The main tourist season has ended, and we are entering the post-season, which is expected to be very good. Accordingly, owners of tourist accommodation can expect good occupancy rates, supported by previous data on the utilization of domestic tourism capacities. According to the latest statistical data for July, Croatian tourism has 421 thousand rooms, apartments, and camping spots, which is three thousand less than in July 2024, while the number of beds remained the same at 1.1 million.
Of the total commercial accommodation capacities for tourists, more than 60 percent of rooms and apartments, as well as beds, were in the category of private accommodation. Specifically, this refers to 253 thousand rooms, apartments, and camping spots, with 676 thousand beds. Compared to last July, this year there were four thousand fewer rooms and apartments in this type of accommodation, and ten thousand fewer beds.
In the hotel category, there were 82 thousand rooms and apartments available, or 19.5 percent of total capacities, while their 173 thousand beds accounted for 15.6 percent of the total number. Unlike the ‘zimmer frei’ segment, hotels entered the majority of this season with a thousand more rooms and an additional three thousand beds. Despite a slightly larger accommodation capacity, occupancy was similar to last year.
Three key factors
DZS data shows that the average occupancy of hotel rooms reached 78.4 percent (compared to 78.6 percent in July last year), and beds 92.6 percent (last year 91.8 percent). For other types of commercial accommodation facilities, DZS does not provide data on average occupancy. Although they operate longer, with solid occupancy, hotels have the least total capacity of all tourist countries in the Mediterranean. Sanja Čižmar, director of the consulting company 505 savjetovanje, explains that the small share of hotels in total accommodation capacities is conditioned by the explosive growth of properties for short-term tourist rental, both commercial and non-commercial.
– No Mediterranean country has a share of these properties of 62 percent in total tourist capacities as Croatia does. Three key factors limit investments in hotels in Croatia. First, the highly seasonal business model in Croatian tourism extends the payback period for investments. This can be mitigated in the medium term by improving air connectivity throughout the year, primarily through the development of new products in destinations outside the model of beach summer tourism.
The second reason is the complex investment environment, characterized by a rigid framework of still unresolved issues regarding maritime property, a long period for resolving issues related to tourist land, and a lengthy process of obtaining permits associated with sometimes insufficiently coordinated spatial planning documents at the local and regional levels.
Third, the declining level of hotel profitability is linked to rising operating costs above the rate of revenue growth. This primarily relates to the increase in labor costs and material costs (food and similar), as the inflation rate in the food sector is significantly higher in Croatia than in the rest of the Mediterranean, which represents our competitive environment in tourism – emphasizes this tourism expert.
The accommodation structure dominated by private accommodation is the main reason for the low average daily spending of guests in Croatia of 170 euros, while in Italy and Spain it exceeds 250 euros, and in France over 400 euros, emphasizes Veljko Ostojić, director of the Croatian Tourism Association (HUT) and former minister.
– Croatia lags behind in investments in hotel accommodation compared to the Mediterranean, and the investment cost is the highest in the wider region. An analysis by Horwath THL presented last year at the Hotelier Congress showed that the average ‘turnkey’ investment in Croatia is 235 thousand euros, while the regional average is 157 thousand euros, which is 51 percent lower. This is the biggest reason for the lag in investments, especially in greenfield projects, of which there are extremely few in Croatia.
There are several reasons for this: unrealistic land prices in T zones that the performance of Croatian hospitality cannot bear, complex and often insufficiently clear urban planning documents, a lengthy and often uncertain process of obtaining building permits, extremely high construction costs with a lack of a competitive construction market and often unknown final construction costs, labor market challenges – lists Ostojić.
Banks are eager
When all these problems faced by hotel investors are heard, it might be said at first glance that banks are not particularly interested in financing such projects. However, the situation is diametrically opposite. According to Sanja Čižmar’s experience with clients she follows, banks are eager to finance quality hotel projects. Of course, provided that the project is well thought out, that a stable investor is behind it who is willing to take on the risk by investing part of their own funds, and that there is professional documentation about the project (conceptual and main project, permits, feasibility study, etc.), adds the interviewee from Lider.
– Hotels provide a long-term stable business and loan repayment, so banks are generally interested in financing these projects. It cannot be said that there are no incentives for investing in hospitality in Croatia, but they are significantly smaller in scale than in the countries of the region. In Croatia, there are, for example, regional measures that support investment in regions with lower tourist intensity or measures to promote competitiveness mainly for small and medium-sized enterprises. HBOR measures are niche-oriented towards the entrepreneurship of young people, women, and start-up entrepreneurs. The measures of subsidized HBOR loans for sustainable tourism for small and medium-sized enterprises are very well designed, but they are not sufficient, as the available funds were utilized in record time in both the first and second rounds – believes Čižmar.
That hotels are interesting to banks is also confirmed by Erste Bank. – Despite the lower profitability of the tourism sector in the short term, Erste Bank recognizes tourism as one of the most significant economic sectors in Croatia and believes that investments in hotel capacities are sustainable in the long term and have significant strategic value. High-quality hotel accommodation is in deficit in the Croatian market, and there is room for growth and new investments in hotel accommodation, as well as investments to improve existing hotel capacities.
With the aim of increasing the competitiveness of destinations, improving service quality, and extending the tourist season, Erste Bank is ready to financially support both greenfield and brownfield investments in hotel capacities, regardless of whether the investor is a tourism company with existing capacities or a start-up company, provided that the projects are market and economically justified and in line with the bank’s business policies – say Erste.
More old is being renovated
Recent concrete experiences of hoteliers with bank financing certainly include last year’s Club Loan Agreement that the leading tourism company in the country, Valamar Riviera, signed with Erste and Privredna Banka Zagreb. The loan was worth 130 million euros.
– In 2024, Imperial Riviera, a member of the Valamar group, successfully rounded off its financial structure through loan agreements with OTP Bank and Zagrebačka Bank in a total value of 50 million euros for the realization of the investment in Arba Resort 4*, Valamar Collection, which opened in early summer on the island of Rab – remind Valamar.
In domestic tourism today, it is significantly more common to raise the quality of existing hotels (so-called brownfield investments) than greenfield investments or new hotel constructions. The reason for this is the large number of hotels dating from the 1970s and 1980s, which can be adapted through reconstruction to meet the demands of today’s tourist market. Sanja Čižmar explains that brownfield hotel investments are lower ‘turnkey’ than greenfield investments, thus their payback period is shorter.
– New hotel construction is associated with higher investment risk because, not only is it more expensive on a turnkey basis, but it is necessary to coordinate a number of factors that condition success in business. From the attractiveness of the location and its transport connectivity to a quality product that needs to be oriented towards diverse market segments to operate for a larger part of the year, and of course to the destination itself where the new hotel is being built. Does that destination live only three to four months a year or for a larger part of the year? – emphasizes Čižmar.
When it comes to investments, Valamar Riviera plans investments of 196.1 million euros for 2026, but the final decision on investments will be made by the end of this year. – The final decision on the structure of financing new investments for 2026 has not yet been made – they say at Valamar.
