A Rocco retreat from Prague as Ritz Carlton set to arrive

By bne IntelliNews December 17, 2012

Nicholas Watson in Prague -

Rocco Forte Hotels' difficult three-year stay in Prague is near an end and the Luxembourg-based owners of the five-star Augustine Hotel are lining up Ritz-Carlton to take over as the new operators of the hotel once talks with the British luxury hotel chain are concluded, sources tell bne.

The financially struggling hotel chain owned by Sir Rocco began talks in the summer with real estate developer Waldeck Capital, the owner of the 101-room luxury hotel next to the Czech parliament, to try to lower the rental payments on the property.

A temporary deal was struck until the end of October, reportedly lowering the rent to around €100,000 a month, a third of what was previously paid. But Waldeck insisted at the time that either Rocco Forte started paying the full amount again or it would look for another operator to take over the lease, which still has 27 years to run.

Unable to reach a deal with Waldeck, Rocco Forte was given 30 days' notice in November to vacate the premises and sources say Waldeck is in talks with Ritz-Carlton, a division of Marriott International, to take over the lease when the British luxury hotel operator completes talks to negotiate its exit.

Waldeck would not confirm whether Ritz-Carlton would take over. "We are unable to confirm the new operator for The Augustine until all contracts and agreements have been signed and executed. Further and please note, that we are not at liberty to disclose which company will be selected until joint press statements have been agreed," Thomas Smit, chairman of Luxembourg-based real estate developer Waldeck Capital, said in an emailed statement.

For its part, Rocco Forte say they have not made a final decision. The hotel owner has insisted since the crunch times began that it wanted to stay in Prague, but a combination of its own stretched finances and the economic slowdown in Europe always made that unlikely. Latest financial results for the holding company Rocco Forte & Family Ltd showed that in the year to April 30 its sales recovered by £15.9m from the year-earlier period to £104m and losses fell to £9.6m from £24.9m, but it had to negotiate a debt restructuring with Royal Bank of Scotland in May last year that used the proceeds from the sale of Le Richmond hotel in Geneva and it's now in talks with two Italian banks to restructure the debt of its floundering luxury Verdura Resort in Sicily.

Tourism to the Czech Republic was also hard hit by the crisis in 2008 and was slow to recover, but numbers have picked up this year. CzechTourism data showed the number of foreign tourists that visited the country in the first half of the year grew by 6.9% on year, reaching 3.3m foreign tourists, while income from tourism grew to CZK68.4bn, up 12.7%.

Much of that growth, according to Rostislav Vondruska, CEO of CzechTourism, is coming from the fast growing emerging markets such as China, South Korea and Russia. The arrival of these new big spenders is giving hope to Prague's hotel owners that the bottom of the market has passed.

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