Final Word from Monday, August 4, 2008
Newly built hotels in Prague are among those hit the hardest by the strong crown. They're facing a triple whammy - lower revenues when converted into crowns, rising labor and real-estate costs, and a general decline in the attractiveness of Prague as a tourist destination. Overpriced real estate will increasingly get blamed for the Czech malaise. It seeps into all areas of the economy and is one of the costs hardest to cut in the short term. Hoteliers who made their commitment a few years can be forgiven for not foreseeing the effect of the real-estate bubble and the strong crown, but they should have seen the fading of Prague's status as a tourist mecca coming. Prague is great for first-timers, but it failed during the golden days to implement a strategy for winning repeat business. Perhaps the current crisis will change this, but it'll be too late for some of the new hotels already facing a sunk-cost dilemma.[Czech Republic tourism currency appreciation]
Glossary of difficult words
squeeze - strong pressure on a business, resulting from supply that exceeds demand;
whammy - an event with a powerful and unpleasant effect;
malaise - a general feeling of discomfort or uneasiness;
to seep - to flow or leak slowly through something;
to fade - to gradually grow faint and disappear;
mecca - a place visited by many people;
sunk-cost dilemma - an investment situation in which the sunk costs (the amounts already spent) are so great that, although the situation has changed for the worse, it is not economical to abandon the project.