ALACO DISPATCHES: Croatian tourist boom belies tensions

ALACO DISPATCHES: Croatian tourist boom belies tensions
A two-hour ferry ride from Croatia’s second city Split, Vis is far removed from the bustle of the Dalmatian coastline.
By Yigal Chazan of Alaco September 6, 2017

A two-hour ferry ride from Croatia’s second city Split, Vis is far removed from the bustle of the Dalmatian coastline, drawing visitors entranced by its natural beauty. Off limits to foreigners in former Yugoslavia when it served as a military base, the island was spared garish communist-era tourism development. These days, the remnants of army buildings and crumbling stone houses form a distinctive backdrop to this relaxed, low-key resort that retains an old-world charm. But how long will the idyll last?

Islanders face a dilemma. They want to preserve Vis’ unique character but are keen to see more of the tourism revenue on which they depend. While eager to see investment, they are wary of developments that might scar the landscape. Recent projects that have met with the authorities’ approval include the restoration of a nineteenth century British fort, now a restaurant and music venue, and plans to turn a dilapidated villa into a luxury hotel.  

This summer there has been a great deal of excitement about the imminent filming of the sequel to the hit musical Mamma Mia on the island. The production will inject much welcome cash into the economy. Yet some are concerned that the publicity could lead to an unsustainable increase in visitors, putting a strain on resources and spoiling the tranquillity of the place.

The omens are not good. Some popular Croatian resorts have suffered from overexposure. The ancient coastal city of Dubrovnik experienced an upsurge in visitors after it featured in the HBO mega-series Game of Thrones. The crowds in the Old Town are such that mayor Mato Frankovic plans to limit the number of cruise ships docking in the port. The island of Hvar, rich in culture and history, has become a raucous party venue, with locals increasingly unsettled by the legions of bawdy young revellers. Newly-elected mayor Rikardo Novak has introduced hefty fines for bad behaviour.  

The tourist-related concerns, expressed in several resorts across southern Europe, come as Croatian tourism continues its surging growth. Benefiting from holiday-makers’ nervousness over security in North African destinations and the refugee influx in Greece and Italy, Croatia is set to enjoy another record-breaking season — foreign visitors increased 35.3% year-on-year to nearly 2.5mn in June. In 2017 they are expected to generate €9.5bn, up almost a billion on last year. It caps a decade of impressive development: the number of tourist sector businesses increasing by more than 120%, with sectoral revenues growing by 80%.

Yet the expansion of tourism — now 18% of GDP — has not been without problems. Grumblings about its intrusiveness aside, the industry has been experiencing a labour shortage. In the middle of high season some 2,700 jobs remained vacant, despite an unemployment rate of 11%. The lack of skilled personnel — many lost through emigration — and poor working conditions are said to have contributed to the shortfall. Recently a former economy minister, Davor Stern, caused a stir when he suggested recruiting workers from the Philippines. The government has reportedly made some efforts to ease the problem. It intends to spend €20mn on education and training for the unemployed, and has increased quotas for foreign construction workers in order to avoid hold-ups to investment projects in the autumn.

Across Croatia, some €800mn of tourism sector investments are either planned or underway this year, with 40 new and renovated hotels expected to open, most of them 4 or 5 stars. The push for up-scale accommodation — most visitors stay in private rooms and camp sites — is part of efforts to get tourists to spend more money and extend the season, which is, for the most part, limited to the summer months. Domestic companies are driving the hotel expansion, but foreign investors are alert to opportunities: a Turkish €80mn development in Zadar, due for completion in 2019, is a notable high profile project.  

While the Croatian papers are keen to trumpet record visitor numbers, there are clearly concerns about mass tourism and the profitability of the industry, which the focus on luxury hotel development aims to address. 

Back on Vis, there is little evidence of the strains affecting other parts of the Dalmatian coast and archipelago. Daily ferries disgorge hundreds of visitors in Vis’ port, but they quickly melt away. Charter yachts moor on the quayside overnight and are gone the following morning. An easy-going atmosphere prevails – although this may be about to change.  Dubrovnik’s mayor, Frankovic, was recently quoted in the media as saying the island could become the next “extremely popular” destination. “They must prepare for it, and I hope they won’t be taken aback like we were...,” he said.   

Yigal Chazan is an associate at Alaco. Alaco Dispatches is the business intelligence consultancy’s take on events and developments shaping the CIS region.