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Prague tourists rattled by rising Koruna avoid beer, souvenirs  Jul 28, 2008

Mindy and Gerald Gartner say they looked forward to celebrating their 25th wedding anniversary in Prague, known for its inexpensive beer, food and hotels.

After paying the equivalent of $80 for breakfast and then buying a $5.50 cup of coffee in the Czech capital, the New York couple decided against a souvenir necklace because of the price.

``I understood Prague was going to be the cheapest of the three places we were going to and if this is the cheapest, it's a little scary,'' said Gerald, 52, chief financial officer of New York City-based AHRC NYC, a non-profit organization that offers aid and legal services for the disabled. While on vacation, ``you sort of don't like to think about what's affordable,'' he said. ``When it hurts the pocketbook, you have to be more reasonable.''

The Czech koruna rose to a record against the dollar and euro on July 22, making it the world's best performing currency and damaging the former communist city's reputation as a bargain destination. Prague topped Berlin, Brussels and Stockholm for the first time in a cost of living index published by consulting firm Mercer LLC on July 24. Tourism officials forecast a decline in visitors when second-quarter figures are released on Aug. 15.

``Demand has been falling since May as people cancel their stays, citing the strong koruna,'' said Veronika Mirovska, owner of Accomm-Prague s.r.o., which sells lodging and excursions to tourists. ``You can get a holiday flat for the same price in Vienna, or even in the center of Paris.''


The koruna gained 19 percent against the euro in the past 12 months and 37 percent against the dollar as annual economic growth of at least 5 percent since 2005 attracts foreign investment. Prime Minister Mirek Topolanek and central bank Governor Zdenek Tuma have spoken out against the currency's strength this month in an effort to reverse the trend.

A glass of beer in Prague's picturesque Old Town Square costs $6.56, or 4.13 euros, more expensive than a half-liter in Berlin, Frankfurt, Vienna or Madrid, according to price data compiled by Bloomberg News.

``Tourists are being discouraged from coming here,'' said Pavel Hlinka, president of the Prague-based Czech Association of Hotels and Restaurants, in a telephone interview. ``It's too expensive.''

Prague jumped to 29th place in Mercer's 2008 ranking of cities from 49th place last year, making it more expensive than any other eastern European city outside of Russia.

Pork, Dumplings

Bargains are available for those who shop in the warren of alleyways that make up the Old Town. There, a half-liter of beer costs about $2 and a plate of traditional pork, dumplings and sauerkraut about $6.50. The same pork dish at the Grand Café Praha on Old Town Square costs 420 koruna ($27), or 18 euros.

That's twice the cost of a comparable dinner in Frankfurt and Berlin and more than an order of fish and chips in the Museum Tavern near the British Museum in London.

``It's a catastrophe,'' said Rita Hysi, who owns two Old Town jewelry stores specializing in traditional Czech semi-precious red garnets. ``I'm in the red, I can't pay invoices. It was never like this. This is the worst'' in a decade, she said.

Marie Brejcha, a 30-year-old project manager from Sweden, is on her second trip to Prague in two years. When she was last in the Czech Republic, the koruna was 22 percent cheaper against the Swedish krona than it is now.

Like Stockholm

``It's just like having lunch in Stockholm,'' said Brejcha, as she strolled near Prague's historic astronomical clock on Old Town Square.

Relief may be coming. The koruna is forecast to fall to 24.2 against the euro by the end of the year, a decline of 2.6 percent, according to the median prediction from 24 economists and currency strategists compiled by Bloomberg. Central bank chief Tuma signaled on July 22 that the bank may cut interest rates as early as next month to counter the koruna's strength and avoid ``damage'' to the economy.

The koruna reached an all-time high against the euro of 22.908 on July 22, before Tuma's comments about rates pushed it lower. The currency traded at 23.718 to the euro and 15.105 against the dollar on July 25 in Prague.

``It's obvious that no economy can withstand such a marked strengthening without being damaged,'' said Tuma on July 22.

Revenue at shops and restaurants in the center of Prague has dropped as much as 30 percent this year, said Tomio Okamura, a spokesman for the Association of Czech Tourist Agencies.

New Tourists

The mix of people coming to the city of 1.2 million is also changing. As the number of western European visitors decline, they are replaced by Slovaks and Poles, who spend less than Germans, British or Americans, Okamura said in an e-mailed statement.

At the Old Town Square's Erpet Bohemia Crystal shop, where tourists browse shelves for traditional plates, cups and vases, Ota Ledvinka is lamenting her lost business.

``The koruna is really hurting us,'' the 38-year-old manager said. ``With the koruna this strong, tourists first pay for their hotel, then food and only commit the last bit of money to presents and souvenirs.''

The Gartners of New York said they were headed to Venice after their stay in the Czech Republic, and hoped that the Italian city would be less expensive than Prague.

``Everything you touch here is like a fortune,'' said Gerald. ``It's been a little bit of a shock.''

Prague tourists rattled by rising Koruna avoid beer, souvenirs
Prague /

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