As Poslovni Dnevnik/Marija Crnjak writes, the overall decline of GDP in Croatia back in pandemic-dominated 2020 can be explained by the decline in tourism, the most affected industry that has led to a decline across all related sectors, while at least 4.5-5 percent of total GDP growth in 2021 can be attributed to the subsequent recovery of tourist traffic.
This shows the exceptional importance of tourism for the Croatian economy, but despite a significant increase in tourist traffic this year, the situation remains dramatic as the crisis has caused a sharp drop in Croatian tourism investments and the recovery will not be spontaneous without additional investment incentives from the state.
Analyst Velimir Sonje warned about precisely that, presenting his research on the connection between tourism and the pandemic recently at the Congress of Hoteliers, organised by the Croatian Hotel Employers’ Association (UPUHH).
“Croatian tourism investments and its activity is in a sharp decline of 60-66 percent when compared to 2019 and the duration of such a situation threatens to weaken the positive development effects of tourism, such as a proven contribution to alleviating emigration from Croatia. We got the impression that after this season, which was short, but successful, that everything would be fine and that we’re finally returning to normal. But a spontaneous recovery won’t happen unless there is a strong recovery in investment soon. This requires investment incentives, and investors’ expectations are focused on the new Law on Investment Promotion and the implementation of a new regional aid map,” explained Sonje, whose research is based on the results of a survey among the ten largest hotel companies in the country, with total revenues of 5 billion kuna recorded back in 2019.
“Paradoxically, despite the fact that tourism is crucial for economic recovery, the European Commission has allocated only 5 percent of the total amount from the National Recovery and Resilience Plan to this sector,” concluded Sonje.
The Director of the Croatian Tourism Association, Veljko Ostojic, pointed out the four biggest challenges that the hotel business will face in 2022. With the return on investment, after the 2021 season in which Croatia had the best tourism results in the Mediterranean and Europe, the biggest challenge in preparation next year will be the sheer lack of qualified personnel, an issue present in the sector throughout Europe at the moment.
“In Croatia, it isn’t only a question of engaging domestic workers, but also a faster and more flexible administration in hiring foreign workers. The second most important issue will be the continuation of investments in quality, without which Croatia will not be competitive in relation to other Mediterranean countries in particular. There will be an important contribution of money for NPOO projects, but also the legislative framework, primarily addressing the issue of tourist land. We’re in intensive talks with the Ministry of Construction and State Property and I believe that in the coming weeks we’ll be able to find solutions that will enable investments and generate significant revenues to the state budget,” believes Ostojic.
The fourth important factor will be the unfolding epidemiological situation, which is still a challenge and a trigger for the majority choosing a holiday destination, but Croatia and the sector have done a great job in the last two years, so there are no severe worries. Hoteliers also point out the important challenge that inflation and the situation with supply chains will pose in financial operations.
“It will be a very big challenge that we won’t be able to mitigate through rising prices and many will not be left for investment. Without the help of the state, through the Law on Investment Promotion and similar solutions, we cannot expect the recovery of the investment power of the tourism sector,” warned Popovic.
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