Czech Republic Tourism Report Q2 2009

Tourism Overview Following weakness in the hospitality sector in Q208, recent data for Q308 year-on-year (y-o-y) add to the gloomy picture. Although figures on foreign tourism were weak (and especially poor for German and UK arrivals – key source markets), domestic tourism recorded marked declines in the third quarter of 2008. Foreign tourism nights in spa resorts, however, showed a reasonable increase.

Hospitality The number of overnight stays totalled 14.3mn in Q308, which was 5.9% lower y-o-y. Of these overnight stays, foreign tourism nights were down by 1.1% y-o-y, while domestic residents recorded a large fall of 9.5% y-o-y. The average length of overnight stays for all guests also decreased from 3.4 to 3.3 nights (foreign guests from 3.1 to 3.0; domestic guests from 3.6 to 3.5 nights). During the same period, a total of 4.4mn guests were recorded at collective accommodation establishments, down 3.3% on Q307, with a total of 2.2mn foreign and 2.2mn domestic guests (up 0.4% y-o-y and down 6.6% y-o-y respectively). Spa accommodation establishments recorded 2.1mn overnight stays, down 1.6% y-o-y, although foreign tourism nights were up 3.3% y-o-y to 0.8mn nights. With regard to source markets, the majority of tourists came from Germany but overnight stays by German tourists declined 6.5% y-o-y, while nights by UK arrivals fell a considerable 14% y-o-y. The highest growth in the number of overnight stays was recorded in arrivals from Russia (up 25.4% y-o-y) and Poland (up 12.2% y-o-y).

Forecast Scenario Our forecast scenario remains largely unchanged this quarter, with foreign visitor arrivals to the Czech Republic expected to show only marginal growth in 2008. This year, however, we foresee negative growth, with slight recovery taking place only in 2010. This is based primarily on economic conditions in major source markets, with the economic outlook for the eurozone continuing to deteriorate. In 2009, we forecast a contraction of 1.6% in the eurozone. A slow recovery is expected in 2010 though, with real GDP growth of 0.7%. BMI maintains only a modest outlook for foreign visitor arrivals over the remainder of the forecast period to 2013, which is influenced strongly by our view of the strength of the Czech koruna in relation to the euro.

Prague Ruzyne International Airport If further evidence of a slowdown in the tourism sector were needed, latest figures show a relatively sharp weakening in the growth of passenger traffic at Prague Ruzyne International Airport. In the first eleven months of 2008, the airport recorded an increase in passenger numbers of about 2.8% compared with the corresponding period of 2007 (but with a noticeable fall of some 15% y-o-y in November). This follows 7.4% y-o-y growth for the whole of 2007. Indeed, the outturn for growth in total passenger numbers in 2008 will be much weaker than the airport anticipated.

Czech Airlines Latest results for the first three quarters of 2008 show Czech Airlines (CSA) generated a profit of almost US$22.1mn (before tax) – more than doubling profit compared with the same period in 2007. This is an excellent result considering that the industry is burdened by high fuel prices and a sharp economic downturn. Passenger traffic in the first nine months of 2008 was over 4.4mn, a favourable increase of 4.9% y-o-y (and relatively strong compared with other European carriers).