UPUHH: Hoteliers Concerned About Limited Growth Potential

Hoteliers, members of the Association of Employers in Croatian Hospitality (UPUHH), will achieve business growth again this year, which is not surprising given their years of investment, but they are worried about the situation in which hospitality finds itself as a driver of tourism development and that in practice the growth potential is extremely limited.

“It is certain that the tourism sector as a whole will achieve revenue growth of over 5 percent this year compared to last year, but the growth of revenue and investment sends a false message that tourism is doing excellently and that the potential for further growth is unlimited. In practice, this is not the case because it is almost impossible to find people in Croatia with the knowledge and skills necessary for tourism growth, the construction sector has been decimated in crisis years and lacks the strength and workforce for announced investments, and the competitiveness of Croatian tourism ‘stands on fragile legs’ due to the highest VAT rate in the Mediterranean, numerous other fiscal and parafiscal burdens,” emphasizes UPUHH President Ivica Sabljić, commenting for Hina on this year’s overall tourism and hotelier business results.

He reminds that at the beginning of next year, an increase in the fee for renewable energy will come into effect, which will burden the sector with more than 50 million kuna and negatively affect further investments and competitiveness, which is why UPUHH strongly opposes this measure, as well as other burdens that are imposed without coordination between the public and private sectors and analysis of the impact on the tourism sector and the economy.

By 2018, investment of around 1.6 billion euros

Considering that hoteliers are the largest investors in tourism, Sabljić believes they must be the bearers of the next phase of tourism development, in which it is necessary to at least double the share of hotel accommodation in total capacities from the current approximately 17 percent, primarily with high-category facilities (resorts), which is important for extending the season and increasing competitiveness.

“Investments in tourism have been growing in recent years, but the dynamics still lags behind the approximately 7 billion euros of planned investments in the Tourism Development Strategy until 2020. However, it is encouraging that investors, despite the limitations and obstacles, view Croatian tourism and the development of higher quality facilities and destinations more positively. According to estimates, from 2016 to 2018, around 1.6 billion euros will be invested in the construction of new and renovation of existing facilities by tourism companies and others in tourism, which no other sector in Croatia can boast of,” emphasizes Sabljić, stating that such a level of investment should be achieved every year and that it should be the goal of both the tourism sector and the state.

To make this achievable, UPUHH believes it is necessary to reduce tax and other burdens on business costs, resolve urban planning prerequisites, address the issues of tourist land and maritime property, and influence the strategies of related activities, such as construction, and the development of human resources in tourism.

The connection between investment and employment with a reduction in payroll taxes

More investments also mean more employment, but this raises one of the, as he says, most important problems in tourism – the lack of quantity and quality of the workforce, which UPUHH has been warning about for years, but this year it has become clearer as it has been extremely difficult to find around 15,000 workers for tourism despite around 300,000 unemployed.

“In recent years, we have focused most on attracting investors, while simultaneously poorly encouraging work in tourism and hospitality, which this year has manifested as a labor shortage, and it will be even more pronounced in the coming years if the attractiveness of tourism professions and the overall professionalization and quality of services in tourism and hospitality are not urgently increased through strong measures,” warns Sabljić, adding that the ‘key’ to solving this problem lies in the state, which could facilitate business by significantly reducing tax burdens on wages in the off-season months and ensuring maximum flexibility of work during the season.

He notes that UPUHH has been collaborating with the ministries of tourism and labor and social welfare, as well as the Croatian Employment Service (HZZ), since the beginning of this year to develop an employment model with short-term and long-term measures that should facilitate the finding of competent personnel for whom there is already greater demand than supply. He praises existing measures such as student scholarships, which hotel companies implement in cooperation with the Ministry of Tourism, but the problem remains the lack of stronger coordination between schools and the hotel industry in connecting theory and practice, in order to better and timely prepare students for concrete work.

“If all announced investments are realized, and at the same time there are no significant changes in the education system and the labor market, we will face the situation that there will be no one to work in beautiful new hotels. Therefore, we should also consider turning to countries in the Western Balkans and the wider region in search of workers, and we believe that good results can also come from training programs tailored to the needs of hotel companies being developed so that employers can find an adequate number of competent employees as early as the 2017 season,” assesses Sabljić.

Call to the Croatian Government – to ensure more favorable business and employment conditions as soon as possible

Due to this problem, as well as the strategic share of tourism in GDP of almost 20 percent, UPUHH calls on the Croatian Government to ‘sit at the table’ to present the guidelines and policies it considers necessary for sustainable and quality tourism development, with a broader view of the strong connection between hospitality and other sectors, which they believe is also the reason to ensure more favorable and stable business and employment conditions as soon as possible.

“Hoteliers do not only invest in facilities, but also actively participate in the development of destinations through support for various events, investments in beaches, promenades, bike paths, ecology, and more, which other forms of accommodation, especially private ones, cannot. In addition to the development of destinations, hoteliers also strongly influence other economic sectors, from trade and construction, transport and agriculture to food, wood, textile, and creative industries, which actually opens doors to exports, which is also an important determinant of tourism,” concludes Sabljić.