Czech Republic Tourism Report Q3 2009

Tourism Overview BMI estimates that foreign visitor arrivals to the Czech Republic in 2008 declined marginally. This is primarily based on hospitality sector data which show that foreign guest arrivals fell 0.4% year-on-year (y-o-y) in 2008. Indeed, the number of tourists in the hospitality sector from Germany - the key source market for the Czech Republic - declined nearly 5% compared with a year earlier. Moreover, following weakness in the hospitality sector in Q308, data for Q408 add to the gloomy picture.

Hospitality Data for 2008 records a 3.8% y-o-y fall in the total (domestic and foreign) number of overnight stays at collective accommodation establishments. Overnight stays by foreign guests dropped by 3% y-o-y. Data for Q408 also show increasing weakness in the hospitality sector for both foreign and domestic tourism.

The number of overnight stays totalled 7.2mn in the fourth quarter, which was 8.2% lower y-o-y. Of these overnight stays, foreign tourism nights were down a sizeable 7.5% compared with the same period in 2007, while domestic residents recorded a further marked fall of 9.2% y-o-y. A total of 2.6mn guests were recorded at collective accommodation establishments in Q408, down 5.4% on Q407, with a total of 1.4mn foreign and 1.2mn domestic guests (down 6.3% and 4.2% y-o-y respectively). With regard to major source markets in 2008, the number of German guests fell nearly 5% y-o-y (down 2% y-o-y in Q408).

Arrivals from the UK recorded even more significant falls, with the number of guests down over 14% yo- y (falling some 23% y-o-y in the final quarter of 2008). The number of Russian guests, meanwhile, rose a strong 30% y-o-y last year, while Polish guests were also up a favourable 25% y-o-y.

Forecast Scenario In 2009, we foresee a relatively large annual decline of 8% in the number of foreign visitor arrivals. This is mainly due to severe economic conditions in key source markets - the eurozone (especially Germany) and the UK. The German economy is now forecast to contract by 4.6% in 2009. Largely due to the Germany downgrade, the eurozone bloc as a whole is forecast to contract by 3.6% this year. Slight recovery of 0.1% in economic growth in the eurozone is forecast in 2010. Although growth in arrivals is anticipated to pick-up slightly next year, BMI maintains only a modest outlook for foreign visitors over the remainder of the forecast period to 2013.

Prague Ruzyne International Airport As expected, there was a sharp slowdown in growth of total passenger traffic at Prague Ruzyne International Airport in 2008. Passenger numbers increased just 1.6% y-o-y to around 12.6mn (after 7.4% y-o-y growth in 2007), with international traffic up nearly 1.5% y-o-y to almost 12.5mn, while domestic passengers increased about 12% compared with 2007. Indicating the scale of the downturn, in November and December 2008, total passenger numbers fell some 15% and 14% y-o-y respectively.

During 2008, low-cost airlines transported 6.3% more passengers y-o-y to just under 3.0mn, while their share of the airport's overall operations was over 23% (up slightly on a year earlier). Latest figures for the first two months of 2009 show further sharp falls in total passenger traffic at Prague Ruzyne Airport, down more than 17% compared with the corresponding period of the previous year.

Czech Airlines Unaudited financial results show Czech Airlines (CSA) recorded a profit before tax of CZK500mn (US$29.3mn) in 2008, an improvement of CZK389mn on a year earlier. CSA carried more than 5.6mn passengers, up about 2.4% y-o-y, although declines in traffic y-o-y were recorded in the last few months of 2008. In March 2009, the Czech Finance Ministry closed the first round of tendering for CSA, with four preliminary bids received from Air France-KLM, Aeroflot, private equity firm Odien and a consortium comprising Czech Unimex Group and Travel Service. According to the ministry, the winner should be known by the end of September 2009 at the latest.