Nick Marsh, Executive Vice President at Jones Lang LaSalle Hotels stated that "after a slow start to the year, the Prague hotel market recovered strongly in the second quarter, boosted by the decrease in VAT on hotel rooms from 22% to 5%." He expects this to result in an overall increase in room rates between 5% and 10% for the year end.

The strong performance of the market can not entirely be attributed to the decrease in VAT. Mr Marsh adds that "the recovery in the Czech Republic's economy and the increasing leisure demand from the US and Western European countries is boosting demand. Quality hotel occupancies increased by 10.8% during the first seven months of the year to 71.5%".

With occupancy levels around 70%, the hotel market has achieved a more stable demand curve, moving away from the seasonality trend of peak demand in the summer months and very low winter demand. "Corporate and conference demand is now being attracted during the low and shoulder season, boosting overall occupancy levels" states Marsh.

The strong performance of the market has resulted in an overall room yield increase of 21.4% to CSK2,772. This ranks Prague as the third highest growth market in Europe, behind Berlin and Barcelona and easily the highest growth market in Central Europe. Mr Marsh predicts that this growth is likely to continue "with the strong economic growth and reforms the country is undergoing for eventual EMU entry and the increasing sophistication of the city's tourism industry". However, he does warn that occupancy growth may slow somewhat in the short term as the new hotels including the Four Seasons are absorbed into the market, although rate will be boosted.

The Prague market has only seen one major single-asset hotel transaction in 2000, the Renaissance Prague Hotel as well as the adjacent Gestin commercial centre which was acquired by Hospitality Europe BV (a Dutch based company). As the market fully recovers, the level of investment activity is expected to rise according to Jones Lang LaSalle Hotels, as investors gain greater confidence in the Prague hotel market. Mr Marsh concludes by saying that "the US investors in particular are attracted by the double digit entry yields and the prospect of capital rate compression in the short to medium term".

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Jones Lang LaSalle Hotels is the largest and most qualified specialist hotel investment banking services group in the world. Through its 18 dedicated offices and the global Jones Lang LaSalle network of 6,000 professionals across more than 100 key markets in almost 35 countries, Jones Lang LaSalle Hotels is able to provide clients with value added investment opportunities and advice.

Jones Lang LaSalle Hotels recent two year success story included the sale of 17,027 hotel rooms to the value of US$2.2 billion in 75 cities and advisory expertise for 200,036 rooms to the value of US$29.8 billion across 278 cities. Jones Lang LaSalle Hotels' services include transactions, mergers & acquisitions, financial advice & capital raising, valuation & appraisal, asset management, strategic planning, operator assessment & selection and industry research.