Guy Norton in Zagreb -

Casting a shadow over the tourist-dependent countries of Southeast Europe is the fallout from the crisis in Ukraine, which threatens to upset the best laid plans of countries in the region to attract the growing legions of cash-rich visitors from Russia and other ex-Soviet states, as well as the much-needed investment necessary to ensure their tourist industries remain lucrative cash cows over the long term.

None more so than Montenegro, which with just 650,000 inhabitants may be a global midget in population terms, but which has proved to be a relative giant on the global tourism stage, thanks to it being a firm favourite with tourists from the former Soviet Union ever since it voted to dissolve its union with Serbia and opt for independence in 2006.

Revenues from tourism and associated infrastructure and investment projects have formed a key part of Montenegro’s credit story. And according to the latest research published by the World Travel and Tourism Council (WTTC), Montenegro is forecast to remain a global leader in terms of tourism growth over the coming decade, which will further increase the importance of the travel industry’s already major contribution to the economy.

Last year, on the back of around 9.5m overnight stays generated by 1.5m tourists, the WTTC reported that the total direct and indirect contribution of tourism netted Montenegro around €715m, equivalent to around 20% of GDP. Looking ahead, the WTTC forecasts that tourist revenues will rise by 13.2% this year and by an average rate of 8.8% over the next decade, with the result that by 2024 tourism could account for as much as 37.2% of Montenegro’s annual GDP.

According to the WTTC, tourism could directly help to create 25,000 new jobs in Montenegro over the next decade, while the indirect contribution account for over 60,000 fresh positions, equivalent to around a third of total employment in the country.

With visitors from Russia and other former Soviet states such as Ukraine accounting for roughly 40% of the country’s total tourist numbers and as much as 80% of residential property sales in the tourist parts of the country, concerns about the potential economic fallout from any potential drop-off in tourism and investment levels from there are understandable.

Over-reliance on rubles

The latest available tourism data though makes for relatively comforting reading for the authorities in Podgorica. According to the Montenegrin statistics agency, Monstat, in the first four months of this year overnight stays increased by 5.8% versus the same period last year to reach 336,750, with the number of visitors from both Russia and Ukraine showing strong increases – up 23.3% and 124% respectively. If anything like those numbers is repeated in the key high season months of July and August, then concerns about Montenegro’s heavy dependency on Russia/ex-USSR-related tourists will abate.

Nevertheless, there have been criticisms voiced in the local media in Montenegro that the authorities have pursued a short-sighted strategy when it comes to marketing itself as a tourist destination, favouring reliance on traditional visitors from Russia and other parts of the Soviet Union, rather than cultivating new visitors from Western Europe, the US and Asia.

Montenegrin daily Vijesti recently quoted local businessman Zarko Rakcevic as claiming that official and unofficial revenues generated by tourists and property buyers from Russia and Ukraine could be worth as much as €350m-400m a year to Montenegro. “Political and economic events and trends in these countries will certainly have a negative impact on the tourist industry and the trade balance of Montenegro," Rakcevic told Vijesti. The paper also quoted a leading restaurant owner in the tourist hotspot of Petrovac as claiming that pre-season revenues in bars, cafes and restaurants this year were 80% down on 2013.

On a more optimistic note, Danilo Kalezic, public relations manager for luxury marina and apartment resort Porto Montenegro, told Vijesti that arrivals at the elite destination developed by Canadian billionaire Peter Munk – which is the only place in the region able to accommodate the largest super-yachts so favoured by mega-rich Russians and Ukrainians – were at least 10% up on last year.

Porto Montenegro, developed on the site of a former naval base at Tivat on the Bay of Kotor, is soon set to be joined by a number of other luxury developments that could see the Kotor area attract as much as €2.5bn in tourism-related investments over the next five years, according to the Financial Times.

Projects in the pipeline include the €1bn Lustica Bay resort being managed by Swiss-Egyptian outfit Orascom Development, in cooperation with the Montenegrin government, which has a 10% stake in the tourist complex. This development should open its doors to its first guests in 2015. Meanwhile, in June Azmont Investments, a subsidiary of Azerbaijan’s state-owned oil company Socar, received the final sign-off to begin construction on its €500m Portonovi hotel and marina complex in Kumbor, which is due to be completed in 2016.

No doubt that by the time both those two projects are up and running, the developers will be hoping normal service will have been resumed and that Russians and Ukrainians will be fighting to get the best places on Montenegrin beaches rather than each other.