Croatia: The Mediterranean as it used to be


sea

Introduction

Croatia is a country located in Southeastern Europe. It is bordered to the north by Slovenia and Hungary to the east with Serbia, in the south and east with Bosnia and Herzegovina and Montenegro, while the Adriatic sea divides it from its neighbor Italy.

The coastline is 5,700 km long and its 1,185 islands, islets and rocks, make it one of the most rugged coastline of the Mediterranean. Therefore Croatia justifiably deserved the name ‘The land of a thousand islands’.

Demographics

According to the CIA World Fact book Croatia has 4,313,707 inhabitants. Croats make up 90.4% of the population. Most important national minorities are Serbs, who make up 4.4% of the population, followed by Bosnian, Hungarian, Slovene, Czech and Roma ethnic minorities.

The land area of Croatia is 56,542 km, which places Croatia among medium-sized European countries. Capital city is Zagreb (779,145 inhabitants), which is the economic, cultural and political center of the country.

Government

Croatia is divided into 20 counties and the City of Zagreb, which posseses the status of a county.

County within its sphere of self-governance performs activities in education, health, physical and urban planning, economic development, transport and transport infrastructure and the development of educational, health, social and cultural institutions.

Croatia is a parliamentary republic. According to the Croatian Constitution (accepted on December 22, 1990), Croatia is a unitary and indivisible democratic and social state.

Croatia is a member of the United Nations since May 22, 1992, the Council of Europe, the World Trade Organization, the Organization for Security and Co, North Atlantic Treaty Organization. As of 1st of July 2013, Croatia is also a full member of the European Union.

Climate and nature

Croatia stretches across two different climate zones. Continental climate with hot summers and cold winters is present in the interior part of the country (locally also fragments of mountainous climate may be found), whereas Mediterrainean climate stretches along the Adriatic coast, with usually sunny days and a sea temperature that does not fall below 20. Mild Mediterranean climate attracts tourists throughout the year.

Therefore, Croatia has all necessary predispositions for further development of tourism – one of the most beautiful coasts with more than a thousand islands and well preserved nature with 8 national parks, 10 nature parks and cultural and historical heritage of monuments protected by UNESCO:

National parks of Croatia:

  • Plitvice lakes (the oldest national park in Croatia, a UNESCO World Heritage Site)
  • Paklenica
  • North Velebit
  • Kornati
  • Mljet
  • Brijuni
  • Krka
  • Risnjak
National parks of Croatia

Nature parks of Croatia:

  • Kopački rit
  • Papuk
  • Lonjsko polje
  • Medvednica
  • Žumberak-Samoborsko gorje
  • Učka
  • Velebit
  • Vrana lake
  • Telašćica
  • Biokovo
  • Lastovo islands

Heritage of monuments protected by UNESCO:

  • Dioklecijanova’s Palace in Split,
  • the towns of Trogir and Dubrovnik,
  • Euphrasian Basilica in Porec
  • Sibenik Cathedral
  • Stari Grad Plain on the island of Hvar
  • Stećci Medieval Tombstones Graveyards at the border with Bosnia and Herzegovina

Tourism Overview

Tourism is one of the main driving forces of the Croatian economy, generating 10.1% of direct contribution to the country’s gross domestic product. History of tourism dates back to the mid 19th century, in the period around 1850. Successfully developed, today it places Croatia as one of the most important tourist destinations in the Mediterranean.

Tourist offer is diverse and rich – from nautical tourism, diving, congress, environmental, rural, cultural, religious, adventure, hunting and fishing tourism, to health and wellness tourism, motorboat cruises and excursion tourism.

According to official data of the Croatian bureau of statistics, Croatia has been visited by 15,594,157 tourists in the year 2016. 13,808,532 of those visitors were foreigners, which represents a 8.9 % increase in foreigner arrivals compared to the year before.

With overnights in 2016 totalling a number of 78,049,852, Croatia made an increase of 9 % compared to year 2015. 92.05 % of these overnights were made by foreign tourists. The number of overnight stays by domestic tourist increased by 2 %, while the number of foreign tourists increased by 9.6 %.

In 2016 the structure of foreign tourist arrivals (only top 10 european countries listed) recorded in Croatia was as follows:

Relation of arrivals and overnights of foreign tourists in 2016
Rank Country Arrivals Arrivals compared to 2015 Overnights Overnights compared to 2015 Overnights per arrival
1 Germany 2.277.378 7,20% 17.082.011 8,30% 7,5
2 Slovenia 1.298.501 8,90% 7.139.500 6,90% 5,5
3 Austria 1.237.969 10,60% 6.511.388 10,30% 5,3
4 Italy 1.119.932 0,80% 4.960.583 3,30% 4,4
5 Poland 757.523 12,30% 4.963.896 14.8% 6,6
6 Czech Republic 688.953 -1,00% 4.770.429 0,90% 6,9
7 United Kingdom 596.444 21,60% 3.026.662 25,10% 5,1
8 France 494.698 6,10% 1.886.364 10,40% 3,8
9 Hungary 486.448 11,60% 2.527.831 11,50% 5,2
10 Slovakia 389.806 2,30% 2.605.627 2,20% 6,7
TOTAL 9.347.652 55.474.291 5,7

Table 1: relation of arrivals and overnights of foreign tourists in 2016 (source: Croatian statistics bureau)

However, it is not from european countries that Croatia marks the biggest increase of tourist arrivals – a major boost of arrivals has been common for tourists coming from next non-EU countries:

Country Increase of arrivals compared to 2015
United Arab Emirates 109.9%
India 77.0%
Indonesia 57.6%
Argentina 43.6%
Qatar 39.5%
Morocco 38.2%

Table 2: arrivals increase from non-EU country based tourists

From non-European countries the majority of visitors coming from the Republic of Korea (343,974; increase of 9.8% compared to year 2015), United States (317,414; 6.3 % increase) and Japan (159,807; 24.3 % decrease).

Significant growth in arrivals was also recorded amongst guests from United Arab Emirates – 109.9 %, Indian guests with 77.0 %, 57.6 % of Indonesian, Argentine 43.6 %, Qatari 39.5 % and 38.2 % increase of Moroccan guests.

Foreign tourist – EU based

A significant decrease, however, has been recorded when speaking about russian tourists. As Croatia entered the EU and, subsequently, adopted the EU legislative, a tourist visa must now be issued for every russian tourist who wants to visit Croatia.

Administrative obstacles, as well as political tensions between EU and Russia, have resulted in a inevitable setback for croatian tourism: nearly 30% less russian tourists in 2014 than year before (in 2013 there were 165.000 russian arrivals with 1,400,000 realized overnights). 120.000 Russian arrivals was registrated in 2016. In 2017, Croatia plans to increase the number of Russian tourist to 200.000 like in 2012 with reduction of visa costs and subsidizing charter flights.

Russia nevertheless remains a huge market opportunity that Croatia must tackle efficienty in the near future.

Accomodation of tourists

4,617,371 of 15,594,157 tourists, stayed in hotels (4.0 % increase), 5,810,895 in private accommodation facilities such as apartments and rooms (17.8 % increase), and 2,479,540 in the camps (1,8 % increase).

The highest increase was recorded in the segment of camping accomodation outside of camps, where 5,324 arrivals were recorded, which is a huge increase compared to year before: 152.3%.

accomodation facilities occupied by tourists in Croatia 2015
Accomodation facilities Number of guests Incerase compared to 2012
Hotel room 4.617.371 4,00%
Private accomodation 5.810.895 17,80%
Camp 2.479.540 152,30%
Hostel 5.324 152,30%
Other 2.681.027,00
TOTAL 15.594.157

Table 3: accomodation facilities occupied by tourists in Croatia 2015

An overview of tourist arrivals and overnights by Croatia’s counties (2015)
County Arrivals Increase/decrease in % Overnights Increase/decrease in % Overnights per arrival
Istarska 3.763.174 11,7 23.128.233 -2,20 6,15
Primorsko-goranska 2.685.436 4,9 13.989.567 3,10 5,21
Splitsko-dalmatinska 2.737.304 20,7 14.880.891 9,00 5,44
Dubrovačko-neretvanska 1.598.767 10,8 6.827.837 8,30 4,27
Zadarska 1.362.206 5,6 8.209.852 -0,50 6,03
Zagrebačka 75.527 15 128.255 16,60 1,70
Šibensko-kninska 817.755 2,6 4.988.303 9,00 6,10
Ličko-senjska 621.129 8,1 2.322.753 6,90 3,74
Karlovačka 278.965 13,9 466.432 6,80 1,67
Total 13.940.263,00 74.942.123,00 4,48

Table 4: arrivals Vs overnights by counties in 2016

Economic Context

Gross domestic product (GDP) of Croatia in 2015 amounted to 43.9 billion EUR or 10,419 EUR per capita, while the decline compared to the year 2014 was approximately 2%.

The main economic branches in Croatia are agriculture, food industry, textile industry, wood industry, metal industry, chemical industry, oil industry, electrical industry, construction, trade, shipbuilding, marine and tourism.

According to economic indicators, prepared by UniCredit Bank, GDP growth should continue during 2017 based on private consumption growth boosted by EU funds’ absorption and progress in easing obstacles to business.

The fiscal position should improve further, but challenges abound as the government is facing so far the most demanding year in terms of public debt redemptions while global financial markets remain unsettled. The analysts therefore find the country’s strong extended basic balance position and prospects of credit rating improvements in the medium term encouraging.

Economic Indicators
2014 2015 2016E 2017F 2018 F
GDP (EUR bn) 43 43,9 45,5 47,4 49,5
Population (mn) 4,2 4,2 4,2 4,2 4,1
GDP per capita (EUR) 10.146 10.419 10.875 11.375 11.950
Real economy yoy (%)
GDP -0,4 1,6 2,7 2,7 2,9
Private Consumption -1,6 1,2 3,2 3,1 2,6
Fixed Investment -2,8 1,6 4,2 6 6,7
Public Consumtion -0,8 -0,3 1,4 1 1
Exports 7,6 10 5,3 4,5 4,8
Imports 4,5 9,4 5,9 5,8 5,5
Monthly wage, nominal (EUR) 958 1.000 1.035 1.066 1.105
Unemployment rate (%) 17,3 16,3 13,7 12 10,9
Fiscal accounts (% of GDP)
Budget balance -5,4 -3,3 -2,1 -2 -1,6
Primary balance -1,9 0,3 1,3 1,3 1,6
Public debt 86,6 86,7 85,2 83,6 81,5
External accounts
Current account balance (EUR bn) 0,9 2,2 1,3 1 0,8
Current account balance / GDP (%) 2,1 5,1 2,8 2,1 1,7
Extended basic balance/GDP (%) 4,1 6,2 6,3 6,1 6,1
Net FDI (%OD GDP) 1,9 0,4 2,2 1,9 2,2
Gross foreign debt (Eur bn) 108,4 103,8 96,8 94,4 91,9
FX reservers (EUR bn) 12,7 13,7 14 14,8 15,8
Inflation/Monetary/FX
CPI (pavg) -0,2 -0,5 -1,1 1,3 1,5
CPI (eop) -0,5 -0,6 0 1,7 2
3W money market rate (Dec avg) 1,08 1,24 0,9 0,9 1
USD/HRK (eop) 6,3 6,99 7,08 6,88 6,49
EUR/HRK (eop) 7,66 7,64 7,58 7,57 7,53
USD/HRK (pavg) 5,75 6,86 6,79 6,98 6,62
EUR/HRK (pavg) 7,63 7,61 7,53 7,51 7,49
Real effective excange rate, 2000=100 104,1 100,4 104,9 106,9 107,9
Change % -5,3 -3,6 4,5 1,9 0,9

Table 5. Economic Indicators (Source: Eurostat, NSI, UniCredit Research)

Tourism – economic forecast

According to World travel and tourism Council, which has been investing in economic impact research for over 20 years in order to assess and quantify the value of Travel & Tourism’s contribution to GDP and employment, the total contribution of Travel & Tourism to Croatia’s GDP is forecast to rise by1.9% in 2016, and to rise by 4.2% pa, up to 2026.

Travel & Tourism investment in 2015 was 10.8% of total investment in Croatia. It should rise by 0.6% in 2016, and rise by 2.3% pa over the next ten years.

Forecast key facts, based on annual research in 2016 (World Travel& Tourism Council):

  • GDP direct contribution of tourism

The direct contribution of Travel & Tourism to GDP was HRK33,896.7mn (10.1% of total GDP) in 2015, and is forecast to rise by 2.6% in 2016, and to rise by 4.4% pa, from 2016-2026, to HRK53,697.3mn (13.2% of total GDP) in 2026.

  • Employment direct contribution

In 2015 Travel & Tourism directly supported 130,500 jobs (9.8% of total employment). This is expected to rise by 1.0% in 2016 and rise by 1.6% pa to 155,000 jobs (11.5% of total employment) in 2026.

contribution of Travel & Tourism to Croatia’s GDP
  • Visitor exports

Visitor exports generated HRK61,065.7mn (36.0% of total exports) in 2015. This is forecast to grow by 2.7% in 2016, and grow by 4.3% pa, from 2016-2026, to HRK95,260.0mn in 2026 (41.0% of total).

  • Investments

Travel & Tourism investment in 2015 was HRK6,836.2mn, or 10.8% of total investment. It should rise by 0.9% in 2016, and rise by 2.3% pa over the next ten years to HRK8,682.7mn in 2026 (11.2% of total).

Croatian Hotel infrastructure

According to the Ministry of Tourism, there were 4.567 tourist facillities in Croatia in 2015:

  • 692 hotels and apart hotels,
  • 271 campsites,
  • 11 spa resorts,
  • 187 hostels
  • 28 second dwellings
  • 48 tourist villages, and
  • 330 other facilities.

In all of facilities listed above there is 1,029,312 beds. In 692 hotels and aparthotels there is a total of 135,322 beds.

hotel categorization in Croatia

Hotel categorization in Croatia by stars:

  • 69 hotels with 2 stars
  • 304 hotels with 3 stars
  • 265 hotels with 4 stars
  • 35 hotels with 5 stars

Hotel infrastructure – major owners

Most of the hotel facilities are owned by Valamar Group. Valamar posesses 47facilities on the Adriatic coast, Istria and Dubrovnik.

Maistra d.d is a property of Adris Group, which owns 10 hotels, 6 camps, 5 resorts and 3 apartment resorts in Istria.

Bluesun Hotels owns 14 hotels in Dalmatia (Bol, Brela, Tucepi, Starigrad Paklenica).

Liburnia has 16 hotels, five villas and a resort in the Kvarner region.

(Please note that detailed data about hotel ownership will be provided in the upcoming task)