Andrew MacDowall in Sofia -

March's ITB Berlin saw the usual flurry of publicity for strange and wonderful destinations. The world's largest tourism fair attracts representatives from almost every country on the planet - 187 this year - many of which barely feature in the glossy brochures of the average travel agent's. Tourism is the world's largest service sector, and few are the nations that don't want a share of the large and growing market.

Somewhere between the world's most famous destinations (the likes of Spain) and the more obscure (Chad returned to the ITB for the first time since 1999) is a country in Southeast Europe that, according to official figures, attracts more visitors than India, yet still remains relatively unknown to most of the world's travellers. For decades, Bulgaria has thrived as a sun, sea and sand destination for European package tourists. Other than pleasant sandy beaches, the country's success is almost entirely based on one competitive advantage - low prices. In recent years, Bulgaria has also become known as a ski destination, again capitalising first and foremost on affordability.

The World Tourism & Travel Council (WTTC), a global body of industry leaders, estimates that the "overall impact" of the sector will account for 12.9% of Bulgaria's GDP in 2012. The WTTC's definition is certainly a broad one, but by most estimates tourism contributes between 9% and 14% of Bulgaria's economic output.

Some 8.71m foreign visitors came to Bulgaria in 2011, up 4.0% on the previous year, according to official figures. Dependable though a base of several million package tourists each year has been, there is a growing awareness in the industry that it cannot be relied on forever - and that Bulgaria has considerable potential to develop higher-margin activities to develop a crucial economic sector. Success in doing so, however, has been limited.

The Germans are coming

Bulgaria's appearance at the ITB has led to a number of positive-sounding headlines. Eurosport is to air a special report on the country's participation at the conference, while TUI, Germany's largest tour operator, has reported a 14% increase in pre-bookings to the country. The government has pledged to continue to invest in promotion overseas, including attending other tourism fairs.

But to a large extent these developments represent business as usual. Companies outside the mass-market segment complain that too little is being done to diversify into higher-value niches such as cultural, adventure and ecotourism. Bulgaria's range of relatively unspoiled natural landscapes, historic villages and towns, archaeological sites, and remarkably well-preserved traditional culture offer opportunities for tourism development that have thus far been under-exploited. Reports suggest that just over 10% of visitors to Bulgaria make their way to cultural sites at present.

Niche tourism may never bring in millions more visitors, but tend to deliver higher margins with less environmental impact - and could also bring economic development to rural regions. Furthermore, Bulgaria may not be able to rely on mass-market tourism forever; there is plenty of competition, and it could intensify. Should Romania finally get its act together and refurbish its coastal resorts, Romanians would have less reason to head south for their summer holidays. Were Greece to leave the euro, currency devaluation could make it an affordable coastal tourism destination once again. "Bulgaria's main competitors for summer vacations are Turkey, Greece, Spain and Croatia," Tsvetelina Tsankova, managing director of nvision travel, a Sofia-based travel company, tells bne. "Their advantages are good price policy, cheap flights to the destinations, good and constant promotion, relatively better image and better service."

Tsankova is sceptical about the success of current promotion efforts, and argues that a shift in emphasis is needed to address the lack of diversification. "Bulgaria still can't get rid of its old image of being a cheap summer destination, which hinders the development of cultural tourism," she says. "The promotion done by the ministry abroad is not sufficient. If we compare it to that of Turkey and Greece, we can even say it's almost missing altogether."

Much of the existing promotion and development of alternative tourism has been pioneered by the private sector, though the government is working on improving cultural attractions such as archaeological sites and museums. The official InvestBulgaria Agency (IBA) is attempting to direct foreign investment into niches in which it sees particular potential. "Value-added in tourism is not so high at the moment," IBA executive director Borislav Stefanov says. "But we aim to encourage upscale projects. There's quite a lot of potential in cultural tourism, as well as medical and spa tourism."

A common concern is that the sector is currently poorly led and coordinated. At government level, it is shoehorned into the unwieldy Ministry of Economy, Energy and Tourism, while private sector lobby groups are fragmented and occasionally operate at cross-purposes.

Patchy promotion and lack of infrastructure, as well as Bulgaria's position outside the Schengen visa zone, are also hampering efforts to tap into fast-growing tourism markets in Asia and the Middle East. While Bulgaria is expected to join Europe's visa-free Schengen zone this year, allowing visitors from countries such as China to visit on a single European visa, Bulgaria will have to do much more to attract the attention of emerging-market tour operators. Coordination with counterparts in neighbouring countries to offer regional packages would be a start -Bulgaria is currently so little-known outside Europe that it is not a particularly viable stand-alone destination.

Bulgaria's sound base of mass-market summer tourism is an important earner for a beleaguered economy, and it is now being supplemented by a respectable, if somewhat inconsistent, winter sports sector. But competition is tough, particularly given the global economic environment. Structural changes and a more concerted, better-targeted overseas promotion campaign could help sustain the industry, and, crucially, promote diversification.