Seasonality and Costs Hinder Tourism, Hotel Investments Are the Solution

Croatian tourism enters a period of market stabilization in 2025, but the industry warns that long-term progress will not be possible without changing the accommodation structure and strengthening the hotel segment. At the 27th Congress of Hoteliers, organized by the Association of Entrepreneurs in Hospitality of Croatia (UPUHH), it was emphasized that Croatia continues to depend on extremely seasonal and fragmented accommodation, where as much as 70 percent of capacity consists of short-term rental properties, while hotels account for only 9.2 percent.

At the peak of the season, private accommodation generates two-thirds of total revenue, while hotels account for 39 percent of annual overnight stays in July and August. The industry believes that in the coming years we can no longer expect an increase in the number of guests during the peak season, so future development should be based on increasing the share of quality hotel accommodation.

– This tourist year has been challenging but ended in line with our expectations. Thanks primarily to the knowledge and professionalism of people in the sector, we managed to achieve another successful year – said Veljko Ostojić, director of the Croatian Tourism Association, adding that the hospitality sector is under strong pressure from rising costs, especially labor and food, which are increasing in Croatia faster than in competing countries in the region.

He also pointed out that the analysis of hotel investments shows that the value of investments is returned through eight years of newly created value, while in 12 years the state receives an amount equal to the value of the investment through fiscal and parafiscal contributions.

At the congress, it was reported that the number of hotel beds has slightly increased, but the overall accommodation structure remains unfavorable: out of nearly two million beds, about 1.5 million are located in short-term rental properties. At the same time, costs in hospitality are rising faster than revenues. Accommodation revenues increased by 8.2 percent, while labor costs jumped by 50.1 percent from 2020 to 2025, significantly higher than the average in Mediterranean countries. Food costs are also rising faster than in the EU, resulting in a decline in EBITDA margin from 28.2 to an expected 26.6 percent and a reduction in net profit margin.

– The offer in organized tourism is undergoing a transformation from a mass model to high-quality and value-added tourism. This allows us some room for price increases, but this growth must also be accompanied by an increase in quality – said Zrinka Bokulić, president of the Management Board of Jadran, emphasizing that demand is highest for the highest quality hotels.

At the congress, awards were also given to the best hotel managers. Among the laureates are Damjan Dumić for excellence in hotel opening and Mario Matković for exceptional long-term excellence and leadership in five-star hotels. The best director of a boutique hotel was declared Davor Jančić, the best director of a four-star hotel Nuša Korotaj, and the best director of a five-star hotel and overall winner Matija Bošković. Les Roches University awarded the winners with scholarships for its Executive MBA and Master programs.