Tourism Minister Gari Cappelli on What Awaits Croatia in 2020

Daniela Rogulj

April 6, 2020 – Croatian Tourism Minister Gari Cappelli talks about what awaits Croatian tourism in 2020. 

In the past few days, the eyes of hundreds of thousands of people in the country have been hooked on the Ministry of Tourism and the Croatian Government in anticipation of financial assistance and relief that will make it easier for them to survive the (non) tourist business year.

Because, apart from the fact that, in Croatia, every fifth kuna comes from tourism spending, the country has about one hundred thousand employees in the sector, and another 108 thousand families engaged in family rentals. There are also some fifty thousand who earn their salaries in the hospitality industry, and who knows how many other services that are directly or indirectly related to the profits from tourism.

All of them are on the same side in the tourist supply and demand chain in Croatia. Because not only is the season a success for tourist workers, but every hairdresser is hoping for a good season, because if their clients do not make money, they will not get their hair done. The same goes for the butcher, the furniture dealer, the pedicurist, the friend who pays the mobile operator, the carpenters, the souvenir and car salespeople, and the colleague who works at the bank.

With this thinking in mind, and while preparing for another fruitful tourist year, which began well with bookings, the news of the coronavirus pandemic threatened tourism for the first time since the war.

There is still no answer to the uncertainty that hit us one month ago, and we can’t say what this year’s tourist season holds – or if it will be held at all. 

Thus, Slobodna Dalmacija interviewed Croatian Tourism Minister Gari Cappelli to find out more.

The international travel market is completely dead. What information and estimates on the duration of the crisis do you receive from our representatives and partners abroad, how long could it last?

“We are in contact with our seventeen representative offices of the Croatian National Tourist Board all the time, and we receive reports daily. We are also involved in international tourism organizations, with several videoconferences. As the World Tourism Organization has announced, the expected decline globally is 30 percent.

We know how important tourism is for many national economies, and the coronavirus pandemic has directly impacted the tourism sector. Travels from China dropped sharply in January and February, expanding to the rest of the world in February and March. The tourism economy is now stalled in many countries around the world and is likely to remain so until at least the middle of this year.

Restrictive measures are in place, and even when tourism supply chains start functioning again, the recovery will take some time, given the interconnected effects of the economic and health crisis and the gradual lifting of travel restrictions. This will have great consequences for many national economies.”

There is an ongoing cancellation of arrivals even for the main season or bookings postponed to 2021. Do you think that the Croatian Government’s measures will enable the tourism sector to survive this business year?

“It is currently understood that bookings have stopped and bookings for the following period are canceled. We must also look at it from the point of view of safety and health protection, and not primarily through the loss of tourist traffic. At this point, long-term assessments are difficult to determine, given the unanticipated course of the coronavirus pandemic development.

The package of measures of the Croatian Government for the economy is worth tens of billions of kuna, and the measures apply to all departments that need intervention in this situation. A large part of the measures relates to the preservation of liquidity and the preservation of jobs.

We are aware of the fact that the tourism sector has been significantly affected by this pandemic and, therefore, we have hastened to devise and adopt measures that we believe will help overcome this challenging period. It is important to note that the Ministry of Tourism and the Croatian Government will continue to take short, medium and long-term measures to minimize the effects and impact of the current situation on tourism and other economic segments.”

What are the specific measures of the Croatian Government intended explicitly for tourism and how much will it help the sector?

“Measures include, among other things, securing loans for liquidity and working capital, introducing a moratorium on credit obligations, and establishing a new financial instrument, COVID-19 Loans, for working capital for small and medium-sized enterprises. The Ministry of Tourism introduced a deferral of payment of the tourist tax as part of the Government’s measures, while the Ministry of Finance made it possible to defer the payment of a flat-rate income tax through amendments to the General Tax Law.

In addition, the payment of the concession fee on tourist land co-owned by the Republic of Croatia is postponed to mitigate the first financial impact on the tourism sector.”

What is the overall financial burden on the sector through the most important measures?

“The relief from the tourist tax is estimated at HRK 164 million, while the exemption from paying the variable part of the concession fee will relieve the tourism sector by about HRK 15 million. Furthermore, within the measures of the Ministry of Labor and the Pension System, the duration of the “permanent season” measure is extended so that seasonal workers receiving off-season benefits do not lose their jobs.

To extend this measure, the state will provide HRK 11.5 million, and the measure includes about five thousand permanent seasonal workers in tourism and agriculture.”

At this time of crisis, a public pandemic sometimes gives the impression that tourism is being marginalized over some other industries that are being touted as more important. Is that correct?

“Tourism is a sector that accounts for almost 20 percent of Croatia’s GDP and, in addition, is a horizontal industry that provides revenue and jobs to a number of related industries. Therefore, together with other sectors in the Croatian Government, we will find the right balance of measures for all sectors affected by the current crisis, and tourism will certainly receive the deserved place and the help it needs to overcome the current state and the period that follows after the crisis.”

Are you satisfied with the cooperation of professional tourism associations with the Ministry and how do you communicate during this crisis?

“In such crises, frequent interaction between the public and private sectors is needed to act promptly. I believe that the entire tourism sector supports the efforts made so far to overcome the economic and other challenges as effectively as possible.

We are continually receiving valuable suggestions for overcoming this situation by various professional associations active in the tourism sector, and we are constantly reviewing and trying to incorporate the legislative changes and economic measures of the Croatian Government, which will be adopted in several circles.”

What would you say to family renters who have already mentioned in a survey that they lost about 50k in this year and fear the losses will be much higher?

“Household accommodation accounts for the largest share of the Croatian tourism accommodation offer and, therefore, private renters are essential stakeholders in our sector. I believe that a lot of them have lately lent themselves to invest in increasing quality and expanding their supply. With the turnover and revenues we have generated in recent years, such an investment has been logical and sustainable

However, in times of financial crises such as this one certainly is, the tourism sector is always one of the first to suffer, but experience has also shown that it is among the first to recover. Moreover, tourism is said to be the driver of economic development after the crisis. Therefore, we have abolished the payment of half the amount of the annual lump sum of tourist tax for basic beds and the whole amount of lump sum for extra beds to the persons providing catering services in households and on farms.

In addition, the Croatian Government will do everything possible to free the sector of all benefits, to provide a moratorium on loan repayments, etc., so that private accommodation will be that generator of growth after these troubles.”

In the current situation, many think about the time after the pandemic, and the solution is seen in domestic tourism. How realistic is this in a position where half a million employees in the country are at minimum wage?

“Croatia, headed by the Civil Protection Headquarters, manages the emerging health situation well and, despite a further increase in the number of patients, the spread of the infection is under control, which means that we have prepared better than many European countries.

I believe that Croatia is still a safe country, and I believe that, after the health crisis and the gradual loosening of restrictions on work and movement, Croats will be able to spend at least part of their holidays at sea or in the continental part of our country.

As for their consumption, it is difficult to predict how much it will be. This will depend on the scale of the latest economic crisis we are currently in, and it is very difficult to estimate how long it will take.”

Will the government encourage vouchers or otherwise promote domestic travel and the recovery of the sector after the pandemic?

“We have prepared projects such as the already widely known Croatian Tourist Card (CRO card) and the action “A Week Off is Worth It”, which, unfortunately, was put to rest due to the coronavirus pandemic. All the necessary remodeling for both projects aimed at stimulating domestic tourist consumption has been completed, and I believe we will be able to use them to encourage domestic travel after the normal tourist flows are restored.

In addition, the amendments to the Law on the Provision of Tourism Services gave the Minister the power to regulate in the circumstances of special circumstances. Thus, this means terminating travel contracts in a package arrangement in such a way that tourist agencies may offer vouchers to be secured insurance policy, instead of refunding for unrealized travel.”

Do you think that the position of Croatia and the fact that we are an easy-to-reach destination by car will be our trump card in the recovery of tourism?

“I still sincerely hope that we can make up at least part of the tourist season. If so, if the situation calms down, the rest of the tourist year will be marked by “last-minute” trips. In such a scenario, it will certainly help us to be close to our most significant markets. But in addition, our reputation and recognition that we have built in recent years will also help us, and it is primarily about hospitality, safety, quality and nature conservation.”

The Croatian National Tourist Board system is financed almost exclusively by membership fees and tourist tax, which will not be paid in the next 3 + 3 months. Many tourist boards are already empty accounts. How will they be helped to survive without a basic income?

“Given the measures adopted by the Croatian Government to assist the economy, which partly relate to the delays in paying tourist membership fees and tourist fees, we have taken certain steps and arrangements with the Croatian Bank for Reconstruction and Development regarding securing funds for the liquidity of the tourist boards system.

HBOR will enable the monitoring of legal entities under the program Sustainable Current Assets through commercial banks. In preparing the new measures, HBOR will take care of the tourist boards and include them in the eligible legal entities for financing under the Risk Sharing Model together with commercial banks, as well as for potential direct funding.”

The responsibility to lend to the tourist boards will lie with the presidents of the tourist boards, i.e., the prefects, mayors, counties?

“Amendments to the Law on Tourist Boards and Promotion of Croatian Tourism, adopted at a cabinet session Thursday, enabled higher financial borrowing by tourist boards in times of special circumstances, and Tourist Board presidents will decide on the amount they need to borrow to maintain work.

Amendments to the same Act also gave the Minister the power to determine by an ordinance an amount that could be used for the salary costs of employees in the tourist board, which had hitherto been limited to 40 percent of income.”

If you were a casual tourist worker currently without traffic and income, what would you say to Minister Cappelli at this point, what is the most important thing to do?

“The most important thing is to ensure the retention of jobs and the liquidity of companies and trades in the tourism sector so that they can resume work as soon as possible after the crisis. In addition, it takes a lot of patience, concern for the health of everyone in the sector, and the conviction that we will emerge even stronger from this situation, with new experiences to overcome difficulties.”

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