A large part of the Croatian public longs for one or more worse tourist seasons. Part of this public is frustrated by the belief that the tourism team, plundering the sea which is our common national good, easily reaps extra profits in two to three months with no direct taxation. Another part, allergic to tourism, hopes for a crisis among apartment renters and caterers on the Adriatic so that the authorities will finally come to their senses and start playing the industry card.
For these two reasons, which are often intertwined, great attention is paid to the news that there are a thousand newly built villas with pools empty along the coast of the northern Adriatic during the peak season. Hope is rekindled when some landlord admits that two out of ten of his apartments are empty. Or when some caterer complains that instead of two or three ‘guest rotations’ at the table, he now has only one. And that pizzas and ćevapi are selling better than white fish and expensive bottles of wine.
The expected decline in tourism, according to all indications, will not happen. Tourism will continue to be caressed by both the invisible hand of the market and the visible hand of the state. Even if the year is not record-breaking in visits and overnight stays, revenues will be at last year’s level. More importantly, forecasters, such as those from the consulting firm McKinsey & Co., predict that global tourism spending will grow until 2030. One reason is that every year, 110 million people worldwide ‘join’ the middle class. And they want to travel!
Demand will grow
GDP growth driven by globalization and enormous borrowing by world governments is being transferred to the residents. Incomes are rising. When this coincides with the inability of younger generations to solve housing issues through savings, the decision becomes ‘let’s spend and travel’, making it unsurprising that it is predicted that in Western Europe, tourism spending will grow by five percent per year. In Eastern Europe, it will grow by seven percent. The wealthier part of humanity will want to travel and spend more. Overcrowding and increasing resistance from local populations in the most attractive destinations (like Spain) will put additional pressure on destinations in Croatia.
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In conditions of long-term growing demand, it is not surprising that in and around Croatia, everyone with some money to invest first looks to invest in real estate on the Adriatic. The list is long. Starting with those who were fortunate enough to have parents or grandparents who received social housing during socialism, and then had the money to build weekend houses on the coast (which are now being expanded with apartments). Those who were not so lucky could, at the turn of the 21st century, if they had decent incomes, buy an apartment on credit. And it turned out that this brought infinitely more profits than saving with no interest in banks.
Then there are entrepreneurs struggling with production, who then direct part of their profits, just in case, into real estate on the Adriatic. The list also includes those prone to corruption who, thanks to their position in the public sector, gather a few million euros for villas with pools. There are also wealthy foreigners from ‘new EU’ countries (once poor tourists from the Czech Republic, Poland, Hungary…). It may not be worth mentioning, but international crime groups need to legalize dirty money somewhere. Real estate on the Adriatic looks attractive, so it is not surprising that Croatia remains on the list of suspicious countries regarding money laundering.
Tourism has swallowed us
Now, someone in an optimistic mood might note that a movement to stop apartmentization has begun. The first examples of attempts to halt apartment construction are emerging, and there is talk of the possibility of legally prohibiting the rental of apartments in residential buildings. Perhaps there are sincere intentions to protect the quality of life and lower rental prices. But it should be noted that there are also elements of cluster association. Those who have filled the coast with ugly apartment buildings, often illegally and then legalized, fear new competition. They would gladly protect their oligopolistic position. And thus the ability to keep prices at which they have become accustomed.
When asked how this season is going, a friend, the owner of a holiday home in Istria, precisely replied: ‘Tourism has swallowed us!’ Given the growing global and European tourism spending on one side and the desire of many to take a piece of the pie that will grow at least until the end of the decade, this swallowing will continue. From the new-old government, one should not expect them to give up the tax that most generously fills the state treasury. Better VAT from tourism in hand than tax from tomorrow’s modern high value-added industry on the branch. There is actually no dilemma.
