heritage Sites by UNESCO). The famous spa town of Karlovy Vary (formerly Karlsbad) was hit hard by the drop in the number of wealthy Russian visitors following Russia's 1998 financial crisis, but has since recovered thanks to new German visitors, as well as returning Russians. For domestic tourists, the lakes and rivers of southern Bohemia are the main attraction, followed by the mountains of the north.
As in other sectors of the services economy, the government's laisser-faire approach resulted in cases of excessive chargingmost infamously by taxi drivers in the capitaland poor levels of services, but the government has improved regulation and supervision significantly in recent years. Czech tourism infrastructure is still underdeveloped in areas other than the capital, but there has been a lot of investment in these locations over the past decade. Initial investment was focused at the upper-middle end of the market, but has since spread both to the economy sector and to upmarket hotels. There were 7,608 commercial accommodation establishments in 2005, representing 164,871 rooms and 435,993 beds. When hostels, bungalows, guesthouses and camp sites are omitted, the Czech Republic is left with 4,279 hotels, representing 99,966 rooms and 232,295 beds. There are 34 five-star hotels in the country, and 252 four-star hotels. Many international chains operate in the country, including Intercontinental (UK), Marriott (US), Ritz Carlton (US) and Four Seasons (Canada).
Orea Hotels (Czech) is the largest hotel chain in the country. The company operates more than 25 hotels in more than ten destinations in the country. The firm is currently planning to build a regional franchise business in central Europe by entering other markets, including Hungary, Poland and Austria. It has already opened one hotel in Slovakia, the Club Hotel.
Useful web links
Orea Hotels: www.orea.cz
Intercontinental: www.intercontinental.com
Marriott: www.marriott.com
Supplyairlines and other tourism transport
The Czech transport and communications system is good by east European standards, but below the quality commonly found in western Europe. Roads are the main means of entering the country, with 92.2% of foreign arrivals using this means of transport in 2005. Rail and air routes are used rarely and accounted for 3.1% and 4.7% of foreign tourists, respectively, in 2005. The country has 11 international airports and about 60 domestic airports. Prague's Ruzyne airport is the most important, accounting for 95% of total passenger traffic.
Although the Czech Republic has the best road network in the region, it remains underdeveloped compared with western Europe. The government is struggling to counter the deterioration in quality that has resulted from low investment in repair and maintenance since 1989. A steep rise in private car ownership between 1990 and 2005, from 2.4m to 3.9m, has compounded the pressure on the road network. Long-term plans focus on completing connections through northern Bohemia to Berlin via Dresden and south from the Prague-Brno motorway to Austria, although environmental concerns have caused delays to both projects.
Despite the fact that travel by air is marginal compared with that by road, international air passenger transport has grown swiftly, from 1.4m in 1991 to 11.4m in 2005. This has been facilitated by the completion in 1997 of a major expansion and modernisation of the terminal at Prague's Ruzyne airport. A new terminal, completed on schedule at the end of 2005, with the European Investment Bank (EIB) providing partial financing in the form of a 286m loan, is expected to boost annual capacity of the airport to 15mpassengers. Letiste Praha (formerly Ceska sprava letist), the administrator of the airport, is likely to be privatised in 2008, but has yet to be transformed into a joint-stock company in order to facilitate this. However, the sale of a minority stake in Letiste Praha has been complicated in part by a land dispute with a private investor that acquired roughly 25% of land intended for construction of a third runway, which is scheduled to begin in 2007. Letiste Praha earned Kc1bn in profits in 2006, down from Kc1.2bn in 2005, owing to a rise in cost outlays related to the launch of a new terminal at Ruzyne airport.
CSA is the national carrier. Passenger traffic for the airline increased by over 20% year on year in 2005, to 5.2m. The airline's fleet consists of 49 aircraft, including 29 Boeing planes. CSA has been affected by economic difficulties and reported an after-tax loss of Kc496.1m in 2005, compared with an after-tax profit of Kc324.1m in 2004. The management of the company has subsequently been replaced and the airline is now undergoing major restructuring. The government recently announced that CSA will be privatised in 2007. Other carriers include British Airways, Austrian Airlines, and Lufthansa (Germany). Low-cost carriers include easyJet (UK), which offers direct flights from Prague to eight destinations: five in the UK plus Basel, Milan, Geneva and Dortmund; Jet2 (a subsidiary of the UK's Dart Group), which flies from Prague to five destinations in Ireland and the UK; and Ryanair (Ireland), which offers flights between Brno and London. SkyEurope (Slovakia) launched flights from Prague in April 2006. Out of the 54 airlines that include Prague as a destination, SkyEurope ranks sixth, behind CSA, Travel Service, easyJet, Lufthansa and British Airways.
The railway network remains a loss-making organisation, despite sharp cuts in physical stock and the labour force. Further sharp cuts in rural lines were stalled for political reasons, and privatisation has made little headway. This is partly attributable to the strength and militancy of the railway workers' union. The delayed restructuring of Ceske drahy (Czech Railways; CD), the state-owned freight and passenger service provider, resulted in an annual drain on the budget of around 1.25% of GDP in the 1990s. Despite the separation of CD in January 2003 into a semi-private company responsible for transport services and a wholly state-owned company to operate the infrastructure, no further major rationalisation is anticipated. Construction of new trans-European network (TEN) corridors has taken priority over maintenance, resulting in poor track conditions and frequent breakdowns of rolling stock.
Useful web link
Czech Airlines: www.csa.cz
SOURCE: The Economist Intelligence Unit
Copyright 2007 Economist Intelligence Unit
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