BMI's Executive Summary

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Tourism Overview

Following relatively strong growth in foreign visitor arrivals of around 5% year-on-year (y-o-y) in 2005, BMI estimates that arrivals totalled some 102.4mn in 2006, up just under 2% y-o-y. This estimate is based on modest growth of 1.6% y-o-y in the number of foreign guests in the hospitality sector, compared with 4.5% y-o-y growth in 2005. Of particular note is that the number of German guests – the key source market – was up only 0.7% y-o-y in 2006, after a 2.4% y-o-y rise in the previous year.

Hospitality

In H107, there was a marginal decline y-o-y in the total number of guests overall at collective accommodation establishments. However, foreign guests recorded a relatively modest 2.1% increase y-oy. The top two source markets (for the hospitality sector) performed badly, with the number of guests from Germany and the UK falling 5.4% and 8% y-o-y respectively. Guests from Russia meanwhile, the third most important source market, were up a buoyant 34% y-o-y. The total number of tourism nights in H107 was disappointing, declining nearly 2% y-o-y, although foreign tourism nights were up just over 2% y-o-y. During the same period, overnight stays by both German and UK tourists were down over 8% y-o-y. In line with the buoyant growth in the number of Russian guests, overnight stays by Russian tourists were up a similarly strong 33% y-o-y. BMI expects Russia to record the second largest number of overnight stays in the Czech Republic in 2007 (after Germany). This is partly due to the high average number of overnight stays per Russian guest (5.6 nights per guest in H107).

Forecast Scenario

Thanks to solid consumer demand and stronger than expected export expansion, we have revised up our 2007 and 2008 Czech economic growth forecasts to 6.0% and 5.3%, respectively. In our view, a potential exacerbation of the international credit crisis will represent the main downside risk to our positive outlook.

In line with the latest hospitality data for foreign guests, we have edged up slightly the forecast growth rate for 2007 (with growth marginally higher than 2006) but it still remains somewhat low. Despite continued diversification of source markets, BMI anticipates relatively subdued growth in foreign visitor arrivals over the remainder of our extended forecast period to 2012 (with a slowdown in growth in 2008). This is partly due to anticipated weakness in arrivals from Germany and the UK. The outlook is also based on modest strength of the Czech koruna in relation to the euro over the medium term. At the end of the forecast period, foreign visitor arrivals are expected to reach over 113mn.

Prague Ruzyne International Airport

After relatively strong increases in passenger numbers at Prague Ruzyne International Airport in the past three years, the outlook is sanguine for 2007. Latest data for H107 show the airport handled almost 5.6mn passengers, up a strong of 9% y-o-y. Low-cost carriers continue to record the best growth rates, with just over 29% more passengers y-o-y in the first half of 2007. Moreover, low-cost airlines accounted for nearly a quarter of the airport's total activities in H107. CSA maintains its position as the largest carrier, however, with 43% of the total number of passengers in the same period.

Czech Airlines

As Czech Airlines (CSA) proceeds with its restructuring plan, financial results for H107 show a significant improvement, with the company reducing losses to CZK175mn (US$8.8mn), from CZK773mn in the corresponding period of 2006. Traffic data for the period January to June 2007 show CSA carried 2.49mn passengers, up a modest 1% y-o-y. The company, which appears to be on track to meet its profit target for 2007, may add Boeing 767 or Airbus A330 planes to its fleet. In September 2007, the government confirmed that the airline will be privatised once the restructuring process is completed in 2008.

Chapter 1 - Executive Summary

Tourism Overview

Forecast Scenario

Accommodation

Czech Airlines

Chapter 2 - Market Overview

Tourism Outlook

Table - Czech Tourism: Historical Data & Forecasts

Table - Czech Travel Industry: Historical Data & Forecasts

Czech Republic Tourism – SWOT

Chapter 3 - Travel

Commercial Airlines

Table: Scheduled Routes From Prague – CSA Market Share (%)

Key Players - Czech Airline Industry 2005

Chapter 4 - Industry Forecast Scenario

Chapter 5 - Macroeconomic Forecast Scenario

Surging Ahead

Perking Up At Home

Risks To Outlook

Table: Czech Republic - Economic Activity

Chapter 6 - Middle East, Europe and Africa Tourism Business Environment Rankings

Table: Middle East, Europe and Africa Tourism Business Environment Rankings Matrix

Long Term Political Risk

Country Business Environment

International Tourism Receipts

Visitor Arrival Growth

Investment Environment

Shock Factor

Chapter 7 - Business Environment Outlook

Czech Republic Business Environment SWOT

Foreign Direct Investment

Overview

Investment Climate

Red Tape

Key Investors

EU Impact

Investment Opportunities

Chapter 8 - Hospitality

Accommodation

Table: Structure of Czech Accommodation Market

Chapter 9 - Infrastructure

Chapter 10 - Company Profiles

Czech Airlines (CSA)

Orea Hotels

Hilton

Chapter 11 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Tourism Industry

Sources

Competitive Landscape for Emerging Europe Tourism Reports: Sample of Companies Ranked

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Comparative cross-border analysis assessing business and regulatory factors to rank Asia’s most competitive tourism markets. Indicators used include Political Risk, Business Environment Risk, Forecast International Tourism Receipts, Visitor Arrival Growth, Investment Environment and Shock Factors (taking account of any special factors such as terrorism, natural disasters and disease). Company SWOTs for leading resort, hotel, airline, travel and tourism operators in each market, including competitive intelligence on overall geographic presence, competitive positioning and relationships with international operators; % share of operator markets; % share of international arrivals and departures; % share of busiest domestic routes; main products and services; panregional expansion, merger and acquisition strategies.

Network of European Tourism Sources

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BMI's European Tourism Reports are based on an extensive network of multilateral organisations, government departments, tourism industry associations, chambers of commerce and company reports. Information sources include: