Tourism has suffered greatly, but we have increased revenue per overnight stay and the length of guest stays

We knew that tourism was the hardest hit of all economic sectors during this pandemic period, and now we know how much. The consulting firm BlueRock Consulting and the Faculty of Management in Tourism and Hospitality from Opatija have produced a detailed report on the sector’s performance in 2020 titled 'Analysis of Benchmarking Results for Hotels, Camps, and Marinas in Croatia'.

Comparing the tourism results of competitors, the Analysis showed that last year the number of international tourist arrivals in the Mediterranean fell by an average of 72 percent, while revenues from services exchanged internationally through tourism in 2020 were on average 68 percent lower than in 2019. Croatia experienced smaller losses than the Mediterranean average in 2020, specifically 68 percent fewer tourist arrivals and 54 percent less revenue.

The number of overnight stays in Croatia fell by 50 percent, with hotels experiencing the largest losses, with 73 percent fewer overnight stays.  Non-commercial accommodation showed greater resilience (-46 percent), which is a result of the escape effect and the need for a more private location (the trend of working from another location for flexible workplaces, COVID isolation, escape from earthquake-affected areas, etc.)

The summer season achieved more than half of the revenue from 2019, while the pre-season and post-season completely underperformed in light of the lockdown. The season relatively improved the tourism picture, except that it is also the period when the highest number of overnight stays is achieved, and at that time, the measures were the most relaxed after the spring lockdown – under those conditions, there were 44 percent fewer overnight stays. However, despite the freer tourist traffic during the summer, 13 to 14 percent of hotels in 2020 did not open their doors at all.

The analysis shows that the greatest losses were experienced by parts of Croatia that depend more on business tourism and air markets, with Dubrovnik-Neretva County and the City of Zagreb experiencing a decline of 60 to 70 percent in overnight stays, and Croatia had the largest decline from the markets of the United Kingdom, Sweden, the Netherlands, and the USA, which achieved between 15 and 21 percent of the number of overnight stays from 2019 in 2020. On the other hand, road markets that had somewhat fewer movement restrictions salvaged the season, with Germany being the primary emitting market.

An interesting positive trend is that the average length of tourist stays in Croatia increased from five days to seven days (most in coastal counties), as a result of social trends such as remote work, 'longstay' accommodation packages, escape from urban areas, longer stays in one place, less mobility, etc.  

Based on data from the leading hotel benchmarking in Croatia conducted by the Faculty of Management in Tourism and Hospitality, University of Rijeka, which is co-financed by the Croatian Chamber of Economy and Croatian Tourist Board,  revenue per overnight stay achieved during 2020 was calculated. Thus, the hotel sector experienced a revenue decline of 67 percent compared to 2019, primarily as a result of a significant drop in the number of overnight stays in hotels, which amounted to 73 percent. Likewise, hotels in 2020 achieved an average of 67 percent lower TrevPAR (total revenue per room). – Despite the drastic decline in all indicators, hotels relatively managed to maintain price levels, with a significant change in the structure of sales channels and market segments (dominant individual segment with the absence of groups). Thus, revenue per achieved overnight stay maintained its level, or even increased by five percent, from 67 to 71 euros. The results of the season show greater resilience of higher value-added facilities and a complete defeat in the three-star segment, emphasizes project manager Sandra Janković.

The high level of last year’s losses could potentially jeopardize the financial position of a large part of hotel companies, given that leaders in Croatian hospitality reported losses of up to 69 percent of revenue in 2020 compared to 2019.

Individually, the largest companies also suffered the most. Thus, Valamar Riviera had a 69 percent drop in revenue in 2020, from 2.2 billion to 697 million kuna. Maistra dropped from 1.3 billion to 610 million kuna in revenue, a decrease of 53 percent, Plava Laguna from 1.2 billion to 481 million kuna (-60 percent), and Arena Hospitality Group from 536 to 168 million kuna (-69%). With a drastic drop in EBITDA, which in individual cases ranges from -71 to -181 percent, companies are in an even worse position.

Thus, among hoteliers, a series of cost optimization measures have been announced, deferral of investment cycles, retention of profits, and activation of crisis incentives (e.g., incentives for job preservation), and companies will also need to reprogram or increase their debt.

Camps, depending on the structure of accommodation, lost 49 to 56 percent of accommodation revenue, but achieved a smaller decline in revenue per room than hotels. After the spring lockdown, camps quickly opened and utilized their position in nature outdoors. They attempted to increase occupancy through 'longstay' offers that promote longer stays in the camp or mobile homes as a workspace outside the summer season, but occupancy still fell by up to 56 percent for mobile homes.

Marinas did not experience a significant drop in revenue due to permanent and land moorings (the revenue drop was only 13 percent), but nautical traffic, i.e., boat rentals, experienced a significant drop of 54 percent, which was most felt by charterers.

At the end of the year, we can state that the price positioning of Croatian hotels, camps, and marinas was relatively successfully maintained and that the revenue drop was predominantly generated from the decline in the volume of tourist overnight stays.

-Last season was a unwanted experiment that highlighted the advantages and disadvantages of Croatian tourism that were not erased by the corona crisis, but rather imposed additional imperatives to increase the resilience of the entire sector. Although from today’s perspective, the severely affected tourism sector understandably longs for the old records of huge numbers of overnight stays, it may indeed be time to consider, from a strategic planning perspective, a model of tourism with fewer overnight stays during the peak season and create realistic foundations for a greater number of overnight stays throughout the year. We believe that after all, it is no longer and must not be a question of whether tourism is based on a quality offer of high added value beyond sun and sea, the kind that Croatia needs – emphasized Emanuel Tutek, partner at BlueRock Consulting and one of the authors of the Analysis.

Sector forecasts for this season are much better than last year’s, moreover, optimistic predictions are around 70 percent of the revenue from 2019. Daily positive news is coming from the Croatian Tourist Board from international markets, with the latest being that Croatian destinations are increasingly being searched in the US market. For example, on the popular KAYAK travel search site, Dubrovnik recorded a search increase of as much as 205 percent. In Croatia, nearly 70 thousand overnight stays have been achieved from the US market so far this year, which represents a growth of 38 percent compared to the same period last year.

{embed_digitalno_izdanje}{/embed_digitalno_izdanje}