| MAIN FEATURE >
NATO summit: make profit, not war
Written by: Jasna Sýkorová
For the first time, a NATO summit
will be hosted by a post-communist country. This is not only an
honor with political and military significance, but also a chance
for Prague's business community to boost its global reputation.
LIKE ANY OTHER undertaking, the summit needs a budget. The Czech
government approved CZK 800 million, an appropriate sum for such
a mega-event. This money will be used to finance the convention,
accompanying events, transport, and security. Other assets will
flow from private subjects and embassies, because the two-day meeting
will be accompanied by many social get-togethers. The delegates
themselves pay for their transportation to the Czech Republic and
their housing, which itself accounts for at least another CZK 100
million.
This "injection" and promotion for Prague makes Prague
hoteliers happy. "I can see promotional spots on CNN for Vienna
or Budapest, and our capital city has a handicap in these terms,"
says Michal Chour, sales director for the Radisson SAS hotel. Furthermore,
Prague hoteliers find themselves in a rather complicated situation
this year. The first six months saw fewer tourists than last year
visiting the Czech Republic, and then Prague was inundated by catastrophic
floods. The Hilton, which was damaged by the waters, reopened in
September, and the Inter.Continental should resume operation in
the beginning of November. Some hotels, such as the Four Seasons,
will unfortunately be unable to complete their repairs before the
NATO summit opens.
According to Alexandr Vondra, the government's commissioner for
summit preparations, the summit provides great motivation for firms
to restore their operations to normal. He says that global television
networks will be steadily observing Prague for two days, this time
in a context that is not catastrophic, which should help the travel
industry here. In connection with the NATO summit, people frequently
speak of positive indirect economic impacts - more tourists will
come in the future, and Prague's prestige as a convention-friendly
city will rise. However, critics point out that there were similar
expectations before the IMF meeting, which did not pan out.
References matter
One need not look for only indirect positive effects. The money
that the state freed up for the convention budget will enter the
economy directly. The amount that will be used for organization
comes to CZK 340 million, and, according to Halka Kaiserová, spokeswoman
for the NATO Summit Office (KSN), most of this figure will go to
supplier firms. "There were forty tenders in all, and about
100 contracts have been signed," Kaiserová says. Contracts
were closed with firms with no competition in their fields (e.g.,
the Congress Center). Tenders were not required by law, because
this is an event associated with state visits, Kaiserová adds.
Although KSN wants the entire process to be as transparent as possible,
in two weeks it was unable to provide The Prague Tribune with a
complete list of suppliers, or more detailed rules for tenders and
controls. Although the names of the firms are not confidential,
only a few names have been made public - the Congress Center will
be equipped with Dell computers; Sanjiv Suri, owner of the catering
firm Zátiší Group, will be in charge of catering, in cooperation
with other restaurants and firms like Golem. Furniture for the convention
will be provided by Alax, and VPU Deco, along with other firms,
will be in charge of construction modifications. The Adecco agency
is in charge of staffing, as it was for the IMF meeting.
Firms agree that references are more important to them than the
job itself. The sheer number of firms restricts the budget, so suppliers
often reduce their margins or provide their services free of charge
in exchange for the prestige. One such example is the Import Volkswagen
Group, the official summit partner that arranges for Škoda and Audi
limousines, passenger cars, and minibuses. Not surprisingly, the
convention also means unpleasant administrative tasks. "If
we were to compare the enormous amount of work with the financial
returns we will get for our services, we would not be involved in
such an event," says Jindřich Chytráček, sales director for
the catering company Golem. His 250 employees will have to go through
security screening, which means lots of extra administrative work.
"For us, the biggest business lies in the references,"
Chytráček explains.
Proof of fitness
The NATO summit has a final, but no less significant, business dimension
- military. The security arranged will show whether the Czech Republic
is an equal alliance partner. Additionally, there will be experts
among the delegates who can appreciate the technologies used. Some
of the hallway meetings will probably include military business.
"There is some consideration being given to the Czech Republic
becoming a part of a defensive nuclear umbrella. This would bring
contracts for arms companies, as well as for the building of infrastructure
- roads and missile silos," notes a military technology expert
who wishes to remain anonymous. "Additionally, the Czech army
wants to reinforce its position as a trainer for armies of eastern
countries that are NATO candidates. But western armies also like
to rent our military facilities, such as Ralsko and Doupovské hory.
So the NATO summit will be good advertising not only for the travel
industry, but also for these 'services'," he adds.
| NATO
reality
The NATO summit, which will take place on November
20 and 21, will be the largest convention ever to
be held in Prague. As such, it has racked up some
impressive figures:
· 46 heads of state
· 2,500 delegates
· 3,000 journalists
· 12,000 people (KSN est.) will take part in extra-curricular
events
· Czech budget: CZK 800 million
· CZK 340 million will be divided among about 100
suppliers
· 70 employees for summit preparations
· 500 cars and buses for transport (KSN est.)
· 3,000 NATO protesters (KSN est.)
· 12,000 police and military unit members for security
(paid out of the budget's remaining CZK 460 million)
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| Summit-based
benefits
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| Alexandr
Vondra |
Photo: V.
Weiss |
Alexandr Vondra, the government commissioner
for summit preparations, is known as a former dissident, the
Charter 77 spokesman, and as the Czech ambassador to the US
in the 1990s. Now he is in charge of coordinating the biggest
convention in the history of the Czech Republic. He points
out that the event's success could have a positive influence
on the entire country.
Like many others, you support the indirect effects
of the NATO summit on the local economy. But after the IMF
meeting there was no great increase in tourism or the convention
industry. What makes the NATO summit different from that convention?
As far as tourism goes, Prague has prospered in the last ten
years. But it has been grievously affected by the floods,
and we believe that the NATO summit and the journalists that
cover it will help bring the tourists back. Revenues from
the travel industry are in the billions of crowns every year.
Conventions are also very important to Prague. In October
alone several big conventions were organized here - FORUM
2000, the Trilateral Commission, and others.
How did your office select the large number of suppliers?
We called tenders for most of the services, and we prepared
the methodology in cooperation with the consulting firm Arthur
D. Little. Overall there were about forty tenders for transport,
catering, lodging, and Congress Center equipment, to name
a few. The tenders, which were generally called by addressing
multiple firms, were always won by firms that best met our
requirements, and price was the main criterion for selection.
We are trying to handle our assigned CZK 340 million economically.
Do you think that cooperation in the organization
of the NATO will be a significant reference for firms in their
future business activities?
I think it could be. Of course it depends on how the individual
firms manage to make use of their participation in their marketing
activities. For example, in the area of transport, we managed
to arrange free insurance on delegates' cars due to great
interest on the part of insurers.
Can the organization of the summit have an impact
on winning military orders - such as the Czech Republic joining
the defensive anti-nuclear umbrella?
Anti-missile protection is currently under discussion as to
the project's feasibility. If NATO agrees that such a project
is possible for the protection of Europe, it could be an interesting
challenge for Czech firms.
Interview by Jasna Sýkorová |
| Hotels
welcome prestige
|
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| T.
Urbánková |
Photo: Kurt
Vinion |
Prague hoteliers, who will have to provide lodging for 2,500
to 3,000 delegates and about as many media representatives,
are understandably gearing up for this November's NATO summit.
According to Arnošt Kareš, the lodging coordinator at the
Prague NATO Summit Office, hotels that will house the delegates
must meet the following criteria: a high standard of services
provided by five-star hotels (delegates will be housed in
most of Prague's twelve hotels of this category); ability
to adapt to the security system ensured by the interior ministry;
and they must be as centrally located as possible. The hotels
that house journalists must offer a broader price range for
the services they provide, and they must also be accessible
in terms of transport.
Prague hotel representatives - who were rather sparing in
their comments, due to security concerns - generally agree
that housing participants (for which the delegations pay approximately
EUR 200-300 per room/night) will result mainly in increased
prestige for them. "The benefits of such an event can
be long-term, resulting in positive references about Prague
from highly-placed delegates around the world," says
Michal Chour, sales director for the Radisson SAS hotel. "The
short-term impact will be financially significant, but on
the other hand, hotel occupancy is generally poor shortly
before and after events of this type, and this should balance
out the advantages," he adds.
According to public relations manager Tereza Urbánková, the
financial benefit to the Hilton hotel of housing NATO delegates
will be on the order of tens of millions of crowns. But the
summit will mainly demonstrate to the world that Prague and
the entire country are back in business following the floods.
Urbánková says that this will be the greatest benefit. "We
do not feel that the city or national government is making
any great effort to alter the negative perception of the Czech
Republic, which resulted from news reports by the foreign
media. The NATO summit could serve as a great promotional
event," she opines.
Martin Zika |
| Betting
on long-term value
FOR THE NEARLY 100 firms that will service the summit's various
needs, the chance to take part in an event of such great international
significance is extremely attractive. Their principal gain
will be the prestige that can be of substantial help to them
in future business activities.
Catering services will be provided by several firms. Zátiší
Group will arrange dinners for heads of state. The company
will have to be able to set up a kitchen from scratch in a
given location in order to prepare food for about 800 people.
"Prices are usually depressed at such events, and we
will also have to make sizable investments," says Sanjiv
Suri, president of Zátiší Group. "We can use what we
invest in in the future, but any talk of profit is nearly
impossible. It is primarily a question of prestige for us."
ProMoPro, a company that specializes in rental and service
of convention technology, will play a large role ensuring
services for the Prague Congress Center - from sound systems
and interpreting technology to studio preparation. According
to ProMoPro director Jaroslav Veselý, NATO representatives
requested his firm on the basis of references from the IMF
meeting. "We will enjoy the references for a long time.
For example, when we tell a potential client that we made
arrangements for the IMF meeting, there is in fact nothing
else we need to say," Veselý remarks.
Local firm Alax will handle the rental of furniture for the
Prague Congress Center and other buildings in the area. "It
is certainly a very interesting, large order. Our profit will
not be as great as usual, but it was very important for us
to win this contract with respect to references," notes
the company's sales manager Miroslav Havel.
Martin Zika |
| Security:
in the state's hands
|
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| Michal
Kuník |
Photo: P.
Veselý |
Alliance F-16 fighters in the sky, police snipers on rooftops,
metal detectors at every turn, CIA and FBI agents checking
rooms in five-star hotels and armored luxury limousines. This
is no James Bond scenario, it is the reality for Prague this
November.
Although the NATO summit will be an even greater security-clad
event than the World Bank and IMF meeting in 2000, it will
only marginally impact the private security services market,
according to Michal Kuník, the president and manager of Securitas
ČR. Out of the total CZK 800 million budget that the foreign
affairs ministry has allocated for the event, CZK 460 million
are earmarked for security. As organizer, the ministry is
relying exclusively on the police, the army, and the secret
services, so these funds will wind up in state hands. Private
security services will enjoy heightened demand only through
clients such as hotels housing foreign delegates and banks
in the city center, where attacks by demonstrators can be
expected. The lack of a law on security services prevents
greater involvement by private entities in similar events,
Kuník claims.
Libor Novák, the security manager for the Hilton hotel, estimates
that security costs at the hotel during the summit will be
three to four times greater than usual, reaching a maximum
of CZK 500,000. "The American and Dutch delegations will
occupy seven floors out of a total of eight, so you can imagine
how tight security measures will be here. We will have metal
and explosives detectors," says Novák, describing the
situation at the Hilton, where US President George W. Bush
will stay. The police will ensure the protection of people,
while police pyrotechnicians and American agents have reportedly
already screened the hotel rooms for bombs and bugs. The hotel
will enjoy considerable savings thanks to the police providing
security.
Paradoxically, the private entity that will participate to
the greatest degree in the security measures has nothing to
do with security services. Audi CZ will rent a total of 55
Audi A8s, some of them armored, to prominent guests. A basically
equipped, 2.5 TDI Audi A8 costs CZK 1.8 million without armor,
bullet-proof glass, and special tires, with the six-liter
limousine costing nearly CZK 4 million. "The price of
the armored version is about four times that of the basic
model," says Jan Klíma, Audi CZ's spokesperson. Audi's
sister firm in the Volkswagen group, Škoda Auto of Mladá Boleslav,
has also gotten into the act, loaning 171 fully-equipped Superbs
and 25 Octavias, worth a total of CZK 250,000,000, to the
organizers for free. After the summit is over, Škoda will
sell these cars through its dealership network. Because the
prices of the most luxurious cars decline the most quickly
on the used car market (according to experts, by at least
20% when the car is driven off the lot) the car maker will
effectively donate at least CZK 45 million to the organizers.
What's in it for them? "The whole event should contribute
to the brand's visibility around the world, and raise Škoda's
reputation," says Karel Pokorný of the Škoda Auto press
department.
René Jakl |
| Out of
the city
DURING THE SUMMIT, Prague residents should flock to the outskirts
of the city for prime shopping. Within the framework of the
so-called partnership project, the foreign affairs ministry
has addressed hypermarkets in Zličín, Černý most, and others
outside of Prague (in Liberec, České Budějovice, etc), asking
them to offer substantial discounts and accompanying programs.
Other firms, such as travel agencies, will probably come up
with similar special promotions.
Some insurers (Allianz and Kooperativa) are also offering
"NATO services", as a supplement to property insurance
(against civil damage). Contracts cannot be closed for only
a short period of time.
Jasna Sýkorová |
| Attracting
the conference crowd
|
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| Karel
Procházka |
Photo: P.
Veselý |
While experts forecast promising development for Prague's
convention tourism, the Prague Congress Center (KCP), where
the main part of the NATO summit will be held, is considered
by many experts to be the black hole of state investments
in Prague. Two years ago the city borrowed nearly CZK 3 billion
for refurbishing the KCP in the leadup to the World Bank and
IMF meeting, and last November the Prague city council threw
in another CZK 500 million. In March the council approved
an additional subsidy of CZK 80-100 million per year for the
next six years, since the KCP is unable to pay off the refurbishment
loan from its own funds. Director František Dušek points out
that the NATO summit will probably not save the KCP either,
as the organizers will pay only CZK 38 million in rent.
Karel Procházka, general director of Guarant, a firm that
organizes conventions, says that the KCP is a part of the
city's basic infrastructure, like mass transit, so it must
be subsidized. He feels that funds thus spent will be returned
many times over, because conventioneers are big spenders.
Procházka says that the average convention participant spends
USD 300-400 on participation fees alone. "The typical
international convention attendee in Prague spends another
USD 600-700 on a hotel room. Not to mention restaurants, transport,
and gifts," Procházka insists. According to Mag Consulting,
last year Prague rose to 24th in the world in terms of international
convention attendees. In central Europe, Prague trailed Berlin,
Budapest, and Vienna. Mag Consulting works with statistics
provided by the Union of International Associations, which
tracks convention tourism in 180 countries.
Howard Klein, business development director for Reed Exhibitions
Europe, the largest exhibition organizer in the world, says
"Prague is an attractive city, and services and infrastructure
are now generally okay there." He believes that Prague
is fairly strong in conferences, but lacks something to develop
its potential for organizing exhibitions that are tied to
conventions. "Many of the truly large exhibitions are
held in Brno, which offers four times the exhibition space
of Prague." According to Klein, Výstaviště Praha could
be improved with additional investment, and the new exhibition
center in Letňany is also promising.
Klein believes that the NATO summit will help attract business
conventions in the future, but only to a limited degree. "Conferences
go to places where the market has an interest in organizing
them," he says. "The Czech Republic's importance
will increase as it joins the EU."
René Jakl |
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