Tourism Minister Gari Cappelli on Restarting Businesses, Private Renters, and More

Daniela Rogulj

April 19, 2020 – Croatian Tourism Minister Gari Cappelli talks about what Croatian tourism can expect this year and the measures in place to save the country’s tourism industry. 

Tourism was the first to be hit by the coronavirus crisis. At the moment, everyone’s primary goal is to survive. Whether or not there will be tourism, no one dares to forecast at the moment. However, some measures and instructions have been announced to restart business activity. In doing so, expectations are primarily on domestic guests. 

Croatian Tourism Minister Gari Cappelli explains further in an interview with Novi List, with excerpts transmitted in English below. 

How will businesses restart when the measures are loosened?

“In the coming week, we will know by sectors what can start first and how. At the moment, we believe that the first tourist traffic can be launched in segments that are actually more isolated, for example, holiday homes, i.e., private accommodation, then accommodation in smaller areas or outside major and urban destinations, and with the right prices, something can certainly be done in nautical tourism. There are also, for example, camps. So anything closer to nature, which still allows for some social distance and reduced contact with other people. However, the basic prerequisite for us is opening internal traffic and the issue of borders, especially for our important auto-destinations. Ultimately, we still have facilities that work like some hotels.

Among other things, we will also propose that in hotels, every third or fourth room would be open to guests. With the guests leaving, they would be left empty for a few days to be cleaned and disinfected according to the recommendations of the epidemiologist. At that time, a part of the rooms that were previously empty would be used; therefore, at any one time, a third or a quarter of the capacity would be available. Basically, there will be a lot of work to be done on security. One of our suggestions will also be to be among the first to open travel agencies where there will certainly be no invasion and I do not see a problem for tourists to enter the space one by one. Or into tourist boards. Also, we need to be aware that when things are up and runnning, there will not be five people at the table, but two, that not every table will be available, but every second or third. These are all suggestions we are putting on paper and are sitting down with epidemiologists to see what can be done and how. The reality is that it will be good to start anything. But I see that the experts have responded positively to this and want to talk about trying to do something at least. In this regard, we will send our proposal to the Government within a few days.”

You have been analyzing a drop in traffic of 60, then 75, and in the worst case, more than 90 percent. While there is currently nothing to forecast, what are your reasonable expectations?

“We hold that at the moment, it may be the most realistic drop of 75 percent. So, to be able to accomplish 25 percent or less of last year’s activities. I’m not ominous, but as the Prime Minister said, we want to speak very clearly and openly. Therefore, very frankly, if I expect business activity, then I expect it only after August 1, primarily in the domestic market, and it will be good if there are foreign guests at all. Certainly, foreign owners of houses and vessels on the Adriatic will have the most interest, be they Austrians, Slovenes, Germans, Hungarians or Czechs. They will be the first to look to Croatia. Information from the field, specifically from the marinas, indicates that foreign owners gave orders to take their ships out and prepare for navigation as if they were coming to the Adriatic. And maybe something positive can be done with charter people. Namely, the guest comes directly to the marina, to the ship with a car, and does not have to enter any marina at all. But all this clearly depends on other countries and their rules on leaving the country, returning to the country and the like. We cannot influence it, and I have no illusions here.”

You have said that this year, the most is expected of local guests if the movement of people is allowed.

“In 2019, we had about 2.2 million arrivals in commercial accommodation with domestic guests, and from these data, it can be seen that the percentage of domestic guests was still negligible – about 12 percent. If we are talking about tourist overnights, we are talking about some 7.3 million commercial overnights of domestic guests. Clearly, in camps, for example, they were small, about four percent, while most were recorded in family accommodation.”

What measures are being prepared for local guests? Like the Cro card?

“The Cro card, which is something that we have already prepared in the previous circumstances, will be reprogrammed and we will try to help the domestic market. So, the card is almost ready to be used, say from July. Namely, it is difficult to say that anything will go before that, it is much more realistic to talk about August and September as far as domestic guests are concerned. However, the card will be ready in any case. We will reprogram it so that it can be used in restaurants, hotels, private accommodation as well as agencies. Therefore, agencies will also be able to do certain programs, clearly for Croatia. You can use the Cro card explicitly for payment in Croatia and not for payment abroad.”

What is the burden on the tourism sector through the two rounds of government-supported economic assistance measures?

“It is difficult to say how much is on tourism itself, given that it is a horizontal measure covering other activities. For example, if we take the Permanent Seasonal measure, which will continue to go at 3 plus 3 months, we are talking about HRK 11 million in just one month. So, everyone who was supposed to start work on April 1 because their six months at the Institute expired, will get three more months of entitlement, and then probably, if necessary, three more months. There were a lot of questions about job conservation measures. All those employers who made redundancies, and when they saw that the four thousand kuna plus payroll relief was very good, they asked if they could get those people back into employment. We said they could, with people having to get contracts permanently. So, we allowed them to give back to people, which is especially important. Otherwise, virtually all tourism is under job preservation measures because it simply falls more than 50 percent. This is one measure that made the most to save tourism because not only is there no traffic, but we also have a work ban. Among the measures, there are also deferrals of student scholarships for businesses. We continue to pay our share, but hoteliers do not have to now. Then they measure the concession on tourist land in the campsites and others.”

A new law defining the issue of tourist land is coming to Parliament for a second reading soon, which is considered much better than the previous one. What does it entail?

“This Law is one of the most important foundations for future investments. If it were not for the corona situation, this would certainly be the most important thing for tourism at this time, given that it addresses the issue of tourist land that no one has been able to solve for decades. It is estimated that, by addressing this issue, we are opening up the possibility of three to five billion kuna in investments. No one believed that we would succeed and that the Law would be passed by May.”

The sector also points to the cost-effectiveness coefficient at which some campsites will pay less for tourist land. 

“Let’s take, for example, that a camper travels to a camp in Dubrovnik. He will spend one day staying in Istria or Kvarner and the trip alone will cost him more than staying in the northern Adriatic. Istria has 70 percent of the campsites, but that does not mean that we cannot help the development of camping offers in the south. We will also reduce camp fees on the islands, which, in my opinion, is realistic, given how much more it costs a camper to go to an island. We tried to balance these circumstances, but here, very soon, there will be opportunities in the Croatian Parliament to change things. But I think after the first reading, there was a consensus and we were able to find a balance. And again, no one has been able to solve the issue of the co-ownership community so far, nor that no one has paid anything for years, and that if it had been invested, it was not known what was being invested since the land was not from the camp.”

What about HBOR lending? How much money is available to loan, how and who can get it?

“This is a measure we are implementing right through the Ministry of Tourism. We had certain funds that we have so far placed through the Competitiveness of the Tourist Economy (KTG) program, for which we have announced a competition every year. This year, HRK 26 million has been secured for this purpose, which this time we will pay to HBOR, thus practically subsidizing the entire interest on the loans. Loans to be distributed are worth HRK 600 million interest-free for up to three years. And if one does not manage to repay the principal in those three years, they have the right to extend the additional two years with a minimum interest rate of 1 to 1.5 percent.”

Who will be able to use these loans?

“Small and medium-sized enterprises. So, for example, a small family-run hotel can run into liquidity when it goes back to work after a few months without income, and there is no money to buy groceries and generally supply and pay some obligations. As far as users are concerned, we have been looking at encompassing these, let’s just say, medium-sized entrepreneurs. Namely, HAMAG-Bicro gives smaller loans, up to 25,000 euro, so we watched these loans amount to 100,000 euro or more. So we also covered these higher amounts. Small hotels have always been in the gap. With these loans, we wanted to save that part of small hotels, namely, hoteliers used to take out loans at the time, with relatively high-interest rates, and now they are in trouble because they have not been paid back and have no traffic, so we give them a chance to survive. And of course, we will talk about those old credits as well, is there anything that can be rescheduled.”

When might these funds be available?

“We will receive requests safely by the end of the month, and if they are of good quality, some will be able to get funds by that deadline.”

Renters as individuals are not in this arrangement?

“Private renters can apply for high-quality other credit lines. After all, we also subsidize the reclassification loan we have negotiated with banks. With that, we delayed the categorization by one year. We have written off the residence tax to the renters for six months, delayed the payment of the membership fee because it enters into the General Tax Law and it will be a topic of discussion when discussing para-fiscal levies. The flat-rate income tax for the second quarter was then written off, and the first quarter had to be postponed until March 30.”

So, anyone who asked for the delay on March 31 is too late?

“They are late. I know that in some Field Tax Authorities, the interpretation was different, but the last day to report was March 30. Otherwise, as far as the measures are concerned, we will see how the situation will develop further and, if necessary, respond further.”

Many will say that family accommodation may be the biggest hit in this situation. While it is difficult to predict anything, what do you expect, how will this segment sustain itself?

“In my opinion, private accommodation, nautical charter, and campsites are something that should be started first. When they decide to come, guests will first and foremost look at security, isolation, and quality. Also, foreigners who will come, that is, if the borders are open, will primarily seek security. Therefore, access to maintenance, or cleaning and disinfection, will be very important, we will have to give additional security to the guest that this apartment or holiday home has been prepared in accordance with the epidemiologist’s orders. They will need to have an additional card, that is, a label, a card in two or three languages that the disinfection is really made according to the instructions of the expert services. That card will be in the apartment and we will sign it to guarantee that everything is done right.”

In the end, what would you say to tourism workers in these unprecedented circumstances?

“That both public and private sectors are on the same wavelength. Our goal now is primarily to preserve those ‘glass legs’. Our goal is to preserve it at least, to keep the system alive, and to try to get there by April or May next year. All that will happen in the meantime is a reward for patience, perseverance and quality and all that we will do in tourism to welcome next year. And I say again, both the public and private sectors are together. I am glad that all associations have recognized that we have done the best we can at this moment. There is still room for nautical charter, there is debate, say, about the extent of maritime concessions. If we find a solution to forgive one part of the obligations, then the charterers pay fewer concessions and have the additional benefit that will be good for them. So, we continue to discuss everything that we may not have elaborated and covered in the two phases.”

How much space is left for further relief?

“Even the richer countries than us did not have such measures. We cannot, of course, compare ourselves to superpowers like Germany, but in many measures, we have come very close. And there is still debate about lifting some parafiscal taxes and the like. I can add that right now, it is clear how important it was to stabilize public finances. Having a responsible and quality fiscal and monetary policy has allowed us to make all these measures. And if we were in the eurozone now, we could have substantiated them even better. So patience and health come first. Ultimately, Croatia’s health policy is already recognized internationally as one of the most rigid and restrictive in this situation. Likewise, in all TOMAS surveys of our guests’ attitudes, nature and safety have always been emphasized as our strengths.

In this case, as well, potential guests will recognize Croatia as a safe country, because of all the countries of the European Union, we have taken the most serious approach to the safety and health protection of both our people and foreigners who found themselves here during the pandemic. After all, we still have foreigners living here in their homes, instead of in their own countries, because they feel safer here. This will now be our advantage, the safety of the public health system that has proven itself in this situation. With, for example, the fact that we are an auto-destination.”

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