Branko Bogunović: The Hypothesis That Tourism at the National Level Can Enrich You in the Long Term Has Almost Been Rejected

For a long time, there have been no significant breakthroughs in the tourism sector, which depends on a very high share of the population on the coast, nor have strategic plans that almost all consultants in the tourism field in Croatia have worked on so far been operationally implemented. Economist and tourism consultant Branko Bogunović, along with three partners, founded the consulting company HDC (Hotel & Destination Consulting) in 2016 after leaving the Zagreb office of the global consulting firm Horwath HTL, and his team conducted sustainability studies in Zadar and Istria counties, showing how unsustainable the existing infrastructure is in the long term.

He observes trends and tourism development somewhat differently than the traditional counting of tourists and overnight stays. In his consulting career, he has led over fifty projects in tourism and participated in more than 150, mostly related to strategic planning and development, management, and recently monitoring sustainability and calculating carrying capacity. He is a scientific associate at the Faculty of Economics and Tourism ‘Dr. Mijo Mirković’ in Pula, where his specialties are innovation and the development of tourism products. According to his scientific habitus, he is primarily an expert in tourism development and the economics of tourism.

So, what is the current economy of Croatian tourism like?

– Tourism is certainly an important segment of the Croatian economy, and the globally standardized method of measuring this contribution is the satellite account. The last satellite account was made for 2019 and showed a direct contribution of tourism to GDP of 11.5 percent, and the total, i.e., direct, indirect, and induced, of 17.6 percent. These shares have been slowly and steadily increasing since 2011.

Structurally, in 2016, 29 percent of the total economic contribution related to so-called collective accommodation, i.e., hotels and camps; followed by trade with 17 percent and food and beverage service with just over 14 percent. Interestingly, the total real estate component, which includes private accommodation, contributed only five percent. Thus, companies with a smaller accommodation contingent economically contribute six times more than private accommodation. At the same time, a bed in a hotel or camp is taxed about ten times more than one in private accommodation.

Since there are already official statistics published by DZS, why is no one using them publicly? Why does everyone repeat that tourism accounts for more than twenty percent of GDP?

– In public, the foreign exchange inflow from tourism is often divided by GDP, thus mixing apples and oranges, and ten years ago, shares of 20 or even 25 percent were mentioned, which is completely incorrect. There are also different methodologies and institutions that make such calculations, but national statistical offices should be exclusively considered here.

For example, the World Travel & Tourism Council, WTTC, had calculations for all countries in the world that were increased by fifty to one hundred percent compared to those of national statistical offices, which may be interest-motivated. When we talk about the economic impact of tourism, we must take into account regional importance and differences. In parts of coastal regions, tourism overall accounts for more than two-thirds of the economy, which diminishes when summed with the economy on the continent. But let’s not deceive ourselves; this is also a terribly high share at the national level, one of the largest in the world.

Do you think the new tourism law will contribute to a more accurate statistical picture and the impact of tourism on our economy?

– It is good that the new tourism law includes a proposal for satellite accounts to be made at the level of NUTS 2 or NUTS 3 regions on the coast, which corresponds to coastal counties. If you look at Croatia through statistical monitoring, research, e.g., TOMAS, and related systems like eVisitor, we are doing very well in a global context. Our problem is that a mass of these statistics and research ends up in a drawer and is not used for further management. A large part of our statistics has existed for its own sake so far.

In which direction should we make more serious turns in the further development of tourism and how to operationally organize that?

– Some things have been well established by the new umbrella tourism law. First of all, coordination at the level of the Prime Minister and all ministries has been prescribed. Until now, we had the Ministry of Tourism, which operated completely separately and had limited powers; most of what needs to be done falls within the jurisdiction of other ministries.

Then, the orientation towards sustainability is excellent, but for now, it remains only declarative. There is a lack of a large legislative piece under that law. Other laws and subordinate regulations that explain what sustainability means, how we will measure it, where the thresholds are, and how the entire process will flow on the ground are missing. In this sense, the announcement by the Minister of Tourism that coastal destinations should have some sustainable management plans within a year seems somewhat overly optimistic.

Hoteliers are very resentful about the increase in fees for tourist land. Is the proposal from the Ministry of Construction excessive?

– The initial idea of tourist land was very good, but the realization of that idea is probably one of the most disappointing stories of Croatian bureaucracy and politics. For more than twenty years, hotel companies have had no legal security and guidelines under which conditions they can invest in that vast amount of land, while on the other hand, the state has been collecting symbolic amounts, so in the end, no one was satisfied.

The agreement was complicated by the fact that this is a unique case in the world; it was not possible to find a foreign example to follow. According to the new proposal, the fee amounts to about 18 percent of the company’s profit, which may cut the investment potential of the largest investors in tourism a bit too much. The state should carefully assess what its interest is, have a long-term management logic in tourism that includes investments, and not think exclusively as a land renter.

Can Croatia be considered a poor country due to the high share of tourism in GDP, and how can we break out of that circle?

– There is no easy way out of the tourism economic monoculture in which our coast undoubtedly finds itself, and this has long been scientifically processed. The hypothesis that tourism at the national level can enrich you in the long term has almost been rejected. If you take the share of tourism in the economy and the level of nominal GDP per capita and draw a correlation, it is negative.

Thus, countries with a high share of tourism in the economy are generally poor. However, the opposite direction is certainly possible. For example, Dubai has a huge influx from other activities, allowing it to afford incredible artificial tourist attractions. It is easy to develop tourism when you are rich, but it is difficult to make a rich country predominantly based on tourism.

You can read the entire interview in the printed and digital edition of Lider.