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Croatia’s tourism industry has significant growth potential, with the latest research from Euromonitor International predicting arrivals to Croatia to grow by 42% between 2005 and 2010. Growth in the next few years is expected to be driven by the arrival of budget airlines and the expectation of EU membership in 2010. \

But despite this promise, there are several obstacles that need to be addressed in order to secure the future of the industry. Euromonitor International examines the performance of the country’s industry to date, and identifies challenges to future growth.

Investment in tourism

Croatia’s tourism sector contributed to almost 20% of GDP in 2005 and growth in tourism receipts has outpaced growth of GDP in 8 of the past 12 years. The government’s strategy is to position Croatia as a top-end destination and this is paying dividends.

The government has built its tourism policy around positioning Croatia as a quality destination with the slogan: “The Mediterranean as it once was”. It aims to cater for high-end tourists looking for “quality tourism in harmony with sustainable development”. The strategic aim is to tie in tourism promotion with culture and the environment.

The Croatian National Tourism Board budgeted €8.6 million on advertising for 2006 and €500 million was allocated for investment in hotels, campsites and holiday resorts in the same year. The government aims to avoid over-development of the coast, retreating from the style of the 1970s and 1980s, which was characterised by large hotels catering to the masses.

Visitors welcome

Advertising has benefited Croatia’s tourism industry, with visitor arrivals reaching 10 million in 2005, and accounting for 6.3% of all Southern/Mediterranean arrivals in that year, according to the Ministry of Tourism.

A major change in the trend over time has been the distribution of these arrivals between domestic and foreign visitors. In 2005, foreign arrivals comprised 84.7% of all arrivals; whereas, before the war, the biggest share of tourists were domestic. The reduction seen since then is slightly misleading, however, as post independence, domestic refers to Croatia only, whereas pre independence it referred to Yugoslavia – i.e. it included Slovenia, Bosnia-Herzegovina, Serbia and Montenegro.

Although the number of arrivals has returned to pre-war levels, the number of visitor nights has declined. This indicates that tourists – both domestic and foreign – have shortened the duration of their trips. The number of tourist nights decreased by 24.5% since 1985, with tourists spending an average of 5.1 nights in Croatia in 2005, compared to 6.7 in 1985. In 2005, domestic tourists spent on average 3.6 nights on holiday, compared to 5.4 nights for foreign tourists, according to the Ministry of Tourism.

A likely explanation for this is the arrival of budget airlines to Croatia, which make it a more affordable destination, but encourage travellers to visit for weekend breaks and short-trips, rather than for long stays.

The arrival of budget airlines

The impact of low cost airlines flying to Croatia is playing a key role in the development of the tourism industry. The arrival of budget airlines, such as the UK’s easyJet, which now flies to Split and Rijeka, is encouraging people to visit by improving access to the country and reducing travel costs.

Low cost airlines also remove the need to book a package holiday through a travel agent, as travellers are able to search the internet and book flights themselves. This may also help to increase the variety of accommodation and resorts on offer and make Croatia more of a year-round destination.

Laying the foundations of growth

In order to meet the growth potential of its tourism industry, Croatia must address its lack of adequate infrastructure. To tackle the problem, the government is prioritising the development of infrastructure and tourism infrastructure in particular, giving planning permission for new hotels, golf courses and modernising resorts. Tourism municipalities are also to be improved and major upgrades of ports are planned. Over 350 km of new motorways have been built since 2004, with more planned – including the important extension of the motorway from Split to Dubrovnik.

The lack of quality hotels, is the main stumbling block in the region, which prevents more affluent tourists from visiting. In 2005, the Ministry of Tourism reported that only 4% of hotel beds were in 5 star properties, compared to 55% in three star and 28% in two star establishments. According to Euromonitor International, more luxury and small boutique hotels are key to attracting new visitors, especially high income travellers who are looking for a more luxurious holiday.

Seasonality

Another issue that could hamper the growth of Croatia’s tourism industry is the extreme seasonality of the tourism year, which saw 52% of tourists arriving in July and August of 2005, according to the Ministry of Tourism. Stays also tend to be longer in these months, averaging 6.2 nights per tourist.

Euromonitor International believes that targeting retired couples and couples with no children who tend to holiday outside of July and August would be an effective means of spreading trousim more evenly throughout the year . Promoting Croatia as a cultural destination, rich in heritage, should also help to achieve this goal.

Future challenges

The Croatian National Tourist Board projects that tourist arrivals will exceed 10 million in 2006, with 84.7% coming from abroad, based on actual reservations. It also projects a healthy increase in tourist nights of 2% over 2005, with the average trip remaining at 5.1 nights. The long term aims of the CNTB are to achieve 11 million foreign arrivals by 2010, 66 million tourist nights, and overall receipts of €12 billion by 2010.

Euromonitor International believes that these projections are reasonable, especially given Croatia’s expected EU membership. However, improvements to the country’s infrastructure and further work to broaden Croatia’s appeal are necessary in order to attract a wider range of travellers from different parts of the world and from different demographic profiles.

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