On the first Friday in December, the hall of Prague’s Pyramida Hotel was buzzing with the chatter of several dozen people at a company event, glasses clinking at the bar, and the fact that we were facing another wave of the coronavirus pandemic was more or less only reminded by the veils on the guests’ faces. Receptionists and waitresses were busy. “We’re full. I think people want mobility, flexibility and they want to meet each other,” says Gorjan Lazarov, CEO of the Orea Hotels & Resorts chain. He takes the coronavirus as inspiration to do things differently and better. In December, it will unveil its first completely staff-free hotel in a lucrative location near Prague’s Charles Bridge. Lazarov stresses that beauty – and not just of Prague – should not be sold cheaply.
The Orea chain has a total of eighteen hotels across the country, in cities, mountains and spa resorts. How have the coronavirus pandemic and associated closures affected individual sites?
The biggest negative impacts are on hotels for corporate clients or city hotels, i.e. in Prague and Brno, but also on spas. The traditional German clientele that used to come to Mariánské Lázně, for example, is missing there.
Prague and Brno were the biggest source of sales before covid, so is this a noticeable change?
Ano. Since 2017, we have invested heavily and are gradually transforming Oreo to create a Czech brand that is a symbol of quality and can be exported abroad. It’s true that hotels geared towards corporate clients were the core of the portfolio, but by improving those for leisure, we have seen a very positive response from clients and record satisfaction. This means that not only do they return for stays, but they are increasingly recommending us further afield. This means that even hotels in the regions work quite well despite the complications with covid. For example, we are now able to occupy even periods when it is not traditionally crowded, specifically on the weekends after the 28th. October.
So currently more revenue comes from tourism outside Prague?
Yes, absolutely. Before the covid, the Prague hotel Pyramida accounted for up to 20 percent of the company’s total sales, today it is more the hotels in the regions that are dragging. However, the exact number is harder to specify. However, the pyramid still plays a big role because it performs very much above average compared to the market. Unlike other capacities in the capital, this hotel focuses on Czech clientele, and so it is full even now. Therefore, we do not feel the overall decline as painfully as some other Prague hoteliers. And it also helps that our clients come back – we have invested a lot in our services and they appreciate it.
So the change is that the other segments grew?
Yes, but be careful. In 2019 we had sales of 1.1 billion, this year we’ll end up about half that, but with the fact that we’ve been closed for half a year this year. If I compare the only period that can be compared, the third quarter, we have now had an eleven percent increase in sales compared to the same period in 2019. This means that we grew on the overall portfolio compared to this year.
In other words, unless you are forcibly closed, the hotel is full despite the covid?
That’s right. In the third quarter, for example, both Czech visitors and guests from neighbouring countries were relatively normal. But now, unfortunately, that’s changing. The moment the disease starts to grow, neighbouring countries take various covid measures and people rethink their visits as a result. That leaves us with only domestic tourists.
So the domestic clientele now makes up for the foreign ones?
Yes, but it has its limits. It’s like if Skoda only delivered cars to the Czech Republic. The domestic market is simply too small to cover the shortfall of foreign guests.
In the time between the pandemic periods, when accommodation facilities could operate, the differences between hotels of different price levels were blurred, especially in Prague. To what extent is this trend continuing?
It makes me want to cry. If I take what is happening on the Prague market and compare it with what is happening in Vienna or Bratislava, for example, it is clear that Prague is selling very cheaply. On the one hand, I can understand hoteliers reacting to the crisis by cutting prices to the extreme. But if there is no demand, simply put, you can sell at any lower price and you still won’t generate any interest. It happens to us repeatedly, we’ve been at it for 20 years, this is almost déjà vu. The average price in Prague is low even when demand is high. This is specific to the Prague market, unlike other destinations such as Vienna, Berlin or Barcelona. You can still get a five-star hotel in the capital for a hundred euros a night on the day you arrive. Unfortunately, this is the transactional mood of the market, which is pushing the price down unnecessarily.
Why don’t Prague hoteliers hesitate to discount so much?
One reason is the high number of hotels. The hoteliers also forget that when everyone cheapens once or twice, the price is undercut, the overall price level is lowered and this degrades the market. Hoteliers need to understand that dynamic price management is not about last-minute reactions and discounting, but rather estimating demand. And then there is another factor, or rather opportunity: Prague is one of the most beautiful cities in the world, there is demand here. Now it’s about how we want to present this destination. We don’t offer much for the luxury clientele, be it shopping options, restaurants, interesting concerts, tennis tournament and other experiences. Why should clients come back? What else would they be doing here besides coming for the cheapest beer in the world? In other words, we will either be a destination with beer bikes, or we will use the beauty of the city to attract a different type of tourist. The decision is ours.
How should we present ourselves? What should tourists know about Prague?
That it’s a beautiful city and something beyond that. But more culture, restaurants… experiences. Certainly not “cheap beer”. We should change that. Now, everyone might shoot me down because it’s the national drink, except: do you have the best product in the world here and does it sell the cheapest? Instead of selling a pint for five euros, it sells for two.
So Prague was not able to exploit what it could in tourism even before the covid?
I don’t think so. Perhaps this is partly a tax for the fact that we have a beautiful, cool city and thus we don’t think about the possibilities of how to develop it further. I see a huge opportunity in congress tourism and in presenting ourselves as a city where a big event takes place regularly. It can be about a topic that will be in for the next ten years, such as artificial intelligence or robotics. Let’s do a world conference in a similar vein to the Mobile World Congress in Barcelona or Fashion Week in Milan. This will attract a large number of people, which will also help prices in the area.
Do you think that congresses still have a future?
It’s a question of how it will play out. For example, I heard back in 2000 that if you can communicate online, people won’t want to meet in hotels – but even today we have a full hotel and conference. I think people just want to meet each other. That’s what covid showed us. That’s why I still think that congresses have a purpose. People see value in meeting in one place, and business is all about meeting. By the way, whenever technology has brought something new, we have seen an increase in demand in the industry because the productivity of people has increased due to technological innovations. So I think all the aforementioned online calls via Zoom, Teams, Meet, etc. will eventually do the same. While in the past you had to fly somewhere for a short one-hour meeting, today you can make several video calls instead. But since you end up doing eight such one-hour meetings in a day, you end up having to make a one-day trip anyway to get the necessary things done.
So the coronavirus will not change tourism and convention tourism permanently?
For my part, I don’t expect the business of big events to change because it’s a different energy, people want to meet each other. But the customer mix will change. I remember 2006, 2007 – I was still working at Marriott at that time – and we regularly wrote in the business plan that Prague was oversaturated with hotels, that there were a lot of them. And then in 2015, Airbnb came along, the number of rooms available in Prague doubled, but we still had a record year in 2019. Why? Because it means more choice, even more mobility, different clientele and low cost airlines. It’s not that hotels have disappeared or gone bankrupt, it’s just that the market has grown. And even now I think the demand will increase. For example, I worked from home all morning today and now I was happy to meet people during the day. Maybe even more often than before you need to get people together, to think, to talk strategy. So, yes, executive can be done through video conferencing, but thinking of new things, finding ideas, there is much more need for face-to-face meetings.
Does the coronavirus change the client structure?
As it is always the case after a crisis, we are seeing the return of leisure clients. People are working, but they still want to make use of their free time and are looking for experiences they are willing to pay for. What we lack at the moment is a business clientele, because the classic corporate segment has disappeared. Demand from large companies, multinationals, from which hundreds of guests have come, is still at zero. Their people are staying on the home office. But we also see that smaller and medium-sized enterprises have adapted much better. These were already fully operational in September, October and November. There is also a difference in the individual coronavirus waves. In the first one, everyone was scared. In the second one, leisure tourism worked, but there was no business tourism at all. Now, in the autumn wave, small and medium-sized business was working, but corporate business was not. I think that as vaccination rates increase, those corporate customers will start coming back.
In other words, can we say that the market is returning to normal? No overall transformation of the hotel and tourism industry was started by the coronavirus?
He took off and he didn’t take off. There’s still uncertainty that’s negatively affecting the industry, and I think what’s changing is client habits. But the hotel industry was a bit behind the times and did not digitalize, relying on a traditional approach. That he knows his guest, that he sees him and that he doesn’t need to know any data about him. Even without that, he knows what he likes, when and where he goes… Covid was a wake-up call that showed that even hotels have to move on. Take sales, for example, which are done a lot online. People nowadays order everything from food to clothes electronically, they are used to it and the hotel industry has to adapt to this trend. In the Orea network, we have therefore used the time of closures to complete the transformation and become even more digital. But it’s not really a competitive advantage when you compare it to other industries. We’re just getting to the level that the client expects.
Before the covid, you tried the robot at the Pyramid Hotel reception. This year you tested artificial waiters again in the Krkonoše Mountains and Šumava. What are the results?
When I look at the robot we launched in 2017 at the reception, it acted as a kind of butler. He provided recommendations to guests. However, we found that connecting the old hotel systems to it would be so complicated and expensive that it would be better to replace them. We have now just completed the transition to the new property management system at all hotels. This will make working with technology much easier. We know that people want to control more and more things through their mobile phones. Therefore, we want to digitalize the customer journey overall, to be able to check in via smartphone, open a room, check out, all without any staff intervention. Just 20. In December we should open Orea Place Charles Bridge, a tiny hotel by the Charles Bridge with only a few dozen rooms and no staff.
Is it still a hotel?
We have hotels, resorts and spas and we invented Orea place where we provide serviced apartments. We’ll see how it works. There will be cleaning, which cannot be completely robotized, but the rest will be without staff intervention. This brings us into the Airbnb segment, where it’s the same. An Airbnb customer, unlike a customer of a traditional hotel, does not require service. And then he chooses whether he doesn’t need services and goes to a service-free hotel, or whether he wants to enjoy breakfast, spa and other care and goes to a classic hotel where he will be pampered and is ready to pay for it.
Regarding the new contactless hotel you mentioned, how did you set the prices there?
There’s no comparison. It’s a pilot project where we have a premium location, and I don’t know how the segment will react to that.
So you set the price to match hotels in the same location, even though you save on costs by going contactless?
You could say that, but we want to offer elements that other hotels don’t have, so that clients don’t feel completely without service. For example, the receptionist won’t be there, but customers have a mobile phone and want to write and we will provide his services remotely. Another example: the building of this new hotel has a bar downstairs, so the guest will stay in a room without service, but there will be beer on tap in the fridge and the best Czech organic cosmetics in the bathroom.
You mentioned that there are a number of events missing in Prague. I don’t think there are that few of them, rather there is a lack of connection. Will you offer them follow-up services?
It’s definitely something we can move towards. For example, we want our employees to know what is local and recommend it to clients. But Prague is very specific, we can’t do anything alone, we have to get together with others – people from the tourism industry, representatives of the city and the ministry. We need a strategy to be put together so that we know where to put resources and how to move forward in the offer.
Would a more targeted cooperation with the city be useful?
Ano. But first we need to have a strategy and say, even at the city level, what we want to achieve and what we can do to achieve it. Prague also needs to further develop the necessary infrastructure. While it’s great when bike lanes go up, if it causes two lanes to narrow to one at a time when the number of cars on the road is increasing, then it’s probably not the best solution. Rather, you need to invest to give people another way to get somewhere, like a rapid transit to the airport or a bypass.
A year ago, Orea completely took over the Angelo Hotel in Prague’s Smichov district. In the same district, Cimex is preparing a project to convert the former St Gabriel’s Monastery into a premium hotel. Do you see an opportunity in the crisis?
In the long run, I think so, and it gives me confidence to see that the moment you can “play, you play”. By that I mean that people are interested in staying, having fun, living the culture, despite the covid. I honestly can’t imagine the world continuing for years in the chaos it is in now. And that’s why Orea is thinking about how to develop further.
There are not many opportunities to buy whole hotels. On the other hand, I see an opportunity in the fact that many owners of various accommodation capacities in Czech regions realize the added value of having a Czech brand that has a unified business approach on the market, and we want to offer cooperation to them. The owner will keep the property and we will operate it for a management fee.
Are you worried that there might be some more closures now that we’re seeing the number of infections rising?
Yes, because you can see the connection there. The problem with covid is not whether someone underestimates it or is afraid of it, but that an important pillar in any state is no longer functioning, and that is health care. Take the Boeing 737 Max. After two accidents she had to be grounded for years before it was investigated and she could fly again. And now, figuratively speaking, every day a plane crashes, over a hundred people die. I think the problem is that we have a lot of rules that are not being respected. It’s like we’re all driving and only some of us brake at red lights.
If you could set up a support system for entrepreneurs, what would you change?
We’ve more or less learned what works and what doesn’t during the covid and the crisis, and I think it’s already set and people have got used to it. But what hurt us a lot at the beginning, in 2020, was that support for large companies was limited to CZK 20 million for the whole year. Yet if I calculate how much we would be properly entitled to per number of rooms, it would be 120 million. The difference is then the amount that the shareholders had to subsidize. Some saw support for big companies as favouring them – at the expense of smaller ones. But we’re all in the same boat here. Smaller companies have smaller loans, larger ones have bigger loans, but the moment they stop paying the banks, the whole financial system has a problem.
How much will the hotel industry change? Is there still room for new trends?
The hotel industry is quite traditional, so there hasn’t been much change. I think the basics will remain. The trends that have already influenced the previous twenty years, i.e. the internet, artificial intelligence, robotics or digitalisation, will play an even greater role for the next twenty years.