Manufacturers Seeking Benefits from Tourism

Tourism is not important only for direct earnings. A large part of the service sector and many manufacturers are linked to this activity. The construction and renovation of about 50 hotels are primarily awaited by builders, who will receive the largest share of the tourist investment pie of ten billion kuna in the next two years. How to capitalize on the tourist investment wave is a topic you can read more about in the new issue of Lider, and here we write about manufacturers seeking benefits from tourism.

Builders In two years, new investments of 10 billion kuna Despite the still negligible share of construction work in tourist investments compared to total works, builders already see tourism as a way out of a difficult situation. Some realized this several years ago, such as Kamgrad, however, as hoteliers testify, more and more builders are showing great interest in participating in future projects. After all, according to estimates from the Association of Employers in Hospitality, the tourist sector will invest 10 billion kuna in the construction and renovation of hotels in the next two years. Of course, not the entire amount goes to construction, but it is indicative that the construction sector earns 40 billion kuna each year, so tourist investments in the next two years are ‘worth’ even 12.5 percent of total Croatian construction revenues. However, HGK states that in three years (2013 – 2015), hotels and similar buildings accounted for two percent of all completed buildings, and last year the share increased to 2.2 percent, which is the highest share of completed hotels and similar buildings since before the recession. As for the area of hotels where construction work was carried out in the same period, its share in relation to the total area of completed facilities in Croatia amounted to 3.1 percent over the last three years, and last year it was also slightly higher at 3.3 percent.

– Therefore, we estimate that the contribution of tourism to the construction industry is somewhere within the mentioned frameworks. A similar situation continues, and even improves this year, considering that the share of the number of issued building permits for hotels and similar buildings in the total issued permits for buildings in the first eight months of this year increased to 2.3 percent, while the share of the area of hotels and similar buildings in the total planned area of buildings grew to 7.2 percent – they report from HGK.

They warn that it should still be kept in mind that the tourist activity simultaneously limits construction activity in parts of the country due to the ban on carrying out construction work during the tourist season, which reduces the length of the construction season in the most favorable months for builders. On the other hand, as the CEO of Tehnika Zlatko Sirovec says, the favorable climate on the coast in winter is welcome for builders, who have less activity in the interior at that time.

Furniture Manufacturers Equipping hotels – 10 percent of production Furniture manufacturers have also seen their opportunity in equipping tourist facilities, but unlike the construction sector, foreign companies are increasingly competing with the domestic furniture industry. Most of them are from Montenegro and Slovenia, and in the last year, furniture manufacturers from Serbia have also increased their presence. In addition to them, furniture traders have found their niche, although they most often equip hotel facilities and three-star apartments, rarely those of higher categories. As highlighted at the Adriatic Wood Days in early October in Dubrovnik, wood processors expect the largest investment cycle next year precisely in tourism, specifically in its strongest part – hospitality. So far, domestic companies, Virovitica’s Tvin and Čakovec’s Bernarda, have profited the most, although Đakovo’s Ancona group can also boast several successful projects, such as equipping the Dubrovnik Sheraton. Tvin’s director Ivan Slamić stated at AWD that his company equipped three hotels this year and student campus facilities in Rijeka and that they are already negotiating new projects for the coming years. For example, the Marco Polo hotel from Makarska is already looking for suppliers of equipment on a turnkey basis. Bernarda, on the other hand, has contracts with the largest hotel chains in the world. However, like builders, this niche for furniture manufacturers is still in its infancy, as 70 percent of the total value of produced furniture, which amounts to 450 million euros, is exported. The rest is placed on the Croatian market worth 200 million kuna, and although it is difficult to estimate, the bolder ones mention that about 10 percent of sales go to tourist facilities.

Food Industry Tourism appealing to both big and small The value of food production in Croatia last year amounted to 32.4 billion kuna. Although there are no exact data, it is undeniable that from June to October, the demand for food products increases as tourists arrive. Retail consumption in those months, according to HGK data, rises by 20 percent, so we could roughly estimate that the demand for food items increases by that much. Namely, in addition to restaurants and other food establishments, it should be taken into account that some tourists, especially from the Czech Republic, Poland, and Bosnia and Herzegovina, who are among the most numerous, still bring food with them.

Our large producers have long seen the opportunity, and some of them already generate significant revenue from the HoReCa channel, such as PIK Vrbovec, whose share of revenue from HoReCa is 12 percent, or 250 million kuna. On the other hand, we have examples where food producers invest in tourism themselves, such as the Meat Industry Braća Pivac, which distributes part of its products in this way. Something similar is seen with Maistra, which, together with the largest marine fish breeder in Croatia, Cromaris, is part of the Adris group. They also see investment opportunities in tourism at Agrokor, which can also be a channel for distributing its products, although this seems to be a secondary reason considering that investing in tourism, as things stand now, is profitable.

In addition to the large ones, small food producers can also find their interest, primarily in independent or less renowned restaurants, although if they have a specific product, large hotels will also be interested in it. In any case, the food industry is also one of those that must closely monitor the development of tourism.

Agricultural Producers Cheese and cream for hotel or own restaurants Recently, more and more family farms are emerging that, in addition to agricultural and livestock production, are also opening their own restaurants, most often in a rural home-style. They will sell the surplus production to restaurants and hotels, but in the Dalmatian hinterland, the number of family farms engaged in agricultural, primarily vegetable production, whose products are sought in restaurants, is growing, albeit still modestly. The total annual value of agricultural production is 13 billion kuna, and as with food production, we can estimate that the demand for these products during the tourist season increases by between 10 and 20 percent compared to previous months.

Restaurants are certainly interested in cheese, cream, vegetables, and fruits, even meat, as evidenced by the stories of our interlocutors. Agrofructus confirms that doing business with tourist companies pays off, stating that tourism has significantly, although not decisively, influenced the development of their company. Therefore, they are currently working on expanding their assortment, i.e., adapting products to the specific requirements of customers in tourism. Here we also have examples like Pivac and Adris, where part of the agricultural products is obtained from their own production. Thus, in 2012, an eco-farm began operating in Grđevac, owned by Bluesun and operating within the company Sunčane livade. They claim it is the largest ‘cow-calf’ farm in Europe and the most modern in Croatia. They raise high-quality French charolais cattle, and meat from their own breeding is served in a number of their à la carte restaurants. Bluesun also purchases a good portion of products from family farms.