As Marija Crnjak/Poslovni Dnevnik writes on the 12th of March, 2019, Croatia’s hotel sector stagnated last year in terms of the number of new rooms and in the sense of the level of entry of foreign hotel brands. A lot of this, but of course not all of it, is because Croatia has deemed it more profitable to build and invest more in private accommodation, an often ”grey” area of Croatia’s tourism industry with much lower taxes and a very poor level of general regulation. The level of major investments in new hotel rooms has fallen significantly, the number of which grew by a mere one percent in one year.
Due to all the above mentioned conditions, the market is still dominated by local investors, quite a few new names have appeared on the scene in the last year, which are still to be properly positioned as hotel brands, according to the annual global report on hotel chains in 22 European countries, “European Chains & Hotels Report 2019” by the Horwath Consulting House HTL. In the Republic of Croatia, more than a quarter of these hotels, more specifically 186 of them, operate under 43 brands in total, of which 22 are local and 21 are international brands.
“High seasonality and an unfavourable environment for investors, especially with [granting the necessary] permits, are the main reason we’re in 159th place on the Doing Business list, they’re the biggest barriers for foreign investors, who find it difficult to decide on taking risks in developing projects in Croatia, although a few positive examples have occurred on the market which do lead to more optimism,” stated Siniša Topalović from Horwath’s Zagreb-based office.
Horwath’s analysis, which is based on the numbers from Real Capital Analytic, only takes into account investments of more than 5 million dollars, reveals that investment in hotels in Croatia is down by as much as 90 percent, from 59 million euro to a mere 7 million euro.
”The growth of hotel brands in 2018 in Croatia (4 percent) should be observed through the proper placement of several local hotel names, and only time will reveal whether or not these names will be branded on the market,” Topalović explained.
Additionally, although Croatia can be statistically put in a very good position in terms of the number of brands operating here, the market situation shows that the level of activity is lagging behind some countries which are considered to be weaker than Croatia. A good example of that is Serbia and its increasingly popular capital city of Belgrade, which has received 40 new hotels since 2014, with growth in the hotel sector in Belgrade mainly based on foreign investments and globally respected brands such as Crowne Plaza, Radisson Blu and Luxury Collection.
Although the RevPar (revenue per hotel room) rose by an average of 16 percent in Croatia in 2018, this year a slow down is expected, caused primarily by other Mediterranean countries which are recovering from their respective problems to return to the market (this includes longtime tourism kings like Turkey and Tunisia).
The main potential seems to lie outside of the height of the summer season. Along with Serbia, where further growth is expected in the hotel segment, Albania has some great potential for foreign investors, Albania currently has the smallest share of branded hotels per total number of rooms (2 percent), and Montenegro, Croatia’s neighbour to the south, also offers investors fairly favourable investment conditions and is very active in encouraging a more luxurious tourist product for the country.
Greece, known for its numerous financial issues, has entered the world’s top fifteen tourist destinations despite the country’s somewhat infamous ups and downs, with 150 new luxury hotels ”born” in Greece in 2018, becoming a destination in which more than one in five hotels is in the category of 4 or 5 stars. Last year, the largest amount of investments in hotels went from the United States across the Atlantic to Spain (2.1 billion euro), following came transactions from Israel to the United Kingdom totaling over one billion euro, French investors also invested 951 million euro into the United Kingdom.
Despite all of the potentially (and likely) damning economic risks from Brexit, one of the European continent’s most powerful countries, the United Kingdom, had a total of nearly 4 billion euro in investment in its massive hotel business. In 22 countries from the Horwath analysis, there were a total of 146,600 hotels on the market last year with more than six million rooms, with an average of 61 rooms per hotel. The least-branded hotels had Albania, only 12, while France has 3885 hotels in the hotel chain.
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Click here for the original article by Marija Crnjak for Poslovni Dnevnik
