Investors Against the Ban on Fractional Ownership: Elite Tourism in Question

The new proposal for the Spatial Planning Act (Article 68) has opened a front between the Government and investors in tourism. The ban on fractional ownership in tourist zones and construction within golf courses, investors warn, could halt projects worth billions of euros and redirect capital to competing destinations.

Such provisions, they argue, would undermine the financial sustainability of the globally recognized model of branded residences, which are crucial for five-star hotels, as well as the development of golf tourism, one of the more sought-after segments of the current global offering. Projects of strategic importance, such as Marina Resort in Cavtat, Hvar Luxury Resort, or Livka on Šolta, have come under question, and some investors are already warning of possible capital withdrawal towards competing destinations like Greece, Montenegro, and Spain. As a result, investors are now gathering in a new Association of Investors in Elite Tourism to advocate for quality solutions and to fight against the new proposal.

Division Within the Government

There has also been a divergence at the political level. Namely, the Minister of Tourism and Sports, Tonči Glavina, has strongly advocated for the inclusion of the controversial provisions, while the Minister of Construction, Branko Bačić, was initially against it, warning that they could destabilize the investment environment.

Investors emphasize that branded residences under hotel management do not lead to apartmentization in any way, as owners have a contractual obligation to participate in the hotel rental program with limited private use.

– The ban on fractional ownership abolishes the mechanism that ensures the financial sustainability of elite hotels, and thus the development of high-category tourism – they state.

Statement from the Association of Investors

The Association of Investors in Elite Tourism, which is in the process of being established and gathers interested stakeholders (still unknown) from the fields of tourism, real estate, and investments, has issued a statement in which it presents sharp remarks.

– The ban on fractional ownership in tourist zones represents a serious obstacle to the financial sustainability and feasibility of elite tourism projects. Globally accepted models – such as branded residences and condotel systems – are based precisely on the ability to combine the capital of institutional investors and end users. If such instruments are disabled, Croatia risks being left without a key development tool that has been a standard in competitive destinations for decades – the statement reads.

The Association also warns about the issue of legal uncertainty.

– Fractional ownership is regulated by the Property Law and other real rights. If it were to be partially regulated by the Spatial Planning Act, there would be a collision of regulations – for example, an apartment could be fractionally owned in a residential building, but not in a tourist settlement. Such inconsistency puts investors in a position of legal inequality and undermines the principle of equality before the law, which also calls into question the constitutionality of the solution itself – they add from the Association.

Golf Tourism Without Perspective

The ban on construction within golf zones is particularly contentious. According to investors, such a solution effectively means the extinguishing of golf tourism in Croatia.

– Golf courses can only be maintained through an integrated model that includes residential and hospitality facilities. Without this, projects lose their economic logic, and Croatia misses the opportunity to attract high-paying clientele – they state from the Association.

Investors remind that previous bans on fractional ownership have produced undesirable effects.

– Previous bans did not stop apartmentization; rather, they encouraged it in a chaotic and unregulated form. The result is places like Vira and Novalja – a concreted coastline, mass legalization, and long-term degradation of space – warn the new Association. Instead of blanket bans, they propose strengthening urban planning, spatial balance, and quality.

Proposals for Solutions

The Association does not advocate for apartmentization but proposes precise regulatory mechanisms such as defining the ratio of hotel and residential units, mandatory professional management, linking residences to hotel brands, banning individual short-term rentals, and introducing minimum standards and categorization for branded residences.

– Such an approach guarantees high-quality offerings, prevents apartmentization, and enables investment sustainability. The adoption of the law in its current form would send a negative message to the investment community and seriously jeopardize Croatia’s reputation as a predictable and attractive investment destination – they emphasize from the Association.

Croatia or Competition?

The Association concludes that capital, in the event of the controversial proposal remaining, will simply redirect to countries that offer more favorable and stable conditions. Thus, Croatia risks losing jobs, knowledge transfer, and the development of high value-added tourism, they warn.

Consultation on the proposed law is open until Saturday, and representatives from HGK, as well as from Marina Resort Cavtat, which has come under scrutiny due to the proposal of the new Law, have already expressed their opinions.

– Chamber members engaged in hospitality and tourism activities believe that a complete ban on fractional ownership of hospitality and tourism buildings negatively affects the competitiveness of Croatian tourism and the attractiveness of investments in the long term. Therefore, they propose ‘allowing fractional ownership only under clearly defined and strictly controlled conditions that preserve the tourist purpose of the facilities, prevent their conversion into residential units, and ensure professional management and continuous tourist function – writes the Croatian Chamber of Commerce.

From Marina Resort Cavtat, they state that they support the goal of the Law to preserve the function of tourism and prevent the fragmentation of tourist zones, but they believe that a complete ban on fractional ownership in tourist zones could negatively impact the development of sustainable and innovative tourism projects and the long-term competitiveness of Croatian tourism.

They emphasize that the problem of fragmentation and declining service quality has arisen due to a lack of regulation and centralized management, where investors sell units and withdraw from management, leading to disordered use and degradation of space. They propose conditions that allow fractional ownership only in zones with a clearly defined functional whole, a centralized management model through hotel operators, clearly defined space, and a ban on individual short-term rentals outside the system. Such a model is already practically applied in European destinations such as Spain, Italy, Monaco, and France, ensuring quality, sustainability, and attracting investments.

The controversial Article 68 of the Law has thus opened one of the most important questions of Croatian tourism. The question of how to simultaneously protect space and ensure investment sustainability is often in conflict, but usually, in the end, the pendulum swings towards investment sustainability. However, whether this will actually happen now remains to be seen in the coming weeks.