VAT hike Czech-ing in -- and suppliers arent happy

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NEW YORK -- The Czech Republic, a New European Union member, plans to raise its value-added tax (VAT) on accommodations from the current 5% to 19% -- closer to E.U. norms -- on Jan. 1. And hoteliers and U.S. operators are up in arms.

The National Federation of Hotels and Restaurants, based in Prague, worries that the hike will drive small hotels out of business by putting them at a price disadvantage compared to Poland and Hungary.

Those countries negotiated lower hotel VAT rates -- 7% and 15%, respectively -- under their E.U. accession agreements.

Meanwhile, operators said the VAT increase would put hotel rates in the Czech Republic on a par with pricier western Europe -- and dissuade travel.

Greg Tepper, president of luxury operator Exeter International in Tampa, Fla., said his Czech bookings -- unlike those to booming Russia -- already took a hit due to higher air fares and new hotel pricing in euros, which has soared 20% against the dollar in the last two years.

Our bookings practically doubled this year, but not from the Czech Republic, which was flat, he said. At the very high end of the market, clients will usually go no matter what, but [the price rise] is starting to enter into their considerations.

Bargain travelers are worse off, said Eren Aksoy, vice president and director of tour operations at Picasso Travel in Los Angeles.

The Czech Republic was one of the few destinations where the price was right. Now were seeing the last days of those big bargains, he said. This fall, Picassos Nordique Tours division is offering a four-night Prague stay at $359 per person.

I doubt Ill be able to do that next year, Aksoy said.

To contact reporter Kenneth Kiesnoski, send e-mail to [email protected].

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