CROATIATHE IMPACT OFTRAVEL &TOURISM

ON JOBSANDTHE ECONOMY

CHAIRMAN:Sir Ian ProsserChairmanSix Continents PLC

VICE CHAIRMEN:Donald CartyChairman, President & CEOAmerican Airlines

Jean-Marc Espalioux Chairman of Management Board& CEOAccor S.A.

André JordanChairman Lusotur S.A.

Jonathan S. LinenVice ChairmanAmerican Express Company

Vincent A.WolfingtonChairmanCarey International, Inc.

EXECUTIVE COMMITTEE:Peter Armstrong President & CEORocky Mountaineer Railtours

Stephen BollenbachPresident & CEOHilton Hotels Corporation

Club Méditerranée

Sebastián EscarrerVice ChairmanSol Meliá

Edouard EttedguiManaging DirectorMandarin Oriental Hotel Group

Maurice FlanaganGroup Managing DirectorEmirates

Bernard D. FrelatPresident & CEORail Europe Group, Inc.

Michael FrenzelChairmanTUI A.G

David House Group President, Global Networkand Establishment Services American Express Company

Richard R. KelleyChairmanOutrigger Enterprises, Inc

Geoffrey J.W. KentChairman & CEOAbercrombie & Kent

J.W. Marriott, Jr.Chairman & CEOMarriott International, Inc

David MichelsChief ExecutiveHilton Group

Curtis NelsonPresident and CEOCarlson Consumer Group

P.R.S. OberoiChief ExecutiveThe Oberoi Group

Henry SilvermanChairman & CEOCendant Corporation

Jonathan TischChairman & CEOLoews Hotels

Brett TollmanVice ChairmanThe Travel Corporation

GLOBAL MEMBERS:Akbar Al BakerCEOQatar Airways

Giovanni AngeliniCEO & Managing DirectorShangri-La Hotels & Resorts

David BabaiChairmanGullivers Travel Associates

Phil BakesChairman & CEOFAR&WIDE Travel Corporation

Ted BalestreriChairman & CEOCannery Row Company

Henrik BartlHead of Specialized PropertyFinanceAareal Bank AG

Gordon BethuneChairman of the Board & CEOContinental Airlines

Paul BlackneyPresident & CEOWorldspan

Richard BrownChairman & CEOEurostar Group

Regis Bulot President Relais & Chateaux

Marilyn Carlson NelsonChairman & CEOCarlson Companies, Inc

Alun CathcartDeputy ChairmanAvis Europe Plc

U. Gary CharlwoodFounder, Chairman & CEOUniglobe Travel (International)Inc.

Jennie ChuaPresident & COORaffles International Ltd.

David CliftonManaging Director, Europe &AsiaInterval International

Glen DavidsonSenior VP,Worldwide TravelInsurance & Related ServicesAmerican International GroupInc.

Dinesh DhamijaChairman & CEOebookers plc

Lloyd DorfmanChairman & Chief ExecutiveTravelex plc

Rod EddingtonChief Executive British Airways plc

Manuel Fernando Espírito SantoPresidentGroup Espirito Santo

Sam GaleotosPresident & CEOGalileo International

Laurence GellerChairman & CEOStrategic Hotel Capital

Maurice H. GreenbergChairman & CEOAmerican International Group,Inc.

Philip HaanExecutive VP International,Sales & Information ServicesNorthwest Airlines

Anthony HarrisChief ExecutiveHilton International

Richard HelferChairman & CEORaffles International Ltd.

James HensleyPresidentAllied Europe

James HoganPresident and Chief ExecutiveGulf Air

Stephen HolmesChairman & CEO, HospitalityDivisionCendant Corporation

Raimund HoschPresident & CEOMesse Berlin GmbH

Dieter HuckesteinPresident, Hotel Operations,Owned & ManagedHilton Hotels Corporation

Xabier de IralaChairman & CEOIberia

Clive JacobsChairman & CEOHoliday Autos Group

Nuno Trigoso JordãoPresident & CEO.Sonae Turismo Gestao Servicos

Sol KerznerChairmanKerzner International Ltd.

Nigel KnowlesManaging PartnerDLA

Craig KochPresident & CEOThe Hertz Corporation

Krishna KumarManaging DirectorThe Taj Group of Hotels

Hans LerchPresident & CEOKuoni Travel Holding Ltd.

Paolo MantegazzaPresident & CEOGlobus & Cosmos Inc

Manuel MartinPartnerCyberDodo Productions Ltd.

Paul McManusPresident & CEOThe Leading Hotels of the World

David MongeauVice PresidentCIBC World Markets

Alan MulallyPresident & CEOBoeing Commercial Airplanes

John M Noel President & CEOTravel Guard International

Tom NutleyChairmanReed Travel Exhibitions

Alan ParkerManaging DirectorWhitbread Hotel Company

Jean Gabriel PérèsPresident & CEOMövenpick Hotels & Resorts

Dionísio PestanaChairmanGroup Pestana

Stefan PichlerChairman & CEOThomas Cook AG

Fernando PintoChief Executive OfficerTAP - Air Portugal

David RadcliffeChief ExecutiveHogg Robinson

Jay RasuloPresident Walt Disney Parks & Resorts

Bonnie ReitzSenior VP, Marketing & Sales Continental Airlines

Kurt RitterPresident & CEORezidor SAS Hospitality

Peter RogersPresident & CEODiners Club International

Carl RudermanChairmanUniversal Media

Bruno SchöpferCEO & Managing DirectorMövenpick Group

Robert SelanderPresident & CEOMasterCard International

Per SetterbergCEOGlobal Refund Holdings A.B.

Eric SpeckExecutive Vice President Group President,TravelMarketing & DistributionSabre Holdings Corporation

Barry SternlichtChairman & CEOStarwood Hotels & ResortsWorldwide, Inc

Ron StringfellowExecutive ChairmanSouthern Sun Group

Lalit SuriChairman & Managing DirectorBharat Hotels Ltd.

Ian SwainChairman & CEOSwain Travel Services Inc

Kathleen TaylorPresident,Worldwide BusinessOperationsFour Seasons Hotels and Resorts

José Antonio TazónPresident & CEOAmadeus Global TravelDistribution

Jeffrey TofflerChairmanCoventry Partners

Mustafa TürkmenCEO & Managing DirectorEnternasyonal TourismInvestments, Inc.Yapi Kredi Bankof Turkey

Patrice VinetPartnerAccenture

Trevor de VriesDeputy Managing DirectorMondial Assistance S.A.

Jurgen WeberChairmanLufthansa German Airlines

Peter YesawichManaging PartnerYesawich, Pepperdine, Brown &Russel

HONORARY MEMBERS:Lord Marshall of KnightsbridgeChairmanBritish Airways plc

Sir Frank Moore,AOChairmanTaylor Byrne Tourism Group

Frank OlsonChairman of the BoardThe Hertz Corporation

Gérard PélissonCo-Chairman, Supervisory BoardAccor S.A.

Tommaso ZanzottoPresidentTZ Associates Ltd.

CHAIRMAN EMERITUS:James D. Robinson IIIGeneral PartnerRRE Ventures

IMMEDIATE PASTCHAIRMEN:Harvey Golub Retired Chairman & CEOAmerican Express Co.

PRESIDENT:Jean-Claude Baumgarten

Correct as at 14 February 2003

© 2002 WORLD TRAVEL & TOURISM COUNCIL1-2 QUEEN VICTORIA TERRACE.SOVEREIGN COURT.LONDON E1W 3HA. UNITED KINGDOMTEL: +44 (0) 870 727 9882 or + 44 (0) 207 481 8007 • FAX: +44 (0) 870 728 9882 or + 44 (0) 207 488 1008 • enquiries@wttc.org • www.wttc.org

WTTC is delighted to have collaborated with Croatia’s Ministry of

Tourism and the Croatian Bureau of Statistics to produce this report,

which presents the first Tourism Satellite Accounting research for Croatia.

Undertaken by WTTC, together with our research partners Oxford

Economic Forecasting, this report quantifies all aspects of Travel &

Tourism demand, from personal consumption to business purchases,

capital investment, government spending and exports. It then translates

this information into economic concepts of production, such as gross

domestic product (GDP) and employment, which can be compared with

other industries and the economy as a whole to provide credible

statistical information that will assist in policy and business decision-

making.

Results clearly show that Croatia is already highly dependent on

Travel & Tourism, which currently represents 22.4 per cent of total GDP

and is expected to increase its share by more than nine percentage points

to 31.6 per cent in 2013. Similarly, Travel & Tourism in Croatia today

accounts for 27.4 per cent of total employment, and this is forecast to rise

to 33.9 per cent by 2013.The industry’s primary role as a generator of

wealth and employment across all parts of the country is unparalleled by

any other sector. It also acts as a catalyst for growth in other areas such as

retailing and construction, which would decline if demand for Travel &

Tourism were reduced.

This significant contribution should not be underestimated, but

neither should the industry’s potential for growth be taken for granted.

As illustrated in the Tourism Trends and Policy Framework sections of

this report, several important challenges continue to limit Travel &

Tourism’s full potential for growth in Croatia, particularly in terms of

yield.These challenges include the enhancement of product and service

quality, as well as the development of much needed infrastructure and

human capital.

This report also sets out WTTC’s recommendations on policies that

we believe will help optimize the potential benefits of Travel & Tourism

in Croatia, ensuring longer-term sustainable development and spreading

the benefits across all levels of the economy and the country. Croatia’s

Travel & Tourism could do even better than the baseline forecasts suggest,

as long as certain factors are assured – a favourable government fiscal

policy, a climate that is conducive to business offering incentives for

investment, sustained and effective marketing and promotion, and policies

that respect the environment and local cultures.WTTC stands ready to

support the adoption and implementation of these policies.

THE WORLD TRAVEL & TOURISM COUNCIL (WTTC) IS THE BUSINESSLEADERS’ FORUM FOR TRAVEL & TOURISM, WORKING WITHGOVERNMENTS TO RAISE AWARENESS OF THE IMPORTANCE OF THEWORLD’S LARGEST GENERATOR OF WEALTH AND JOBS.

With Chief Executives of more than one hundred of the world’s leading companies inmembership,WTTC has a unique mandate and overview on all matters related to successin Travel & Tourism.

The World Travel & Tourism Council would like to express its sincere gratitude to the many individuals and organizations that contributed their knowledge, insight anddata/information to the policy review effort. A complete list of contributors can also be found on the back inside cover. Special thanks are due to THR International TourismConsultancy, which made a significant contribution to the section entitled Croatia’s Travel & Tourism: Overview of Recent Trends and Developments.

Jean-Claude Baumgarten

President,World Travel & Tourism Council

Sir Ian Prosser

Chairman,World Travel & Tourism Council

Six Continents PLC

EXECUTIVE SUMMARY____________________________________________________________________________ 4

ECONOMIC IMPACT _________________________________________________________________________________________ 6

GROWTH____________________________________________________________________________________________________ 7

FUTURE PROSPECTS _________________________________________________________________________________________ 8

REALIZING THE POTENTIAL__________________________________________________________________________________ 10

CROATIA’S TRAVEL & TOURISMAN OVERVIEW OF CURRENT TRENDS AND DEVELOPMENTS__________________________________________________ 13

TRAVEL & TOURISM SATELLITE ACCOUNTTOURISM SATELLITE ACCOUNTING __________________________________________________________________________ 20

TSA CONCEPTS & STRUCTURE_______________________________________________________________________________ 22

TRAVEL & TOURISM’S ECONOMIC IMPACT ___________________________________________________________________ 24

TOTAL DEMAND _____________________________________________________________________________________________ 26

EMPLOYMENT _______________________________________________________________________________________________ 27

GROSS DOMESTIC PRODUCT ________________________________________________________________________________ 28

CAPITAL INVESTMENT ______________________________________________________________________________________ 29

PERSONAL & BUSINESS_______________________________________________________________________________________ 30

EXPORTS ____________________________________________________________________________________________________ 31

GOVERNMENT ______________________________________________________________________________________________ 32

THE POLICY FRAMEWORK ____________________________________________________________________ 33

APPENDIXSATELLITE ACCOUNT TABLES ________________________________________________________________________________ 46

CONTENTS

4

In 2003, Travel & Tourism is expected to contribute

22.4 per cent of Croatia’s GDP and account for

294,000 jobs, representing 27.4 per cent of total

employment.These impressive shares show clearly that

the Croatian economy is already highly Travel &

Tourism intensive. Current forecasts suggest that, if

certain key factors are assured, Croatia will continue to

record above average growth levels over the next ten

years. However, this depends on the Croatian

Government recognizing and supporting Travel &

Tourism as one of Croatia’s highest priority industries

and employers, factoring it in to all policies and

decision-making.

In the years following the outbreak of war in 1990,

the near collapse of Travel & Tourism demand placed a

great financial strain on the Croatian tourism industry,

resulting in an increasingly wide gap between Croatia

and competing destinations in terms of infrastructure

and product development. On a positive note, the

complete lack of new development over several years

has helped Croatia avoid some of the mistakes made by

its competitors – excessive construction, and the

exploitation and over-concentration of natural resources.

Today, these are a major part of the destination's tourism

attraction.

The race is now on to upgrade and expand

Croatia’s hotel infrastructure and to enhance the

competitiveness of its human capital.This will ensure it

captures a growing share of international visitor

expenditure, helping to boost the country’s exports and

improve Croatia’s balance of payments.

As the government progressively reduces its direct

involvement in the industry, as well as accelerating the

privatization of hotels and implementing tough fiscal

policies, investors and tourism operators are increasingly

being drawn by the investment opportunities the

country has to offer. However, government must guard

against too rapid a withdrawal of public sector support,

in a rush to meet tight deadlines, since this could work

against the long-term interests of the industry and local

communities.

If managed effectively,Travel & Tourism can be an

important catalyst for the development of other

economic sectors within Croatia, such as manufacturing,

construction and the service industries. It can also help to

protect the country’s primary assets, namely its largely

unspoilt natural and cultural environment. The

government has already taken steps to establish a working

partnership with the private sector. This will facilitate

harmonization of the two sectors’ development targets so

that they remain complementary to Croatia’s high-level

objectives, such as accession to the European Union.

Additional measures recommended in this report

are intended to set the stage to help ensure the larger

rewards that Travel & Tourism can bring over the short,

medium and longer term.

CROATIA’S RECENT TRAVEL & TOURISM GROWTHCONFIRMS THAT IT IS WELL ON TRACK TO RECAPTURETHE DEMAND LEVELS IT ENJOYED PRIOR TO THEOUTBREAK OF WAR IN 1990,ALTHOUGH YIELD WILL TAKEMORE TIME TO RECOVER. MAJOR POLITICAL ANDECONOMIC REFORMS, WHICH HAVE PROMOTEDSTABILITY AND OPEN MARKETS, HAVE CONTRIBUTEDTO STIMULATING GROWTH IN THE SHORT TERM.CROATIA NOW NEEDS TO ADOPT A COHESIVE, LONG-TERM STRATEGY FOR SUSTAINABLE DEVELOPMENT, TOENSURE IT ATTRACTS THE RIGHT KIND OF TOURISM INFUTURE WITH BENEFITS FOR ALL STAKEHOLDERS.

EXECUTIVESUMMARY

6

ECONOMIC IMPACTIN 2003, CROATIA’S TRAVEL & TOURISM IS EXPECTED TO GENERATEKN61,485.0 MILLION (US$7,933.6 MILLION) OF ECONOMIC ACTIVITY(TOTAL DEMAND).THE INDUSTRY’S DIRECT IMPACT INCLUDES:

HOWEVER, SINCE TRAVEL & TOURISM TOUCHES ALL SECTORS OF THEECONOMY, ITS REAL IMPACT IS EVEN GREATER. CROATIA’S TRAVEL &TOURISM ECONOMY DIRECTLY AND INDIRECTLY ACCOUNTS FOR:

138,971jobs __________________ representing 13.0 per cent of total Employment.

Kn 19,664.7million (US$2,537.4 million) ____________________________ of

Gross Domestic Product (GDP) equivalent to 10.6 per cent of total GDP.

294,059jobs __________________ representing 27.4 per cent of total Employment.

Kn 41,609.9 million (US$5,369.0 million) of GDP _______________ equivalent

to 22.4 per cent of total GDP.

Kn 39,576.9 million (US5,106.7 million) of Exports, Services & Merchandise ___

or 43.8 per cent of total Exports.

Kn 4,921.3million (US$ 635.0 million) of Capital Investment __________________

or 11.1 per cent of total investment.

Kn465.9million (US$60.1 million) of Government Expenditures _____________________

or a 1.1 per cent share.

GROWTHOVER THE NEXT TEN YEARS, CROATIA’S TRAVEL & TOURISM ISEXPECTED TO ACHIEVE ANNUALIZED REAL GROWTH OF:

7.4%_____________in Travel & Tourism GDP, to Kn52,239.1 million (US$6,740.5 million) in

2013 for the industry directly and to Kn111,590.0 million (US$14,398.7 million)

for the Travel & Tourism Economy overall (direct and indirect expenditures).

3.7%__ in Travel & Tourism Employment, to 200,070 jobs directly in the industry, and 3.8% to

427,377 jobs in the Travel & Tourism Economy overall (direct and indirect) in 2013.

6.9%_________________________________________ in total Travel & Tourism Demand, to

Kn156,410.0 million (US$20,181.9 million) in 2013.

7.3%_______ in Visitor Exports, rising to Kn93,693.7 million (US$12,089.5 million) by 2013.

5.2% ___________________________________ in terms of Capital Investment, increasing to

Kn10,635.3 million (US$1,372.3 million) in 2013.

4.5%______________________________________ in terms of Government Expenditures to

Kn944.3 million (US$121.8 million) in 2013.

8

FUTUREPROSPECTSTHE BASELINE FORECASTS FOR CROATIA’S TRAVEL &TOURISM ARE VERY POSITIVE. TRAVEL & TOURISMDEMAND IS PROJECTED TO INCREASE BY 6.9 PER CENTPER ANNUM OVER THE NEXT TEN YEARS.This growth would exceed, by nearly 50 per cent, expected worldwidegrowth of 4.5 per cent per annum and, by nearly 66 per cent, the 4.2 percent annual average growth projected for the European Union.

At the same time, WTTC believes strongly that more

effective management of tourism growth, as well as

cooperation between all leading policy-makers and a

sustainable approach to Travel & Tourism development,

can maximize the benefits and spread them to all parts

of the country and across all levels of the population.

TOURISM PLANNINGThe new Croatian Tourism Strategy2010, which is being developed by theCroatian Strategic DevelopmentCommission, McKinsey & Companyand the German Investment &Development Company, should beexpedited swiftly and promoted widely.This will help guide the development of regional

plans, such as that of Istria, which is already underway.

While assessing performance to date and identifying

new national targets and objectives, the strategy should

initiate a more cohesive and cooperative approach to

future tourism development, involving all levels of

government, the private sector and local communities.

MEASUREMENTCroatia’s economic and marketingrelated Travel & Tourism research andforecasting are still very inadequate,both in terms of quality and quantity.As a result, public sector analysis and related policies tend

to overlook or understate the impact of the industry, or

deal only with its smaller individual components. This

new tourism satellite account (TSA), developed by

WTTC and Oxford Economic Forecasting for Croatia,

provides a significant tool for planning and policy

development. Updating this TSA on an annual basis will

help to ensure that adequate data is available to factor

Travel & Tourism into economic and employment

strategies. It also provides the National Tourist Board

with hard economic data to raise awareness among

public and private sector stakeholders of Travel &

Tourism’s full impact across the national economy – not

just on hotels, restaurants and retail business, but also on

construction, real estate, agriculture and other sectors.

INFRASTRUCTUREThe expansion and renovation ofCroatia’s tour ism infrastructure,particularly its hotel supply, is probablyone of the greatest challenges facingthe country’s tourism industry today.This is also a critical competitive factor that could

determine the growth of demand over the coming years.

According to the Croatian Ministry of Tourism, current

supply – particularly in the three- to five-star categories

– is well below the level needed to meet current, let

alone, future demand. Urgent investment is needed in

this area to increase hotel bed capacity to the level

required to meet the projected growth in tourism

demand over the next ten years. Incentive schemes

proposed by the government should be implemented

without delay, in order to stimulate both local and foreign

investment in quality infrastructure development.

WTTC applauds the continued efforts of many of Croatia’s public and private sectordecision-makers towards ensuring a recovery of Travel & Tourism demand.

9

INVESTMENTRecognizing the power of internationalbrands to attract high yield markets and,thereby, to stimulate wealth and jobcreation, the government has openedmarkets to internationally recognizedmanagement companies, such as SolMeliá, Starwood and Hilton Hotels.In terms of real-estate, property and development projects,

challenges still remain that continue to hamper the

attractiveness of Croatia for both domestic and foreign

investment.Addressing these challenges should be seen

as a high priority. Care should be taken to ensure

increased transparency in the privatization process, the

rapid resolution of land ownership issues and the

removal of red tape, as well as to ensure that fiscal

policies such as taxation are not harmful to investment.

TRANSPORTThe Croatian Government hasinitiated several important transportrelated infrastructure projects inCroatia, which will benefit Travel &Tourism and stimulate growth.These include the construction of one of the country’s

main highways between Zagreb and Split. However,

several other areas still require urgent attention. These

include roads linking major airports, such as the road

between Split and Dubrovnik, which is already placed

under great strain by the diversion of airline passengers

to Split airport when weather conditions are bad in

Dubrovnik. Improved access is needed from local and

international markets to major and smaller towns, as

well as to the country’s numerous islands sorely in need

of economic development. A special task force should

be convened, comprising leading policy-makers at

national level, but also from the respective regions, to

find solutions to these urgent challenges.

DIVERSIFICATIONThe former Socialist political systemmade it difficult for Croatia to remaincompetitive as a tourism destination,in terms of upgrading/expandinginfrastructure and diversifyingproducts and services.At the same time, the lack of construction has helped

protect Croatia’s natural and cultural environments

from excessive exploitation, giving the country a

unique competitive advantage. In addition to gaining

share of major growth markets such as sun and beach,

or marine/nautical tourism, Croatia has a fantastic

opportunity to develop innovative tourism products

and experiences, which would at the same time help

promote and protect its natural resources. Special

interest tourism, agricultural tourism, wine tours,

cultural holidays and adventure holidays provide

interesting examples of new products that are already

being targeted in the region of Istria. The MICE

market is relatively untapped. Although it currently

represents a modest share of arrivals and overnights in

Croatia, it offers strong potential for growth, and it

could help to address some of the seasonality problems

affecting the Croatian Travel & Tourism economy.

MARKETING &PROMOTION

Experience has shown that demandfor any tourism destination growssharply if marketing and promotionsare well funded and effective.A competitive, sustained promotional campaign is

critical for Croatia – not only to clarify and enhance

the country’s image in traditional and emerging source

markets, but also to raise awareness of the importance

of Travel & Tourism to national and local economies

and the spin-off to all the different stakeholders. In

addition, effective marketing and promotions can help

prevent an excessive concentration of demand in time

and space, thereby ensuring that the benefits of Travel &

Tourism are spread more equitably.

ENVIRONMENTAL POLICYCroatia has a major advantage overmany of its direct competitors – itsnatural and cultural environment isrelatively unspoilt and offers hugepotential for sustainable tourismdevelopment.Conveying environmentally and culturally friendly

policies, promoting voluntary accreditation schemes

for the industry, and outlining best practice in

tourism development, are all important steps that

need to be taken to protect Croatia’s main resources

from over-development and exploitation. At the

same time, Croatia can influence the development of

new tourism infrastructure to protect and promote

the character of the local environment, developing

authentic tourism products that are unique to the

country and its culture.

10

REALIZINGTHE POTENTIALIN ORDER TO ACHIEVE OR – EVEN BETTER – SURPASSTHE BASELINE FORECASTS, AND TO ENSURE THATFUTURE GROWTH IS SUSTAINABLE, CERTAIN KEYFACTORS NEED TO BE ASSURED.

These include a favourable government fiscal policy, a climate that isconducive to business offering incentives for investment, and sustained andeffective marketing and promotion, as well as environmentally friendlypolicies. Most importantly, clearly defined, long-term development plansmust be drawn up to help guide national and local public and privatesector activities.These plans should be developed in consultation with allstakeholders, feeding from and back into the National Tourism Policy, andthey should be disseminated as widely as possible.

Against this background WTTC has made certain policy recommendations to the CroatianGovernment, detailed in the report under the section entitled The Policy Framework.These recommendations are summarized below:

PLAN FOR THE FUTURE.

■ Increase the responsibility of the Ministry of

Tourism, placing it among the highest levels of

government, and factoring the industry’s needs into

mainstream policies for employment, trade, investment,

education and environmental protection.

■ Expedite the completion of the new National

Tourism Policy, to replace the existing tourism strategy

of 1993, in consultation with regional and local

governments and the private sector.

■ Establish a dedicated research unit to monitor,

anticipate and adapt to changing trends in Travel &

Tourism demand.

■ Encourage greater market and product

diversification in order to reduce seasonality and an

unhealthy over-dependence on traditional markets, as

well as to increase yield.

■ Expand and enhance the convention bureau’s efforts

through the establishment of a National Convention

Bureau (NCB) as a separate entity to the National

Tourist Board, involving the NCB in the management

of all MICE business for Croatia.

■ Upgrade marketing and promotions to match

prevailing competitive approaches, and restructure the

National Tourist Board as a public-private sector

partnership, co-ordinating national, regional and

municipal efforts.

■ Anticipate future investment needs by introducing

incentive schemes for investment from the private

sector – whether local or foreign.

HIGHLIGHT THE STRATEGIC IMPORTANCE OF TRAVEL &TOURISM.■ Recognize Travel & Tourism’s impact across the

wider economy and its strategic importance as a catalyst

for other industries and entrepreneurial activity.

■ Measure the economic impact of Travel & Tourism

by means of a tourism satellite account (TSA), updating

the TSA annually and communicating results to all

levels of government, industry and local communities.

■ Convene an annual National Tourism Congress,

bringing together all Travel & Tourism stakeholders, to

discuss challenges and opportunities for the industry.

■ Reflect Travel & Tourism in mainstream policies for

employment, trade, investment and education, ensuring

that the underlying policy framework is conducive to

sustainable growth.

11

DEVELOP THE HUMAN CAPITAL REQUIRED FOR GROWTH.■ Promote a positive image of the Travel & Tourism industry as a

provider of jobs and career opportunities for all Croatians.

■ Continue to place education and training at the forefront of Travel &

Tourism development, expanding it to all levels of the school curricula.

■ Ensure that formal education and vocational training systems adapt to

the rapidly changing human resource needs of the industry, covering a

variety of skills and customer service

■ Bridge the gap between education authorities and the industry, and

establish public-private sector liaison groups to plan ahead for the future

HR development needs of the industry.

ENCOURAGE OPEN MARKETS AND SKIES AND REMOVE BARRIERS TO GROWTH.

■ Progressively liberalize trade, transport and communications through

the World Trade Organization’s General Agreement on Trade in Services

and regional trading regimes.

■ Open up air transport markets and expand liberal aviation accords.

■ Continue to privatize state-owned tourism enterprises, extending

privatization from hotels to other sectors of the industry, including

transport.

■ Increase transparency in the privatization process and ensure that

future efforts are undertaken in close cooperation with the Ministry of

Tourism, keeping decisions and procedures within the overall vision and

long-term objectives for Travel & Tourism development.

■ Resolve land ownership issues between the state, private land owners

and the industry.

■ Reduce red tape and establish a stable legal framework, providing

protection of investments for potential investors.

■ Develop fiscal regimes that encourage tourism growth, exports

investment, infrastructure, business innovation and job creation.

■ Build safety and security provisions into national, regional and local

strategies and place special emphasis on Travel & Tourism in overall

policing strategies.

MATCH PUBLIC AND PRIVATE INFRASTRUCTURE TO CUSTOMER DEMAND.■ Expand infrastructure, including airports, to anticipate projected

demand and improve road networks, improving links between airports

across the country, and opening up new areas for tourism development.

■ Invest in the expansion and modernization of seaports, marinas and

other transport connections between the mainland and islands of

Croatia, opening up these areas for economic development.

■ Introduce special incentives for the rapid modernization of Croatia’s

hotel accommodation infrastructure.

■ Develop new conference/congress facilities to meet the growing

demand for this high yield sector.

■ Improve land use planning and protection, guarding against

uncontrolled real-estate development that poses a threat to the image

and quality of Croatia as a destination.

■ Introduce timely incentive schemes to attract sustained capital

investment from both domestic and foreign sources.

FAVOUR TECHNOLOGICAL ADVANCEMENT.■ Make Travel & Tourism a priority in helping to introduce and apply

IT systems and telecommunications at a competitive pace across the

country.

■ Take the lead in promoting the use of technology and developing e-

marketing skills in Travel & Tourism to achieve greater efficiencies and

effectiveness.

■ Develop a national tourism database together with partners from the

private sector, so as to improve the distribution of Croatia’s products –

both through the travel trade and direct to consumers – as well as to

enhance Croatia’s image in key markets.

■ Establish clear policies and guidelines for planned and sustainable

tourism expansion.

■ Anticipate and plan ahead regarding the development of consumption,

waste and resource utilization, in order to meet the projected growth in

Travel & Tourism demand while protecting natural resources.

■ Promote the sustainable development of Travel & Tourism as a policy

across the entire industry/country, not just as a policy for rural and

nature-based tourism.

■ Introduce pilot projects to evaluate and demonstrate local

sustainability.

■ Ensure that the socio-economic, cultural and environmental benefits

of Travel & Tourism are spread equitably across the population in all parts

of the country, and recognize the need for local community engagement

and empowerment.

■ Develop and promote a national heritage designation with clearly

defined criteria to support quality. Accompany this with increased

government funding for the development and promotion of identified

areas of particular heritage value, focusing on national and international

designations.

PROMOTE RESPONSIBILITY IN NATURAL, SOCIAL AND CULTURALENVIRONMENTS.

13

RETURN TO GROWTH AFTER ADECADE OF DECLINECroatia’s Travel & Tourism industry started to develop in the early 1960s

and, for the next 25 years or so, the country became an increasingly

important player in the Mediterranean sun & beach market. By the

1980s, Croatia was an established holiday destination, representing

serious competition for the Mediterranean leaders such as Spain, Italy,

France and Greece.The primary reasons for its success were its natural

geographic attractions – notably its beautiful coastline and unspoilt,

natural environment – the warmth and friendliness of the local people,

and the fact that it offered excellent value for money.

In the mid-1980s, the growth in demand for Croatia’s tourism

product nonetheless started to slow as a result of the country’s inability

to adapt to changing shifts in the marketplace. While competing

destinations began to adjust their products and services to meet the

increasingly sophisticated and quality-conscious European tourists, the

ability of the Croatian tourism industry to keep up with the rapid

changes in demand was severely hampered by the Socialist system

governing the country at that time.

The devastation of warDuring the 1990s, Croatia suffered the devastating impact of political

instability and war on Travel & Tourism demand, as well as on the

destination’s tourism infrastructure and supply. Rebuilding Croatia’s

tourism industry since the end of the war has not been easy – and the

country is still a long way from realizing its tourism potential.

Most importantly, perhaps, as a result of its inadequate

infrastructure, it has rapidly regained the image of a destination

primarily targeting the lower end of the holiday market. Yet for

independent travellers – especially those staying in hotels – it is actually

quite expensive in comparison with some other Mediterranean

destinations, as WTTC’s Competitiveness Monitor shows.

Nevertheless, there are a number of positive signs auguring well for

the future of Croatia’s tourism industry. The Croatian Government

recognizes the potential of Travel & Tourism to contribute to the

country’s economic revival, as well as encouraging social and cultural

cohesion within the country, and it has taken steps to implement

measures to facilitate Travel & Tourism growth.As detailed in the Policy

Recommendations of this report, there is still a lot to be done, but

recovery is now well on track – at least in terms of numbers’ growth.

Preliminary estimates point to a 6 per cent increase in total tourist

CROATIA’S TRAVEL & TOURISMOVERVIEW OF RECENT TRENDS AND DEVELOPMENTSThis section of the report has been compiled with the generous support of Barcelona-based THR International Tourism Consultancy.

arrivals in 2002, to 8.3 million, following a 19 per cent growth the

previous year. International business was reportedly stronger in terms of

growth than the domestic market with several markets, including the

UK, recording a second year of double-digit growth. This means that

arrivals ended 2002 at 86 per cent of Croatia’s 1989 peak.

Overnight volume has not risen as sharply, but growth has been

well above the world and Mediterranean averages for the last few years.

Total overnights rose by an estimated 3 per cent in 2002 and by 13 per

cent in 2001, but are still at only 72 per cent of their peak.

The slower growth in overnight volume is the result of a declining

average length of stay, itself due to a trend towards shorter summer

holidays – one week instead of two – but also to an increase in short

breaks.

With Turkey and Bulgaria, Croatia was one of the best performing

destinations, in terms of percentage growth, in the European summer

holiday market last year.And its current level of growth is expected to be

sustained during 2003.The events of September 11, 2001, uncertainty in

the Middle East, and a slow economic recovery have led to increased

price sensitivity among many of Europe’s key source markets, notably

Germany. This has boosted demand for the eastern Mediterranean.

AD

RI

AT

IC

SE

A

AUSTRIA

HUNGARY

SLOVENIA

ITALY

ITALY

BOSNIA and HERZEGOVINA

CROATIA

SE

RB

IA

Zagreb

Ljubljana

Sarajevo

OsijekRijeka

Zadar

Split

Dubrovnik

Pécs

Maribor

Graz

Trieste

Ancona

Podgorica

Shkodër

Mostar

Tuzla

Gorazde

14

The challenge now is to create and promote new competitive

advantages – in addition to its price attraction for package tourists – so that

it further diversifies its markets and improves visitor expenditure and yield.

A RICH NATURAL AND CULTURALHERITAGEIslands in pristine watersCroatia enjoys a unique geographic landscape, with more than 1,000

islands set in pristine waters of the highest quality and clarity.A number

of these have been grouped together as national parks. The country

boasts some of the most attractive coastline in the Mediterranean

region, much of which is unspoilt, as well as lowlands and highlands

culminating in the mountainous region of Lika and Gorski Kotar.

Bordered to the north/northwest by Slovenia, Hungary to the

north/northeast, Bosnia & Herzegovina to the southeast, Serbia to the

east and Montenegro to the south, Croatia’s 5,835 kilometre long

coastline hugs the Adriatic from north to south. In terms of size, the

country is comparable to Denmark, Ireland or Slovakia, with a land

surface area of 56,500 square kilometres. Its 4.4 million population, on

the other hand, gives it a population density similar to that of Spain or

Greece (85 inhabitants per square kilometre).

Croatia has three distinctive geographical and climatic regions –

the Pannonian and Peripanonian mainland, mountains and coastal

region – and four distinctive functional areas around four major

Croatian cities: Zagreb – the capital – Osijek, Rijeka and Split.

While Dubrovnik, known as the ‘Pearl of the Adriatic’, is

considered to be Croatia’s main – as well as internationally acclaimed –

tourist attraction, the country offers enormous potential for

development, boasting numerous cultural and natural sites. The most

developed Travel & Tourism region is Istria, in the north of the country,

x

x xx x

1989 1998 2000 2001 2002a0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0

1

2

3

4

5

6

7

Tourist arrivals ('000)

Overnights ('000)x Average length

of stay (nights)

NU

MB

ER

OF

NIG

HT

S

aPreliminary estimates

Note: Since 2001 tourism data has included statistics on marine/nautical tourism

Sources:THR based on statistics from Croatia’s Central Bureau of Statistics (CCBS); Ministry of Tourism for 2002 data

while the least developed areas – despite their potential – are located in

the southern Dalmatia region.

Traditional towns and villagesThere are literally hundreds of cities, towns and villages – primarily

along the Adriatic coast – that can provide tourists with basic

accommodation and board, as well as a limited supply of sporting

activities, entertainment, sightseeing and shopping. In addition to the

old coastal towns of interest, such as Porec, Rovinj, Korcula,Trogir and

Hvar, Croatia boasts a large number of little villages, which have

preserved their historical character and traditions.And the hinterland of

Croatia offers much more than just the capital city of Zagreb, boasting

dozens of medieval fortresses, castles and mansions.

The coast enjoys a typical Mediterranean climate with hot, dry

summers and mild, humid winters, while the mountainous region can

actually be quite cold in winter, with a lot of snow.

Despite the country’s huge potential for tourism development, the

number and type of attractions and activities – beyond pure sun &

beach relaxation – are limited. There are very few facilities for golf,

health and wellness, or special interest activities, for example.

Developing these segments would undoubtedly help to extend the

current tourist season – May to September – and to increase tourism

expenditure.

Diverse historical and cultural attractionsNevertheless, the country also has a rich cultural heritage, including

archaeological sites dating from the Roman, Gothic, Renaissance and

Baroque periods, and Art Nouveau cities such as Opatija.A rich variety

of different cultural events are organized throughout the year, and some

of these attract international visitors from far and wide. These include

music festivals, Klape singing festivals, carnivals, tennis tournaments,

sailing regattas and motorcycle races.Central Croatia and Slavonia display

the strongest Middle European influences in their architecture and

folklore.

A strategic locationThe country’s cultural and historical traditions have been maintained

thanks, in part, to its strategic location at the crossroads of Europe. No

fewer than ten of Europe’s key international land routes and railway

links – including the historic Europe to Asia route – pass through

Croatia. Numerous passenger and cargo ports are located along the

coast, which is also home to nine international airports.

TRAVEL & TOURISM TRENDSDetailed results are not yet available for 2002 but, as already indicated,

Croatia recorded a 6 per cent increase in tourist arrivals last year, to 8.3

million, and a 3 per cent rise in overnights, to 44.7 million.The major

sources, in terms of arrivals, were: Germany, Croatia (the domestic

market), Italy, Slovenia, the Czech Republic and Austria.

Last year's healthy performance follows an excellent 2001, during

Croatia on the Road to Recovery, 1989-2000

15

Major international markets Germany has maintained its position as international market leader

since the late 1980s, generating close to an 18 per cent share of total

arrivals and a 24 per cent share of nights in 2002.This compares with

19 per cent and 25 per cent respectively in 1989, the country's peak

tourism year. Germans also generate the longest average length of stay

in Croatia – 7.3 nights in 2002 as against an average of 5.7 per cent for

foreign markets, and just 4.4 nights for Italians, in second position in the

ranking.This highlights the Italians' greater propensity for cross-border,

short-break travel to Croatia.

In third and fourth positions are Slovenia and the Czech Republic,

two former east European countries that have become important

sources of tourism business.

The country also enjoys a relatively significant market share in four

other markets: Austria (11 per cent), Poland (6 per cent), Italy (5 per

cent) and Hungary (4 per cent). In most major markets, however, its

share tends to be under 2 per cent.

As a result of the Balkan war, two former domestic Yugoslav

markets that used to be important sources of tourism – now Bosnia

& Herzegovina and Serbia & Montenegro – have shrunk

significantly in size.

Seasonality of demandCroatian tourism is characterized by high seasonality of demand. The

four months of June through August account for as much as 88 per cent

of total overnight volume and 78 per cent of arrivals.The peak summer

season – just the two months of July and August – generate more than

65 per cent of all overnights and 54 per cent of arrivals.

The winter months of October through March, in contrast,

account for a modest 5 per cent of nights and 11 per cent of arrivals.

Average length of stay during these months falls to a low of 2.3 nights

in November, with October generating the highest monthly average

during the winter, of 3.5 nights.Average length of stay during July and

August, by comparison, is 6.7 and 7.3 nights respectively.

which foreign arrivals grew by 23 per cent and overnights from abroad

were up more than 30 per cent.The foreign arrivals count increased by

6 per cent in 2002 and overnights rose by 3.5 per cent. The increase

in domestic arrivals, by comparison, was more modest at 4.5 per cent,

and domestic overnights actually declined by just under 1.0 per cent.

International markets account for some 83.5 per cent of total

arrivals and an even higher 89.0 pert cent of nights, reflecting the

shorter holiday trips taken by Croatians.

z z zz z

z

z

z

z

zz zx x x x x

xx x

xx x x

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

z Nights x Arrivals

Tourist Arrivals and Overnights in Croatia by Month

Source: CCBS

Domestic

Germany

Italy

Slovenia

Austria

Poland

Hungary

Netherlands

UK

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

2002 20011989

Bosnia &Herzegovina

CzechRepublic

Arrivals ('000)

Domestic

Germany

Slovenia

Italy

CzechRepublic

Austria

Poland

Hungary

Netherlands

Bosnia &Herzegovina

UK

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000Overnights ('000)

2002 20011989

Tourist Arrivals in Croatia by Major Markets,1989 and 2001-2002

Tourist Overnights in Croatia by Major Markets,1989 and 2001-2002

Source: CCBS

Source: CCBS

16

Organization of travel to CroatiaThe low average stay is partly explained by the fact that two thirds (66 per

cent) of all tourists visiting Croatia organize their trips independently,

while just one third (34 per cent) are either on fully or partly packaged

holidays, booked through tour operators and/or travel agencies.

This share is below the level of tour operator packages reached in the

1980s, before the outbreak of the Balkan war. Nevertheless, the majority

of German tourists to Croatia have always opted for car travel, with many

staying in campsites at the destination, since this sector of the market is

extremely price conscious. It has only been in the last couple of years that

tour operators have succeeded in offering an all-in price that makes air

package travel attractive.

The Internet’s share of total bookings is reportedly very low,

although it can be expected to rise sharply – with tour operator websites

generating most interest in the foreseeable future.

TransportThe high share of private car-based travel to Croatia (69 per cent) is

another indication as to the continuing importance of independent

travel to the destination. If cars plus caravans and camping vans are

included, the share rises to 82.5 per cent.

Despite the huge growth in sales of air package holidays to Croatia,

air travel – scheduled and charter flights combined – accounts for less

than 4 per cent of all arrivals.

Despite this, Croatia has nine international airports, four of which

are located on the coast – Pula, Zadar, Split and Dubrovnik.Three are

on the islands – Krk near Rijeka and the islands of Losinj and Braè –

and two are in the central plain (Zagreb and Osijek).There are plans for

new airports to be built on other islands.

The country also has six international seaports – Pula, Rijeka,

Zadar, Split, Ploèe and Dubrovnik – and dozens of small ports of local

and regional importance. However, there are some problems with sea

connections between the islands as well as with fast transfers between

central/east European and west European countries.

The Croatian Railways are not seen as an attraction for the tourism

industry at this time. Due to very low cargo and passenger traffic, more

time and much investment will be needed to modernize the railways

and adapt the product to the needs of tourists.

Repeat visitationInterestingly, almost 64 per cent of foreign visitors to Croatia have

already visited the country at least twice before. Some 17 per cent are on

their second trip and 19 per cent are visiting the country for the first time.

Domestic tourismIn 2001, domestic tourism accounted for 17 per cent of arrivals and 12

per cent total overnights in Croatia – virtually unchanged from its

shares in the peak tourism year of 1989. Although the market is

expected to show sustained positive growth in the future, it is not seen

as a dynamic source in the short term.

Domestic tourists stay mainly in hotels, generating an estimated 37

per cent of hotel bednight volume, but holiday villages and campsites

also attract fairly significant shares.

STRENGTHS AND WEAKNESSES OFCROATIA’S TOURISM PRODUCTResearch conducted in June 2001 by the Barcelona-based THR

International Tourism Consultancy, involving 70 leading tour operators,

highlights the most competitive features of Croatia’s tourism product –

in the eyes of tour operators packaging programmes to the destination.

Unsurprisingly, these are the beauty of its coast and islands; clean and

clear seawater; and a warm, sunny climate.

This research is substantiated by the results of the TOMAS survey

carried out in 2001, which indicates the main reasons for visiting

Croatia.As many as 91 per cent cited rest and relaxation by the seaside.

Rented vehicle 0.4%Train 0.4%

Ship/ferry/boat 0.9%

Motorbike/bicycle 1.1%Scheduled flight 1.7%Charter flight 2.1%

Camper van 4.0%

Car/caravan 9.9%

Bus/coach 10.8%

Private car 68.7%

Breakdown of Arrivals in Croatia by Transport Used, 2001

Source:TOMAS 2001, Institute for Tourism, Zagreb

First visit19.0%

Second visit17.2%

Three or more visits 63.8%

Frequency of Foreign Visits to Croatia

Source:TOMAS 2001

17

At the same time, the THR research suggests that tourists from

each of Croatia’s main tourism generating markets are influenced by

different competitive factors when opting for Croatia as their choice of

holiday destination.These are:

■ Austria: the richness of nature

■ Czech Republic: the absence of language barriers

■ Germany: close proximity and price competitiveness

■ Italy: price competitiveness

■ Poland: nature and hospitality

■ USA: culture and history, peace and relaxation

THR’s research also shows that each of Croatia’s regions offers

specific attractions in the eyes of international and domestic visitors

taking holidays in the country:

■ Istria: sun & beach holidays, touring, marine/nautical holidays,

culture and sports

■ Kvarner: sun & beach holidays, naturism

■ Zadar: sun & beach holidays, marine/nautical holidays, touring

■ Sibenik: sun & beach holidays, marine/nautical holidays, touring

■ Split-Makarska: sun and beach holidays, nautical holidays, touring

and culture

■ Dubrovnik: combination of sun & beach holidays and culture

■ City of Zagreb: culture

■ Central Croatia: touring and naturism

■ Slavonia: natural environment and touring

According to the THR tour operator research, Croatia’s main

competitors are Spain, Italy, Turkey and Greece. Other competitors

include France and Tunisia while Austria, Bulgaria, the Czech Republic,

Germany, Malta, Poland, Romania and Slovenia also compete with

Croatia for international visitors, albeit to a lesser extent.

ACCOMMODATIONCroatia currently has a total of 722,525 beds and camping places in

different types of tourist accommodation for tourists, as well as

numerous guesthouses with private rooms, plus rooms in aparthotels,

motels, hostels, spas, etc.

The hotel sector However, according to data from the Central Bureau of Statistics, there

are actually 419 hotels in the country with a total of 49,380 rooms.

Only 34 properties – or 6,286 rooms – are located in four- and five-star

hotels.

About one third of total accommodation capacity conforms to

international industry standards, while one third is at the lower limit of

what is acceptable, and the remaining one third is well below

international norms and badly in need of major renovation.

The hotel sector is the one that is suffering most from damaged and

Accommodation Supply in Croatia by Star Category, 2002

No. of

Category Number Rooms

5* hotels 10 1,931

4* hotels 24 4,355

3* hotels 170 23,939

2* hotels 178 16,989

1* hotels 37 2,166

Hotels, total 419 49,380

4* villas 1 10

Villas, total 1 10

4* aparthotels 1 21

3* aparthotels 4 144

2* aparthotels 3 68

Aparthotels, total 8 233

Total 428 49,623

Source: CCBS

Main Reasons for Visiting Croatia

Reason % share of responses

Rest & relaxation by the seaside 91.1

Pleasure & fun 36.1

Visiting natural attractions 32.5

New experiences 20.2

Proximity of destination 9.8

Visiting cultural attractions 7.5

Sport, recreation & fitness 7.1

Affordable prices 6.5

Visiting friends and/or relations 6.2

Health reasons 4.3

Scuba diving 3.1

Business 1.1

Shopping 0.6

Other 1.6

Note: Multiple answers possibleSource:TOMAS 2001

Holiday villages/apartments 8%

Aparthotels, motels, hostels, etc 11%

Hotels 13%

Campsites 24%

Private accommodation 44%

Breakdown of Bed Capacity in Croatia by Type of Accommodation, 2001

Note:Total no. of beds and camping spaces = 722,525

Source:THR from the Ministry of Tourism

18

ageing bedstock. In fact, the expansion and renovation of Croatia’s hotel

supply is probably one of the greatest challenges facing the country’s

tourism industry – not to mention a critical competitive factor that could

determine the growth of demand over the coming years.

One big disadvantage is that there are few, well-known

international hotel brands operating the country. Sheraton, Starwood

(Westin and Four Points), Sol Meliá, Club Méditerranée, Iberostar and

Riu already have a presence in Croatia and a Hilton International

property is scheduled to open in Dubrovnik before the end of the year.

In addition, a number of international hotel groups have expressed

interest in establishing a presence in Zagreb, as well as in key resort

locations, and local developers are looking to sign agreements with

international operators for properties under construction.

Several, as yet unbranded, resort projects are under construction, or

on the drawing board.These include the conversion of a former 5,000-

bed, mass-market tourist complex in the south of the country, which is

being funded by an unnamed German investor. This will become a

2,500-bed four- to five-star resort including a port that is a potential

harbour for cruise ships visiting Dubrovnik. Other projects include a

tourist complex in Prapatno on the Peljesac peninsula.

Existing local hotel operators tend to be reminiscent of former,

state-owned, locally managed enterprises. In some locations these

companies have been more or less successfully privatized and operate to

international standards. In most places, however, this is not the case, so

the hotels leave a lot to be desired.

Hotel operating performance Data compiled by Horwath Consulting Zagreb for its latest available

annual survey on Croatian hotels suggests that the average occupancy of

leading hotels in 2001 was 42 per cent – around ten points above the

country-wide average – and the average daily room rate was €35.50.

The hotels achieved a gross operating profit of 22 per cent.

Hotels generated 34 per cent of total overnights spent in Croatia in

2001 as against 35 per cent in 1989. In fact, the respective shares of the

different types of accommodation in terms of tourist overnights have

changed relatively little in the last 12 years. Camping is still the second

favourite form of accommodation, followed by accommodation in

private rooms.

FUTURE PROSPECTSThe prospects for Croatia’s Travel & Tourism growth are good, but it

might not be easy to shake off the image it currently has of being a low-

cost destination. It would be a pity if would-be tourists – not to

mention investors – underestimated the destination’s potential in terms

of quality products.

In fact, Croatia has all the necessary natural resources on which to

build the new tourism products required by the new, quality-conscious

and increasingly sophisticated consumer. Even though there will always

be a need to provide low-cost tourism for those who cannot afford

anything else, diversification would ensure the sustainable growth of the

industry for the benefit of all stakeholders.

As the international market becomes increasingly aware of the

environmental friendliness of Croatia, as well as the unique attractions

of destinations such as the Plitvice Lakes, this should encourage further

tourism growth. It should also help Croatia to clarify its image generally.

Operating Results of Leading Hotels in Croatia, 2000

Average size of hotel (no. of rooms) 22.9

Average age of hotel (years) 32.4

Average no. of employees per room 0.5

Average annual room occupancy (%) 42.3a

Average daily room rate (€) 35.50

Total revenue per available room (€) 9,430.00

Gross operating profit (%) 21.7

a Around 10 points above industry average

Source: Croatia Hotel Survey 2001, Horwath Consulting Zagreb

Hotel Holiday village Campsite Private room Other0

5,000

10,000

15,000

20,000

25,000

1989 ('000) 2001 ('000)

Note: 2001 data includes statistics on marine/nautical tourism

Source: CCBS

Tourist Overnights in Croatia by Type of Accommodation,1989 and 2001

The prospects for Croatia’s Travel &

Tourism growth are good, but it might

not be easy to shake off the image it

currently has of being a low-cost

destination. It would be a pity if would-be

tourists – not to mention investors –

underestimated the destination’s potential

in terms of quality products.

20

Over the last three decades, countries have estimated the economic impact of Travel & Tourism through a range of

measures using a variety of definitions and methodologies. Such approaches have prevented meaningful comparisons

among nations. Even for the same nation over different periods of time, they have frustrated business and

government attempts to draw valid conclusions about the nature and course of Travel & Tourism demand in national

economies.This regime has obscured the substantial, positive role the industry plays in national economies and has

thwarted business and government attempts to optimize economic programmes and policies.

The World Travel & Tourism Council (WTTC) recognized the dearth of crucial Travel & Tourism intelligence

from the time of its establishment in 1990 and it published the first detailed estimates of world tourism’s economic

impact that same year.

Since then WTTC has worked to improve its methodologies and to encourage individual countries to enhance

their measurement and understanding of tourism’s impact on their national economies. Furthermore, in the spirit

of joining forces to enhance world comprehension of the role of Travel & Tourism in national economies,WTTC

has strongly supported the programmes of the World Tourism Organization (WTO) to improve tourism statistics

worldwide.

WTTC’S RESEARCHWTTC and its economic/research partners – Oxford Economic Forecasting, (OEF), since 1999, and Global Insight

(previously known as DRI•WEFA), from 1990-1999, have developed and published research on the economic

contribution of Travel & Tourism to the world, regional and national economies.

Starting in 1990,WTTC’s research team has been working to develop practical, real-world models to illustrate

Travel & Tourism’s economic contribution based on the needs of private sector leaders, public sector policy-makers

and industry researchers, and on the interpretation of the system of national accounts.The research is now firmly

anchored in the international standard for tourism satellite accounting that was developed by WTO, OECD and

Eurostat, and approved by the United Nations Statistical Commission in 2000. It was launched at the TSA

Conference held in Vancouver in May 2001 and published as the Tourism Satellite Account: Recommended Methodological

Framework (TSA:RMF) in 2001.

Since 1999, WTTC’s research has assumed the conceptual framework of the UN-approved standard with a

number of discretionary extensions, and it combines the most sophisticated economic modelling and forecasts available

with the most up-to-date, publicly available data to generate a comprehensive implementation of Travel & Tourism

satellite accounting.

This special simulated TSA for Croatia is the product of work commissioned by the Croatian Bureau of

Statistics working in cooperation with the Croatian Ministry of Tourism. In carrying out the work, OEF has drawn

extensively on the methodology developed over the years by WTTC to develop TSAs as operational tools, and has

worked closely with the Croatian Bureau of Statistics and its project steering committee to review the assumptions,

models and results produced by this excercise.

TRAVEL & TOURISMSATELLITE ACCOUNTTOURISM SATELLITE ACCOUNTING

THIS REPORT FOLLOWS THE CONCEPT OF SATELLITE ACCOUNTINGDEFINED IN THE TOURISM SATELLITE ACCOUNT: RECOMMENDEDMETHODOLOGICAL FRAMEWORK (TSA:RMF), AND DEVELOPED UNDERTHE AUSPICES OF THE WORLD TOURISM ORGANIZATION.

21

1999 2000 2001 2002 2003 2004

0

2,000

4,000

6,000

8,000 Economy Industry

1999 2000 2001 2002 2003 2004

0

100

200

300

400 Economy Industry

Travel & Tourism Employment(‘000 Jobs)

Travel & Tourism Gross Domestic Product(1990 Constant US$ mn)

T&T ECONOMYDirect and indirect impact of visitor activities, capital

investment, exports and government services.

T&T INDUSTRYDirect impact of visitor activity (transportation,accommodation, food and beverage, recreation,

entertainment and travel services)

WTTC has endeavoured to implement and produce

the most comprehensive TSA provided for within the

TSA:RMF – by developing the narrow concept of the

‘Travel & Tourism Industry’ in addition to the broader

concept of the ‘Travel & Tourism Economy’. WTTC

advocates full implementation of the TSA as defined in

the TSA:RMF in order to achieve the highest level of

benefits for industry and governments.These include:

■ A wealth of customer and consumer information on

tourism-related purchases (before, during and after

trips – whether domestic or international, imported

or exported – as well as services, durables and non-

durables) that has never been identified until now;

■ Comprehensive documentation and analysis of

the full tourism-product service chain and

government’s ability to deliver quality and timely

service to visitors;

■ Linkages between Travel & Tourism and other

sectors of the economy such as agriculture and

manufacturing to illustrate the flow-through of

spending;

■ Complete outlook for public works that benefit

visitors and Travel & Tourism companies in order

to leverage public sector plans and priorities for

growth;

■ Focused opportunities for domestic production, as

well as incentives from the public sector, to aid in

the growth of businesses that help alleviate trade

balance issues;

■ Demand- and supply-side information on

employment that allows for human resource

planning and development.

WTTC has worked towards developing a

comprehensive TSA – not because it is eager to

exaggerate the size of Travel & Tourism’s impact, but

because the information that can be garnered from the

exercise by governments and industry is crucial for

making intelligent and informed policy and business

decisions. WTTC believes that history will document

its pioneering implementation of the simulated TSA as

one of the most important turning points for Travel &

Tourism’s long overdue economic recognition.

In the WTTC research, no country receives special

treatment or favours. WTTC uses internationally

available data sources and the same scope of tourism

satellite accounting for all countries, as well as the same

basic assumptions through the same system of models.

WTTC’s TSA research utilizes a universal and internally

consistent modelling framework and generates

harmonized results and forecasts for 161 countries

around the world. Details of the methodology used by

WTTC/OEF in its TSA research are available on

WTTC’s website (www.wttc.org).

CROATIA

WTTC’S APPROACH TO TOURISM SATELLITE ACCOUNTING

22

TSA CONCEPTS & STRUCTURE

T&TEconomy

Employment

275.3

PropertyTaxes

IndirectTaxes

950.5

Imports

2,342.3

PersonalIncome Taxes

141.2

Travel & Tourism Economy GDP(Direct and Indirect)

4,645.2

Year 2003 (US$ mn, ’000 Jobs)

Travel & Tourism Taxes

1,105.5

OtherTaxes

13.9

OperatingSurplus -Subsidies

330.6

Indirect

Taxes

310.2

Comp.

985.0

T&T IndustryEmployment

128.8

Depreciation

322.6

Personal Travel & Tourism

1457.6

Business Travel

466.8

GovernmentExpenditures(Individual)

5.3

VisitorExports

3,951.3

GovernmentExpenditures(Collective)

41.1

CapitalInvestment

609.9

Exports(Non-Visitor)

455.5

T&T Industry GDP (Indirect)1,605.1

Imports2,093.9

Travel & Tourism Economy Supply

6,987.5

Travel & Tourism Industry GDP (Direct Only)

2,182.0

Travel & Tourism Industry Supply

5,881.0

Travel & Tourism Economy Supply (Residual)

1,106.5

Travel & Tourism Demand

6,987.5

Travel & Tourism Consumption

5,881.0

23

Travel & Tourism Satellite Accounting research for Croatia reflects

a comprehensive simulation of the new international standard

adopted by the United Nations following the Enzo Paci World

Conference on the Economic Impact of Tourism (Nice, France,

June 1999), ten years of model development and TSA experience by

WTTC and Oxford Economic Forecasting (OEF), and application of

OEF’s latest macro-economic forecasts.

TSA Economic ConceptsThe Travel & Tourism Satellite Account is based on a ‘demand-side’

concept of economic activity, because the industry does not produce or

supply a homogeneous product or service like traditional industries

(agriculture, electronics, steel, etc). Instead, Travel & Tourism is an

industrial activity defined by the diverse collection of products (durables

and non-durables) and services (transportation, accommodations, food and

beverage, entertainment, government services, etc) that are delivered to

visitors.There are two basic aggregates of demand in the TSA:

I Travel & Tourism Consumption represents the value of

products and services that have been consumed by visitors. It is the

basic demand-side aggregate used to construct an explicitly defined

production-side ‘industry’ equivalent for comparison with all other

industries.Travel & Tourism Consumption includes:

• Personal Travel & Tourism, more formally known as consumer

expenditures, which captures spending by Croatia’s residents on

traditional Travel & Tourism services (lodging, transportation,

entertainment, meals, financial services, etc) and goods (durable

and nondurable) used for Travel & Tourism activities.

• Business Travel by government and industry, which mirrors

Personal Travel & Tourism’s spending on goods and services

(transportation, accommodation, meals, entertainment, etc), but

represents intermediate inputs used in the course of business or

government work.

• Government Expenditures (Individual) by agencies and

departments which provide visitor services such as cultural (art

museums), recreational (national park) or clearance (immigration/

customs) to individual visitors.

• Visitor Exports, which include spending by international

visitors on goods and services.

II Travel & Tourism Demand builds on Travel & Tourism

consumption to include Travel & Tourism products and services

associated with residual components of final demand. It is used to

construct a broader ‘economy-wide’ impact of Travel & Tourism.

The residual elements of Travel & Tourism demand are:

• Government Expenditures (Collective) made by agencies

and departments associated with Travel & Tourism, but generally

made on behalf of the community at large, such as tourism

promotion, aviation administration, security services and resort

area sanitation services.

• Capital Investment by Travel & Tourism providers (the private

sector) and government agencies (the public sector) to provide

facilities, equipment and infrastructure to visitors.

• Exports (Non-Visitor) which include consumer goods sent

abroad for ultimate sale to visitors (such as clothing, electronics

or petrol) or capital goods sent abroad for use by industry service

providers (such as aircraft or cruise ships).

By employing input/output modelling separately to these two

aggregates (Travel & Tourism Consumption and Travel & Tourism

Demand), the Satellite Account is able to produce two different and

complementary aggregates of Travel & Tourism Supply: the Travel &

Tourism Industry and the Travel & Tourism Economy.The former

captures the explicitly defined production-side ‘industry’ equivalent,

direct impact only, for comparison with all other industries, while the

latter captures the broader ‘economy-wide’ impact, direct and indirect, of

Travel & Tourism.Through this process, the Satellite Account is also able

to determine that portion of supply, which it Imports from abroad.

Next, the satellite account breaks down both aggregates of supply

(Industry and Economy) into the direct and indirect impacts of Gross

Domestic Product (GDP), the main descriptor of economic

production, as well as the various components of GDP (Wages &

Salaries, Indirect/Transaction Taxes, Operating Surplus,

Depreciation and Subsidies). Beyond the regular TSA accounts, a

separate analysis is also provided of Personal Income Taxes paid by

Travel & Tourism generated employment and Corporate and

Property Taxes paid by Travel & Tourism companies.

Finally, one of the most important elements of the Travel & Tourism

Satellite Account are the Employment results, which can now be

quantified for the basic Travel & Tourism Industry and the broader

Travel & Tourism Economy.

• T&T Industry Employment generally includes those jobs with

face-to-face contact with visitors (airlines, hotels, car rental,

restaurant, retail, entertainment, etc).

• T&T Economy Employment includes T&T Industry

Employment plus those faceless jobs associated with:

• Industry suppliers (airline caterers, laundry services, food

suppliers, wholesalers, accounting firms, etc).

• Government agencies, manufacturing and construction of capital

goods and exported goods used in Travel & Tourism.

• Supplied commodities (steel producers, lumber, oil production,

etc).

24

Worldwide in 2003, it is expected to post US$4.6 trillion of economic

activity (Total Demand), growing to US$8.9 trillion by 2013.

Travel & Tourism Total Demand in the European Union is expected to

total US$1.5 trillion in 2003, growing to US$2.8 trillion in 2013.

In Croatia, in 2003,Travel & Tourism is expected to post Kn61.5 billion

(US$7.9 billion) of economic activity (Total Demand), growing to

Kn156.4 billion (US$20.2 billion) by 2013.

In 2003, the Travel & Tourism Industry should contribute 3.7 per cent

to worldwide GDP. The broader Travel & Tourism Economy should

contribute 10.2 per cent to world GDP in 2003.

In the EU, the Travel & Tourism Industry is expected to post a GDP

contribution of 4.2 per cent in 2003, while the Travel & Tourism

Economy contribution will be 11.5 per cent.

In Croatia, the Travel & Tourism Industry is expected to contribute 10.6

per cent to GDP in 2003 (Kn19.7 billion, or US$2.5 billion), rising to

Kn52.2 billion, or US$6.7 billion (14.8 per cent of total), by 2013.The

Travel & Tourism Economy contribution should grow from 22.4 per

cent (Kn41.6 billion, or US$5.4 billion) to 31.6 per cent (Kn111.6

billion, or US$14.4 billion) over the same period.

Travel & Tourism is a high-growth activity, which is forecast to increase

its total economic activity by 4.6 per cent per annum worldwide in real

terms over the next ten years.

In the EU,Travel & Tourism is expected to post average annualized gains

of 4.2 per cent between 2003 and 2013.

For Croatia,Travel & Tourism economic activity is expected to grow by

6.9 per cent per annum in real terms between 2003 and 2013.

Travel & Tourism is human resource intensive, creating quality jobs

across the full employment spectrum. In 2003, one in 13.3 jobs will be

generated by the Travel & Tourism Economy. The Travel & Tourism

Industry accounts for 2.6 per cent of global employment.Today there are

67.4 million Industry jobs and 193.2 million jobs in the Travel &

Tourism Economy, and these will rise to 84.7 million Industry jobs and

247.1 million Travel & Tourism Economy jobs by 2013.

The EU’s Travel & Travel Industry is expected to generate 7.5 million

jobs in 2003 (4.5 per cent of total employment), while the broader Travel

& Tourism Economy will account for 20.8 million jobs (12.5 per cent

of total employment).

In Croatia, in 2003, Travel & Tourism Economy employment is

estimated at 294,100 jobs, or 27.4 per cent of total employment. By

2013, the number of jobs should grow to 427,400 – 33.9 per cent of

total employment. The 139,000 Travel & Tourism Industry jobs will

account for 13.0 per cent of total employment in 2003 and are forecast

to rise to 200,100 jobs, or 15.9 per cent of the total, by 2013.

Travel & Tourism is a major exporter, with inbound visitors injecting

foreign exchange directly into the economy.Travel & Tourism exports in

the EU are expected to represent 11.8 per cent of total exports in 2003.

In Croatia, exports make up a very important share of Travel & Tourism’s

contribution to GDP. Of total Croatian exports, services and

merchandise, Travel & Tourism is expected to generate 43.8 per cent

(Kn39.6 billion, or US$5.1 billion) in 2003, increasing to Kn106.4

billion, or US$13.7 billion (56.2 per cent of total exports), in 2013.

Travel & Tourism is a catalyst for construction and manufacturing. In

2003, the private and public sectors combined are expected to spend

US$686.0 billion in new Travel & Tourism capital investment worldwide

– 9.6 per cent of total investment – rising to US$1.3 trillion, or 10.1 per

cent of the total, in 2013.

The EU’s Travel & Tourism Capital Investment should total US$194.4

billion in 2003, or 10.4 per cent of total regional capital investment.

Year 2003 capital investment in the Croatian Travel & Tourism Economy

is estimated at Kn4.9 billion (US$635 million) or 11.1 per cent of total

investment. By 2013, this should reach Kn10.6 billion (US$1.4 billion)

or 10.7 per cent of total.

Travel & Tourism is both a generator and receiver of government funds.

Globally, in 2003, Travel & Tourism is expected to generate US$843.6

billion of taxes – 11.7 per cent of total taxation – while channelling

US$224.1 billion of government expenditures, or 3.9 per cent of total

expenditures. By 2013, taxes should increase to US$1.5 trillion – 12.4

per cent of the total – and government spending on Travel & Tourism to

US$378.2 billion – 4.1 per cent of total government expenditure.

Government Travel & Tourism operating expenditures in Croatia in

2003 are expected to total Kn465.9 million (US$60.1 million) or 1.1 per

cent of total government spending. In 2013, this spending is forecast to

rise to Kn944.3 million (US$121.8 million), or 1.4 per cent of total

government spending. Croatian taxes associated with Travel & Tourism

are expected to total Kn8.5 billion (US$1.1 billion) or 16.8 per cent of

total tax collections in 2003. By 2013, this tax revenue is expected to

increase to Kn21.2 billion (US$2.7 billion), or 23.4 per cent of total tax

revenue collected in Croatia.

TRAVEL & TOURISM’SECONOMIC IMPACTTRAVEL & TOURISM – ENCOMPASSING TRANSPORT,ACCOMMODATION,CATERING, RECREATION AND SERVICES FOR VISITORS – IS ONE OFCROATIA’S HIGHEST PRIORITY INDUSTRIES AND EMPLOYERS.

25

CROATIA ESTIMATES AND FORECASTS2003 2013

Kn mn % of Total Growtha Kn mn % of Total Growthb

Personal Travel & Tourism 12,598.0 11.0 20.1 31,106.8 15.5 6.6

Business Travel 3,922.9 --- 8.1 7,293.9 --- 3.6

Government Expenditures 465.9 1.1 21.2 944.3 1.4 4.5

Capital Investment 4,921.3 11.1 -6.3 10,635.3 10.7 5.2

Visitor Exports 35,474.9 39.3 4.0 93,693.7 49.5 7.3

Other Exports 4,102.0 4.5 -2.2 12,735.6 6.7 9.1

Travel & Tourism Demand 61,485.0 --- 5.9 156,410.0 --- 6.9

T&T Industry GDP 19,664.7 10.6 3.2 52,239.1 14.8 7.4

T&T Economy GDP 41,609.9 22.4 3.7 111,590.0 31.6 7.5

T&T Industry Employmentc 139.0 13.0 -2.2 200.1 15.9 3.7

T&T Economy Employmentc 294.1 27.4 -2.5 427.4 33.9 3.8

a2002 Real Growth Adjusted for Inflation (%); b2003-2013 - Annualized Real Growth Adjusted for Inflation (%); cEmployment in '000 Jobs

EUROPEAN UNION ESTIMATES AND FORECASTS2003 2013

US$ mn % of Total Growtha US$ mn % of Total Growthb

Personal Travel & Tourism 661,330 12.2 -0.5 1,115,500 13.1 3.0

Business Travel 171,340 --- -2.5 292,260 --- 3.1

Government Expenditures 60,650 3.2 1.3 93,432 3.2 1.9

Capital Investment 194,410 10.4 -0.3 340,160 10.5 3.3

Visitor Exports 211,060 6.0 -5.9 509,080 6.3 6.7

Other Exports 201,850 5.8 -4.7 487,520 6.0 6.9

Travel & Tourism Demand 1,500,600 --- -2.0 2,837,900 --- 4.2

T&T Industry GDP 389,800 4.2 -1.9 660,570 4.4 3.0

T&T Economy GDP 1,083,300 11.5 -1.6 1,882,600 12.5 3.3

T&T Industry Employmentc 7,468.1 4.5 -2.4 8,356.1 4.8 1.1

T&T Economy Employmentc 20,843.0 12.5 -1.6 23,629.0 13.6 1.3

a2002 Real Growth Adjusted for Inflation (%); b2003-2013 - Annualized Real Growth Adjusted for Inflation (%); cEmployment in '000 Jobs

WORLD ESTIMATES AND FORECASTS2003 2013

US$ mn % of Total Growtha US$ mn % of Total Growthb

Personal Travel & Tourism 2,157,260 10.0 0.8 3,862,270 10.8 3.6

Business Travel 488,765 --- -2.9 871,716 --- 3.7

Government Expenditures 224,058 3.9 3.8 378,172 4.1 3.0

Capital Investment 685,957 9.6 0.6 1,308,620 10.1 4.3

Visitor Exports 530,912 5.9 -4.3 1,332,080 6.0 7.1

Other Exports 478,952 5.3 -0.7 1,186,990 5.4 7.2

Travel & Tourism Demand 4,565,600 --- -0.3 8,939,730 --- 4.6

T&T Industry GDP 1,290,770 3.7 -0.5 2,279,200 3.8 3.5

T&T Economy GDP 3,548,310 10.2 0.0 6,461,360 10.8 3.8

T&T Industry Employmentc 67,365.4 2.6 -2.8 84,684.5 2.9 2.3

T&T Economy Employmentc 193,246.0 7.5 0.0 247,106.0 8.4 2.5

a2002 Real Growth Adjusted for Inflation (%); b2003-2013 - Annualized Real Growth Adjusted for Inflation (%); cEmployment in '000 Jobs

26

TOTAL DEMANDTRAVEL & TOURISM IN CROATIA IS EXPECTED TO TOTAL KN61.5 BILLION(US$7.9 BILLION) OF TOTAL DEMAND IN 2003, INCLUDING:

■ Kn12.6 billion (US$1.6 billion) of Personal

Travel & Tourism consumption by residents

of Croatia (11.0 per cent of total personal

consumption);

■ Kn3.9 billion (US$506.2 million) of

Business and Government Travel by

resident companies and government

employees;

■ Kn465.9 million (US$60.1 million) of

Government Expenditures, 1.1 per cent of

total government spending in Croatia, to

provide individual and collective services

to the Croatian Travel & Tourism Industry

and its visitors;

■ Kn4.9 billion (US$635.0 million) of

Capital Investment, 11.1 per cent of total

capital investment in Croatia, in personal,

commercial and public Travel & Tourism

facilities, equipment and infrastructure by

residents,Travel & Tourism companies and

government agencies;

■ Kn35.5 billion (US$4.6 billion) of Visitor

Exports, or 39.3 per cent of total exports

in Croatia, generated from international

visitor markets; and

■ Kn4.1 billion (US$529.3 million) of

Merchandise Trade Exports, 4.5 per cent

of total exports in Croatia.

This breakdown of Croatia’s Travel &

Tourism demand clearly illustrates the fact that

international visitor spending accounts for

nearly 40 per cent of the Croatian Travel &

Tourism Economy. This would suggest that

priority must be given to protecting and

ensuring international (inbound) Travel &

Tourism.

Over the past seven years (1996-2002),

Croatia’s Travel & Tourism activity has grown

by a healthy 70.3 per cent in real terms.This

compares with 20.3 per cent cumulative

growth over the same period for the European

Union and with 23.9 per cent growth for the

world overall. Although September 11, 2001

had a noticeable impact on EU Travel &

Tourism in 2001 and 2002, Croatia appears to

have weathered the storm and continued to

enjoy growth in Travel & Tourism Demand.

The long-term outlook for growth in

Croatia’s Travel & Tourism Demand is

expected to be consistently positive at 6.9 per

cent per annum. WTTC/OEF expect strong

growth in visitor exports (7.3 per cent per

annum) for the foreseeable future, providing

necessary support for personal Travel &

Tourism, business travel, capital investment and

government expenditures – which are

expected to post similarly consistent if not

slightly slower growth. Overall, Croatia’s Travel

& Tourism is expected to grow by 10.6 per

cent in 2003.

Over the next ten years, growth in

Croatia’s Travel & Tourism Demand is

expected to average 6.9 per cent per annum. If

the forecast proves correct, the growth would

exceed expected worldwide growth of 4.6 per

cent per annum, and the 4.2 per cent annual

average growth projected for the EU.

Personal Travel & Tourism (12.6)

Business Travel (3.9)

Government Expenditures (0.5)Capital Investment (4.9)

Visitor Exports (35.5)

Other Exports (4.1)

Personal Travel & Tourism (661.3)

Business Travel (171.3)Government Expenditures (60.7)

Capital Investment (194.4)

Visitor Exports (211.1)Other Exports (201.9)

1999 2000 2001 2002 2003 2004

1,200

1,250

1,300

1,350

1,400

1,450

1999 2000 2001 2002 2003 2004

4,000

5,000

6,000

7,000

8,000

9,000

CROATIATravel & Tourism Total Demand

(2003 Est. Kn bn)

CROATIATravel & Tourism Total Demand

(1990 Constant US$ mn)

EUROPEAN UNIONTravel & Tourism Total Demand

(2003 Est. US$ bn)

EUROPEAN UNIONTravel & Tourism Total Demand

(1990 Constant US$ bn)

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

CROATIATravel & Tourism Total Demand(Cumulative Real Growth, %)

EUROPEAN UNIONTravel & Tourism Total Demand(Cumulative Real Growth, %)

27

A total of 294,100 jobs (direct and indirect)

are expected to be generated across the

broader spectrum of the Travel & Tourism

Economy encompassing:

■ travel company employment,

■ government agency employment, and

■ supplier company employment.

The first category represents Travel &

Tourism Industry jobs, while all three

categories together equate to Travel & Tourism

Economy jobs.

Travel & Tourism Industry jobs in Croatia

totalling 139,000 in 2003 represent 13.0 per

cent of the country’s workforce. By 2013,

Travel & Tourism Industry employment is

expected to increase by 61,100 jobs to 15.9

per cent of total employment in Croatia.

The 294,100 Travel & Tourism Economy

jobs in Croatia in 2003 represent 27.4 per cent

of the total workforce. By 2013, Travel &

Tourism Economy employment is expected to

increase by 133,300 jobs in Croatia to 33.9 per

cent of total employment.

Over the past seven years, Travel &

Tourism in Croatia has increased its share of

employment by almost 30,000 jobs and shed

two thirds of those, with part of the change

attributed to productivity gains and the

balance to a partial revision of data sources. In

2003, due to continued strong growth in

visitor exports, the employment outlook for

Travel & Tourism is extremely positive, with

employment gains expected to approach

20,000 jobs. Assuming a continuation of

positive economic growth and visitor exports

in the next few years, there is strong potential

over the next decade to create 13,000 new

jobs every year. The total number of jobs in

Travel & Tourism is expected to increase by

just over 3.7 per cent per annum between

2003 and 2013.

The charts below highlight a few points

of interest. First, Croatia’s Travel & Tourism

employment growth was strongly positive

following the ending of hostilities in the early

1990s, and slightly off since 1999 from a

combination of productivity increases and data

revisions.

Second, if Travel & Tourism employment

as a percentage of total employment in Croatia

is compared with the respective shares of

neighbouring and competing destinations,

Croatia ranks towards the top of the list. More

importantly, it ranks favourably in 17th position

among the list of 161 countries whose

performances are estimated by WTTC/OEF.

Finally, the growth rate projected for

Croatia’s Travel & Tourism employment over

the next ten years ranks at the top of the

competitor/neighbour listing but, at 86th

position, it ranks only midway in the global list

of 161 countries. Furthermore, if one

compares this ranking (86th) with its ranking

in terms of GDP growth (16th) on the

following page, one is tempted to conclude

that the structure and maturity of Croatia’s

economy and expectations for future

productivity gains prevents job creation from

matching the rate of GDP growth.

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Economy Employment

(2003, % of Total Employment)

17 Croatia......................................27.430 Switzerland ..........................................17.0

31 Greece ..................................................16.9

34 Austria ..................................................16.6

43 France....................................................14.0

48 Czech Republic ..................................12.4

49 Italy ........................................................12.3

51 Bulgaria ................................................12.1

58 Germany ..............................................10.9

63 Hungary ................................................10.3

130 Romania ..................................................5.0

133 Turkey......................................................4.9

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Economy Employment(10-Year Real Growth,Annualized, %)

86 Croatia........................................3.8104 Bulgaria....................................................3.2

127 Romania ..................................................2.3

130 Greece ....................................................2.2

133 Czech Republic ....................................2.1

135 Turkey......................................................2.0

138 Switzerland ............................................1.8

139 France......................................................1.8

142 Austria ....................................................1.7

152 Hungary ..................................................1.2

153 Italy ..........................................................1.0

157 Germany ................................................0.4

EMPLOYMENTTHE TRAVEL & TOURISM INDUSTRY IN CROATIA IS EXPECTED TOGENERATE DIRECTLY 139,000 JOBS IN 2003.

1999 2000 2001 2002 2003 2004

0

5,000

10,000

15,000

20,000

25,000 Economy Industry

1999 2000 2001 2002 2003 2004

0

100

200

300

400 Economy Industry

CROATIATravel & Tourism Employment

(‘000 Jobs)

EUROPEAN UNIONTravel & Tourism Employment

(‘000 Jobs)

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

CROATIATravel & Tourism Economy Employment

(Cumulative Real Growth, %)

EUROPEAN UNIONTravel & Tourism Economy Employment

(Cumulative Real Growth, %)

28

GROSS DOMESTICPRODUCTTHE TRAVEL & TOURISM INDUSTRY IN CROATIA IS EXPECTED TOPRODUCE DIRECTLY KN19.7 BILLION (US$2.5 BILLION) OR 10.6 PERCENT OF TOTAL GROSS DOMESTIC PRODUCT (GDP) IN 2003.The broader Travel & Tourism Economy

(direct and indirect) is expected to produce

Kn41.6 billion (US$5.4 billion), or 22.4 per

cent of total GDP.The long-term expectations

for Travel & Tourism GDP growth are positive

– 7.4 per cent annualized real growth. By

2013, Travel & Tourism Economy GDP is

forecast to gain 9.2 percentage points to total

31.6 per cent or Kn111.6 billion (US$14.4

billion).

The Travel & Tourism Economy results

and forecasts illustrate the massive economic

stimulus of Travel & Tourism. The first set of

charts (stacked bar) shows how the tourism

industry acts as a leading economic catalyst

since its contribution permeates through

Croatia’s Travel & Tourism Economy. These

charts also illustrate how positive and negative

changes in the Travel & Tourism Industry,

especially visible in the European Union chart

in 2001 and 2002, result in a much larger

impact on the broader Travel & Tourism

Economy.

In the second set of charts (Cumulative

Real Growth), Croatia’s Travel & Tourism

Economy shows massive growth post-1995

with only a small interruption in 1999. Also

evident is the strongly positive outlook for

growth over the next ten years. Overall, this

level of growth is even stronger than for the

overall Croatian economy, which continues to

post positive, but more modest gains. Because

Croatia’s Travel & Tourism Economy is

relatively young by EU standards, the

cumulative growth charts illustrate the vast

difference in long-term outlook.

The third set of charts (right) compares

WTTC/OEF estimates for Croatia and its

neighbours and competing destinations,

showing respective Travel & Tourism

Economy GDP as a percentage of total GDP.

Ranked at number 22 of 161 countries –

above Austria at number 38 and Greece at 39

– Croatia is clearly among the top-tier,

tourism-intensive countries. In addition, the

second league table extract illustrates how

Croatia’s prospects for GDP growth are also

leading most of its neighbours and

competitors within the world ranking – in

16th position. Only Turkey is expected to

achieve faster Travel & Tourism Economy

GDP growth than Croatia over the next ten

years.

1999 2000 2001 2002 2003 2004

0

2,000

4,000

6,000

8,000 Economy Industry

1999 2000 2001 2002 2003 2004

0

200

400

600

800

1,000

1,200 Economy Industry

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

CROATIATravel & Tourism GDP

(1990 Constant US$ mn)

CROATIATravel & Tourism Economy GDP

(Cumulative Real Growth, %)

EUROPEAN UNIONTravel & Tourism GDP

(1990 Constant US$ bn)

EUROPEAN UNIONTravel & Tourism Economy GDP

(Cumulative Real Growth, %)

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Economy GDP

(10-Year Real Growth,Annualized, %)

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Economy GDP

(2003, % of Total GDP)

22 Croatia........................................22.438 Austria ....................................................14.839 Greece ....................................................14.641 Bulgaria....................................................14.143 Czech Republic ....................................13.146 Switzerland ............................................12.849 France......................................................12.458 Italy ..........................................................11.567 Hungary ..................................................10.471 Germany ................................................10.0

100 Turkey ........................................................8.1126 Romania ....................................................5.8

4 Turkey ........................................................9.116 Croatia..........................................7.551 Czech Republic........................................6.260 Hungary ....................................................6.165 Bulgaria......................................................6.0

126 Greece ......................................................4.6134 Romania ....................................................4.2140 France ........................................................3.7150 Italy ............................................................3.1153 Austria ......................................................2.9155 Germany ..................................................2.7156 Switzerland ..............................................2.7

29

The largest component of capital investment

originates from the private sector in new plant

and equipment, while the public sector invests

in new Travel & Tourism infrastructure.

This represents a return to capital

investment growth following four years of

real-term decline beginning in 1999. Over the

next ten years (2003-2013), the contribution

of Travel & Tourism to Croatia’s capital

investment account is expected to increase at

an average rate of 5.2 per cent per annum in

real terms.

Examination of Travel & Tourism Capital

Investment results and forecasts lends greater

insight into the market forces at work in a

given economy and the expectations by the

public and private sectors to meet the

challenges and opportunities in the years ahead.

For the most part, Travel & Tourism Capital

Investment tends to be cyclical, with strong

links to major public policy initiatives, the

business/market cycle, major events (such as

natural disasters) and significant socio-political

changes.

Worldwide, Travel & Tourism Capital

Investment is expected to total 9.6 per cent of

total investment in 2003.The expectation for

global growth for 2003-2013 is 4.3 per cent

per year (in constant US dollars). In the

European Union, the respective figures are

10.4 per cent of total capital investment in

2003 and 3.3 per cent real growth over the

coming decade.

The charts below illustrate several

interesting points. First, Croatia’s Travel &

Tourism Capital Investment is expected to

return to positive growth following its four-

year decline. Second, when compared with

neighbouring and other competitive countries,

Croatia ranks well up the listing, but it comes

only half-way down the broader list of 161

countries from around the world in terms of

investment in 2003.With 11.1 per cent of total

investment, Croatia Travel & Tourism share of

total capital investment puts it in 89th

position, between Bulgaria in 58th position

and the Czech Republic in 92nd.

However, similarly to its ranking in GDP

growth, Croatia’s Travel & Tourism Capital

Investment growth (prospects for 2003-2013)

places it in the top tier of the WTTC league

table for the comparative and the world listings

– in third and 32nd places respectively. This

ranking sends a strong message to Travel &

Tourism operators at home and abroad that

Croatia is set to attract new ventures.

CAPITAL INVESTMENTIN 2003, TRAVEL & TOURISM CAPITAL INVESTMENT IN CROATIA ISEXPECTED TO TOTAL KN4.9 BILLION (US$635.0 MILLION), OR 11.1 PERCENT OF TOTAL INVESTMENT.

1999 2000 2001 2002 2003 2004

160

165

170

175

180

1999 2000 2001 2002 2003 2004

400

500

600

700

800

CROATIATravel & Tourism Capital Investment

(1990 Constant US$ mn)

EUROPEAN UNIONTravel & Tourism Capital Investment

(1990 Constant US$ bn)

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

CROATIATravel & Tourism Capital Investment

(Cumulative Real Growth, %)

EUROPEAN UNIONTravel & Tourism Capital Investment

(Cumulative Real Growth, %)

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Capital Investment

(2003, % of Total)

32 Greece ....................................................22.547 Austria ....................................................16.058 Bulgaria....................................................14.189 Croatia........................................11.192 Czech Republic ....................................10.9

110 Switzerland ..............................................9.4117 Italy ............................................................8.9119 Germany ..................................................8.7125 France ........................................................8.2126 Romania ....................................................8.2136 Turkey ........................................................7.4143 Hungary ....................................................6.9

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Capital Investment(10-Year Real Growth,Annualized, %)

2 Turkey ........................................................8.528 Hungary ....................................................5.232 Croatia..........................................5.243 Czech Republic........................................4.945 Greece ......................................................4.869 France ........................................................4.291 Italy ............................................................4.0

104 Austria ......................................................3.6127 Bulgaria......................................................3.0144 Romania ....................................................2.6149 Switzerland ..............................................2.4159 Germany ..................................................1.0

30

PERSONAL & BUSINESS IN 2003, CROATIA IS EXPECTED TO GENERATE KN12.6 BILLION (US$1.6BILLION) OF PERSONAL TRAVEL & TOURISM CONSUMPTION BYRESIDENTS, OR 11.0 PER CENT OF TOTAL PERSONAL CONSUMPTION.

In Croatia, business travel in 2003 is expected

to total Kn3.9 billion or US$506.2 million (65

per cent corporate, 35 per cent government).

Unlike visitor exports, which depend on

international markets for consumers, the

business generated in these two categories

depends on the Croatian economy itself. As

the Croatian economy grows, Croatian

consumer and business travel will follow suit.

Since 1995, Croatian Personal Travel &

Tourism has grown by only 36 per cent –

clearly indicative of the economy’s struggle to

rebuild. Over the next decade (2003-2013),

Personal Travel & Tourism in Croatia is

expected to grow at an annual rate of 6.6 per

cent, while Business/Government Travel is

expected to grow at an annual rate of 3.6 per

cent.

Although most of this Travel & Tourism

occurs within Croatia, a portion takes place

abroad. When the spending does take place

abroad, the satellite account generates a

corresponding ‘import credit’, providing for an

accurate assessment of Travel & Tourism

‘produced’ in Croatia and Travel & Tourism

‘produced’ by the rest of the world.

Analysis of Croatia’s results highlights a

few interesting points. First, Croatia’s residents

have recently spent about 11.0 per cent of

their personal expenditures on Travel &

Tourism.This percentage is slightly above the

world average of 10.0 per cent and only

slightly lower than the European Union

average of 12.2 per cent. Generally, the level of

personal Travel & Tourism spending is directly

linked to the development of the resident

economy. As per capita income increases, so

does Travel & Tourism spending. Second,

Croatia’s overall macroeconomic situation

since the cessation of hostilities in the mid-

1990s has manifested itself in mixed positive

and negative Croatian resident spending on

Travel & Tourism, as illustrated in the stacked

bar and cumulative growth charts below.

Nevertheless, the cumulative growth

charts for Croatia and the EU below illustrate

the strong future growth outlook for Croatia

well beyond that of EU Travel & Tourism

spending. If, as expected, the economy

continues to show positive growth, Croatia’s

residents’ spending on personal and business

Travel & Tourism is also likely to accelerate.

Finally, the league table extracts reinforce this

message of cautious positive spending. Croatia

ranks in the top tier of countries (34th

position) in terms of current Travel & Tourism

spending vis-à-vis total personal consumption,

and it is also projected to rank in the top tier

in terms of future growth in Travel & Tourism

spending.

1999 2000 2001 2002 2003 2004

0

500

1,000

1,500

2,000

2,500 Business Personal

1999 2000 2001 2002 2003 2004

0

200

400

600

800 Business Personal

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

CROATIAPersonal & Business Travel & Tourism

(1990 Constant US$ mn)

CROATIAPersonal Travel & Tourism

(Cumulative Real Growth, %)

EUROPEAN UNIONPersonal & Business Travel & Tourism

(1990 Constant US$ bn)

EUROPEAN UNIONPersonal Travel & Tourism

(Cumulative Real Growth,%)

WTTC LEAGUE TABLE EXTRACTPersonal Travel & Tourism

(10-Year Real Growth,Annualized, %)

WTTC LEAGUE TABLE EXTRACTPersonal Travel & Tourism

(2003, % of Total Personal Consumption)

9 Austria ....................................................15.915 Switzerland ............................................14.322 France......................................................12.630 Germany ................................................11.332 Italy ..........................................................11.134 Croatia........................................11.052 Bulgaria......................................................9.459 Greece ......................................................8.461 Turkey ........................................................7.868 Hungary ....................................................7.369 Czech Republic........................................7.3

125 Romania ....................................................4.6

2 Turkey ........................................................9.434 Czech Republic........................................6.940 Hungary ....................................................6.742 Croatia..........................................6.650 Bulgaria......................................................6.2

132 Greece ......................................................3.9136 Romania ....................................................3.8150 France ........................................................2.9151 Italy ............................................................2.9153 Austria ......................................................2.8154 Germany ..................................................2.8159 Switzerland ..............................................2.4

31

In 2003, Travel & Tourism services and

merchandise exports for Croatia are expected

to total Kn39.6 billion, or US$5.1 billion (90

per cent by visitors, 10 per cent by exported

consumer and capital goods), representing

some 64 per cent of total Travel & Tourism

Demand. Without question, as this category

grows and contracts, the health and vitality of

Croatia’s Travel & Tourism sector will reflect

the same trends.

Over the past ten years, the gains for

Travel & Tourism Visitor Exports have been

impressive by any measure. In constant terms,

gains for 2000 visitor exports totalled 24.2 per

cent, while gains in 2001 totalled 19.2 per

cent, even after considering that the latter part

of 2001 was significantly impacted by the

events of September 11, 2001. If considered

over a longer period, (1995-2002), Croatia’s

Visitor Exports have grown by 122 per cent in

real terms. Over the next ten years, Croatia’s

Visitor Exports are expected to grow by 7.3

per cent per annum, while Travel & Tourism

Merchandise Exports (non-visitor exports) are

expected to do even better with a growth of

9.1 per cent per annum.

Globally and for the European Union,

visitor exports are expected to grow at 7.1 and

6.7 per cent per annum respectively over the

next ten years (2003-2013).

Clearly, based on these forecasts, Croatia’s

Travel & Tourism Visitor Exports’ growth is

right on track, albeit slightly ahead of that of

its regional and global peers.

Although long-term expectations for

Croatia’s Travel & Tourism export growth

(2003-2013) are positive these forecasts, like

any others, depend on future events and are

therefore not guaranteed. The events of

September 11, 2001 in the USA, for example,

which had a major negative impact on tourism

in the USA and other parts of the world, are a

perfect example of uncertainty inherent in

forecasting.

Examination of the WTTC league tables

reveals that Croatia is placed in the lead

position among its competing and

neighbouring countries on the basis of current

visitor exports as a percentage of total exports.

In the second league table, Croatian visitor

exports’ growth illustrates the competitive job

ahead, since Croatia is ranked in 63rd place

and is overtaken by other countries such as

Turkey and Germany, which are growing a

little faster. This would seem to indicate that

greater attention should be paid by the public

and pr ivate sectors to maintaining

international visitor growth at higher levels.

EXPORTSTRAVEL & TOURISM EXPORTS PLAY AN ABSOLUTE AND VITAL ROLE INCROATIA’S TRAVEL & TOURISM BUSINESS.

1998 1999 2000 2001 2002 2003

0

100

200

300

400

500 Other Visitor

1999 2000 2001 2002 2003 2004

0

1,000

2,000

3,000

4,000

5,000

6,000 Other Visitor

CROATIATravel & Tourism Exports(1990 Constant US$ mn)

EUROPEAN UNIONTravel & Tourism Exports(1990 Constant US$ bn)

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

CROATIATravel & Tourism Exports

(Cumulative Real Growth, %)

EUROPEAN UNIONTravel & Tourism Exports

(Cumulative Real Growth, %)

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Visitor Exports

(2003, % of Total Exports)

13 Croatia........................................39.329 Greece ....................................................24.943 Bulgaria....................................................18.662 Turkey......................................................12.372 Hungary ..................................................10.378 Austria ......................................................9.187 France ........................................................7.888 Czech Republic........................................7.695 Italy ............................................................7.099 Switzerland ..............................................6.6

121 Romania ....................................................3.7133 Germany ..................................................3.0

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Exports

(10-Year Real Growth,Annualized, %)

21 Turkey ........................................................8.647 Germany ..................................................7.754 Bulgaria......................................................7.661 Romania ....................................................7.363 Croatia..........................................7.373 Czech Republic........................................7.183 France ........................................................6.9

106 Switzerland ..............................................6.5122 Greece ......................................................6.3129 Italy ............................................................6.2140 Hungary ....................................................5.9142 Austria ......................................................5.8

32

GOVERNMENTIN 2003, NATIONAL AND LOCAL GOVERNMENT AGENCIES IN CROATIAARE EXPECTED TO SPEND KN465.9 MILLION (US$60.1 MILLION) OFCURRENT OPERATING FUNDS FOR TRAVEL & TOURISM.

This represents 1.1 per cent of total

government expenditures, which are allocated

to providing individual and collective

government Travel & Tourism services to

visitors, travel companies and the community

at large. Over the next ten years (2003-2013),

Travel & Tourism Government Expenditures

in Croatia are expected to increase by an

average of 4.5 per cent per year in real terms.

Globally, the average government is

expected to contribute 3.9 per cent of

government expenditures to Travel &

Tourism-related functions and to increase this

spending by 3.0 per cent per annum over the

next ten years. The corresponding figures for

the European Union are 3.2 per cent of total

government spending and 1.9 per cent real

growth for the coming decade. Based on these

results, Croatia’s 2003 government

contribution of 1.1 per cent suggests that it is

currently well short of its regional and global

competition for Travel & Tourism support and

services.

In this WTTC report, 2003 government

expenditures include individual expenditures

of Kn53.6 million (US$6.9 million) that can

be linked to individual visitors, such as

museum subsidies or immigration services.

But they also include collective expenditures

of Kn412.3 million (US$53.2 million) that are

undertaken for the community at large – such

as airport administration or tourism

promotion – but which have a logical service

connection to Travel & Tourism.

One would naturally assume there should

be a direct link between the impact of an

industry/sector like Travel & Tourism on the

economy (in terms of GDP) and the amount

of funding allocated by governments towards

that industry/sector. In Croatia, the 2003 ratio

of Travel & Tourism GDP (percentage of total

GDP) to government expenditures is 19.5:1.0.

Worldwide and in the EU, this ratio is 2.6:1.0

and 3.6:1.0 respectively. This would suggest

that the Croatian government authorities are

returning significantly less to Travel & Tourism

than governments generally.

The league tables below reinforce this

particular point. First, Croatia’s government

expenditures for Travel & Tourism are

currently very low on a relative scale – second

from bottom of the list of neighbours and

competitors – as well as 152nd out of 161

countries on a global scale. More encouraging

is the outlook for growth – it ranks third

among its regional neighbours and 34th

among the worldwide listing of 161 countries.

Although the Croatian Government clearly

has significant spending priorities and

requirements that may be affecting these

results,Travel & Tourism spending is suffering

a significant competitive disadvantage in the

world marketplace.

1999 2000 2001 2002 2003 2004

0

40

80

120

160

200

1999 2000 2001 2002 2003 2004

50

52

54

56

1995 2000 2005 2010

0

25

50

75

100

125

150

175

200

1995 2000 2005 2010

-100

-75

-50

-25

0

25

50

75

100

125

150

175

200

CROATIATravel & Tourism Gov’t Expenditures

(1990 Constant US$ mn)

CROATIATravel & Tourism Gov’t Expenditures

(Cumulative Real Growth, %)

EUROPEAN UNIONTravel & Tourism Gov’t Expenditures

(1990 Constant US$ bn)

EUROPEAN UNIONTravel & Tourism Gov’t Expenditures

(Cumulative Real Growth, %)

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Gov't Expenditures(10-Year Real Growth,Annualized, %)

WTTC LEAGUE TABLE EXTRACTTravel & Tourism Gov't Expenditures(2003, % of Total Gov't Expenditures)

37 Switzerland ..............................................7.553 Hungary ....................................................5.158 Austria ......................................................4.962 Greece ......................................................4.476 Italy ............................................................3.779 Czech Republic........................................3.684 Bulgaria......................................................3.386 France ........................................................3.2

128 Germany ..................................................2.2143 Romania ....................................................1.4152 Croatia..........................................1.1159 Turkey ........................................................0.6

5 Hungary ....................................................5.621 Czech Republic........................................5.034 Croatia..........................................4.586 Bulgaria......................................................3.6

127 Romania ....................................................2.7128 Italy ............................................................2.6148 Switzerland ..............................................1.8152 Austria ......................................................1.6157 France ........................................................1.2158 Germany ..................................................1.1160 Turkey ........................................................0.3161 Greece ......................................................0.1

33

Yet, while government accepts that Travel & Tourism has a role to play in

achieving robust economic reforms, it does not appear to appreciate the

scope of the industry, nor its role as a catalyst for the development of

other areas of economic activity, such as agriculture, manufacturing or

financial services. Moreover, it seriously underestimates the full potential

of Travel & Tourism – encompassing accommodation, transport, catering,

recreation and travel services – which can help the Croatian Government

achieve its targets of doubling gross domestic product (GDP) within 15

years with an average growth of 5-7 per cent per annum.The industry

can also help reduce disparities between urban and rural areas, while

accelerating Croatia’s transition to a stable market economy.

This lack of appreciation of Travel & Tourism’s potential means that

government policies across all ministries tend to be drawn up without

sufficient attention to their impact on the tourism industry. Neglect of

this kind endangers the long-term success of Travel & Tourism, as well

as sustained growth at the level that Croatia is enjoying today.

Following the start of war in 1990, the country suffered several

years of decline in demand and investment. Croatia’s Travel & Tourism

returned to growth in the second half of the 1990s, and performance

over the last two years has been particularly impressive given the

uncertain global economic and political climate. According to the

Central Bureau of Statistics, international tourist arrivals increased by 6

per cent in 2002 – and by more than 70 per cent from 1996 to 2002 –

while overnights grew by more than 3 per cent.

The latest forecasts from WTTC and Oxford Economic

Forecasting (OEF), drawn up in early 2003, point to an average annual

growth in Travel & Tourism demand of 6.9 per cent over the next ten

years, contributing 31.6 per cent to Croatia’s GDP by 2013. However,

several challenges lie ahead, and these must be addressed to ensure the

long-term sustainable development of Croatia’s Travel & Tourism, with

maximum benefits for all stakeholders and at all levels of the economy.

These challenges include the enhancement of product and service

quality, as well as the development of much needed infrastructure and

human capital.

It is clearly understood that the private sector is best placed to

develop quality products and competitive services geared towards rapidly

changing international and domestic demand, while the role of

government is to ensure the underlying conditions for market

confidence and sustainable development.

Policy-makers in Croatia have started to implement measures

towards economic transition and to reduce the government’s direct

involvement in the provision of Travel & Tourism services. Power is

being decentralized to local and provincial governments, while private

sector participation is being increased. Several priorities remain, such as

the acceleration and extension of privatization to more sectors of Travel

& Tourism, including transport, thereby encouraging investment and the

streamlining of regulation.

WTTC commends the Croatian Ministry of Tourism for its

aggressive promotion of Travel & Tourism growth over the past seven

years. Increasing the responsibility of the Ministry of Tourism to oversee

collateral government agencies and departments that have a direct or

indirect link to tourism, such as transport or the privatization fund,

would help ensure that tourism development meets the quality standards

required for sustainable growth in the longer term.

The Croatian Government should make Travel & Tourism a

strategic priority and factor the industry’s needs into mainstream policies

for employment, trade, investment, education and environmental

protection. The strategic importance of Travel & Tourism should be

communicated to all levels of government, industry and the local

communities.All government departments affected by, or impacting on,

Travel & Tourism development should be closely involved in developing

and implementing national tourism policy. Against this background

WTTC recommends that the Croatian Government:

PLAN FOR THE FUTURELong-term Tourism PlanningLong-term planning at a national level is a prerequisite for the successful

development of Travel & Tourism in Croatia, since the industry can be

fragile and adversely affected by short-term political considerations.

The Croatian Strategic Development Commission for Tourism,

McKinsey & Company and the German Investment & Development

Company are in the process of developing the Croatian Tourism

Strategy 2010, which will replace the existing plan launched in 1993.

The new strategy will need to be expedited swiftly and promoted

widely, helping to guide the development of regional plans, such as that

of Istria, which is already underway.

As well as updating the long-term National Tourism Policy that

THE POLICYFRAMEWORK POLICY RECOMMENDATIONS

The Croatian Government clearly recognizes the role of Travel & Tourism as acontributor to macro-economic growth and social development throughout the country.This is reflected in the inclusion of tourism as one of 19 sections comprising thegovernment’s National Development Plan, the Strategic Development of Croatia in the 21stCentury.

34

assesses performance to date, identifying new issues requiring attention

and setting new targets and objectives, the new strategy (and future

regional plans) will need to address the following areas:

■ Propose a new set of targets to guide the industry forwards over the

next five to ten years. It should support existing industry to meet

these targets, while introducing ways to promote new

developments and initiatives, to attract local and international

investors.

■ Involve all levels of government, the private sector and local

communities in the development of the plan, helping to overcome

conflicting objectives and interests.

■ Start from a vision of the kind of Travel & Tourism that both the

government and the citizens of Croatia wish to develop, in physical

and marketing terms.

■ One of the key priorities in establishing the plan and thereafter

should be to increase the level of cooperation between tourism

boards and the private sector. Supervisory bodies of the tourism

boards in Croatia currently have little private sector representation.

■ Convey environmentally and culturally conscientious policies,

promoting voluntary accreditation schemes for the industry and

outlining best practice in tourism development.

■ Articulate product development and diversification within Croatia.

A wealth of information to support the development of the

Croatian Tourism Strategy 2010 can be found in the Strategic Marketing

Plan – Croatian Tourism 2001–2005, commissioned by the Croatian

National Tourist Board and prepared by THR International Tourism

Consultancy and Horwath Consulting Zagreb.This plan proposes targets

to reinvent and restructure Croatia’s tourism products. It identifies eight

regional clusters within the country and proposes that each cluster

develop competitive and complementary tourism products and

experiences. Focus is given to enhancing the quality of tourism products

and services, as well as developing a new brand identity for Croatia.

Independent and objective information can also be found in the

report commissioned by the German Federal Ministry for Economic

Cooperation and Development in 2001.This plan was developed to help

strengthen regional cooperation within the Stability Pact for South

Eastern Europe. It helped to pave the way for several development

projects within Croatia, serving as model projects, which have been

offered for financing to the international financial institutions from the

Stability Pact, as well as to private companies. These projects included

regional development models for Dubrovnik, Kupari, Konavle, the island

of Mljet and the Sava Valley from Sisak to Jasenovac.

There is no lack of informed opinion-makers and experts, from

within and outside the country, ready to provide advice and input into

the strategic vision of Croatia. In this regard, we encourage all

stakeholders to participate.

Monitor Trends in Travel & Tourism Demand In order to plan ahead better and anticipate changing demand, it is

important to track trends in past and current Travel & Tourism demand.

Monitoring trends will facilitate the identification of threats to growth,

as well as new opportunities, helping to anticipate future capital

investment and infrastructure needs. One example of such a threat is the

fast emerging image of Croatia as a cheap destination. This image can

damage the levels of yield derived from Travel & Tourism and can

influence the country’s ability to target desired markets and investors in

the medium to longer term.

Monitoring Travel & Tourism trends on a regular basis implies the

provision of good quality statistical data on Croatia’s Travel & Tourism,

including data on international visitor arrivals and departures, domestic

tourism, hotel operating performance, expenditure patterns, attitudes and

preferences, as well as the overall economic contribution of Travel &

Tourism.

A national Tourism Forecasting Council (TFC) – established along

the same lines as Australia’s successful TFC, in which all stakeholders are

well represented – could be a useful tool for ensuring the credibility of

historical results and future demand forecasts. It could also help to

mitigate serious supply shortages or oversupply in the future.

Encourage Greater Market and ProductDiversification Croatia faces intense competition from a number of attractive, well-

established and sophisticated Mediterranean tourism destinations,

including Spain, Italy, Turkey and Greece. As a result of the war, these

destinations are thought to have up to a ten-year advantage over Croatia

in terms of Travel & Tourism development.During the period of the war,

these destinations evolved to meet changing consumer demands,

investing in new infrastructure, diversifying their tourism products, and

strengthening their presence in markets that were once Croatia’s main

sources of international visitors, including Germany, Italy,Austria, the UK

and the Benelux countries.

Open markets, more competitive pricing structures, technological

advancements and changing consumer demand are now encouraging

increased competition from destinations further afield, all looking to

entice the major overseas markets.

The country’s former Socialist system hindered Croatia’s ability to

keep pace with the demand for diversification in products and services,

designed to meet more sophisticated travellers’ needs. Political instability

and war in the early 1990s had a serious impact on Travel & Tourism

demand and resulted in declining investment. As a result, Croatia still

suffers from an inadequate infrastructure for Travel & Tourism, including

a lack of diversification in tourism products and services. This largely

explains the high level of seasonality in Croatia’s tourism.

The main concentration of Travel & Tourism activity takes place

between June and September every year, with the majority of tourists

seeking sun and beach-based holidays. Investment is required to adapt

tourism products and services to other market segments which, in turn,

will help ease the levels of seasonality affecting Croatia at this time and

reduce its unhealthy over-dependence on a few key market sources.

Marine/nautical Tourism

A warm climate, pristine waters, and an Adriatic coast that is home to

more than 1,000 islands make Croatia an ideal destination for sailing

holidays. Many of the country’s ports, particularly Dubrovnik, are already

popular with cruise lines. Data from Horwath Consulting Zagreb shows

35

that marine, or nautical tourism accounts for more than 13 per cent

of total tourist overnights in Croatia.

This sector has rightfully been identified as one offering huge

growth potential for the country’s Travel & Tourism industry.

According to the Central Bureau of Statistics, the number of vessels

using permanent moorings in Croatia increased by 76 per cent to

over 11,000 from 1997 to 2001,while the number of vessels moored

temporarily rose by 61 per cent to 165,000 over same period.

Many of the marinas and ports nonetheless require substantial

investment to accommodate growth in this sector and to enhance

the quality of infrastructure provided to tourists.Most of the marinas

are currently owned by the Adriatic Croatia International Club

(ACI) and two other state agencies, which collectively own more

than 80 per cent of the shares in 21 of the country’s marinas. Plans

to increase private ownership in ACI will help to stimulate much

needed investment towards developing the ports and marinas in

Croatia.

Resort Tourism

Resort tourism is already the most popular form of Travel & Tourism

in the country accounting for more than two thirds of total tourist

overnights.Although its market share has stagnated, and even fallen,

in the Mediterranean generally, the sector continues to attract

growth in absolute volumes. However, tourists today demand much

more than just sun, sand and sea.They are actively seeking resorts that

can provide high-class sporting facilities, non-stop entertainment,

spas and other facilities for health and wellness, and much more.

Croatia will require modern facilities that meet international

demand if it is to ensure sustained, long-term development in this

sector.While government policy should help stimulate investment in

this area, it should also help Croatia avoid the risk of over-developing

resorts in specific regions of the country.

This is an opportune time for Croatia to use the lessons it has

learned from short-sighted developments in other countries, such as

Spain. These have resulted in excessive construction and an over-

concentration of buildings that have spoilt kilometres of coastline. In

fact,many destinations continue to make the same mistakes.Croatian

policy should help deter developers away from standardized

developments, which present no unique features, facilities or

authentic facets of the local region and culture. Policy developments

should also help to promote Croatia’s great opportunity to overtake

competitors in the development of environmentally and socially

sound resorts and accommodation facilities.

Special Interest Tourism

Demand for special interest and/or sporting holidays, such as golf,

is growing rapidly worldwide. Many operators actually believe that

destinations are now interchangeable and that the facilities offered

to accommodate special interests determine which destinations

today's tourists will choose. Croatia’s warm climate and natural

resources offer great potential to tap this market.There are already

plans to develop Croatia’s first golf resort. However, to gain

visibility in this sector and compete more effectively with

neighbouring destinations, further investments will be required in

36

order to provide visitors with a choice of courses boasting world-class

facilities and recognized brandnames.

The Croatian Government has already started to stimulate the

development of rural holidays and agricultural tourism. Incentive

measures have been introduced to encourage families with farms to

adapt them for tourism purposes as a supplementary activity. In addition

to offering financial incentives, Croatian policy should promote the

development of quality facilities that cause minimal damage to the local

environment. Ease of access to, and widespread dissemination of, this

information is vitally important. The National Tourist Board would

provide an ideal central base for the collation and communication of

news, guidelines and best practices for small to medium-sized enterprises

in Croatia, while regional boards would be well suited to promoting

these sources of information, especially in rural areas.

Meetings, Incentives, Conferences and Exhibition

(MICE) Travel

The meetings, incentives, conferences and exhibitions (MICE) market is

relatively untapped in Croatia compared with leading European tourism

destinations.The MICE business currently accounts for a modest 4 per

cent share of arrivals, although it has a strong potential for growth.

Croatia’s central European location, allowing for short journey times

from most of Europe’s main cities, is a definite competitive advantage.

The sector is also a good one to develop further as it is relatively high

yield and can generate strong visibility for the destination.

Conference and congress facilities located in Zagreb, Opatija and

Dubrovnik are performing well, hosting an increasing number of events

every year. Recent growth in demand has led to the development of

new facilities for medium-sized groups of up to 400 delegates.With the

exception of the Vatroslav Lisinki Hall in Zagreb, which can

accommodate up to 1,800, Croatia lacks the facilities to host large

international conferences. Development of the MICE market could

help Croatia attract new year-round business and enable the country to

compete more effectively in the international marketplace.

The development of MICE facilities in Croatia will nevertheless

require big investment and international know-how, ensuring that

facilities meet international standards and can remain competitive

throughout their business cycles. A comprehensive approach to

development should be adopted, ensuring that hotel capacity and other

support facilities, such as transport links, are developed in line with the

needs of new congress halls and conference centres. There are already

concerns in destinations like Dubrovnik, where existing and planned

conference facilities have not adequately taken into account future

delegates’ accommodation needs.

Croatia’s convention bureau efforts should be significantly

expanded, enhanced and perhaps re-engineered under a National

Convention Bureau (NCB) that is separate from the National Tourist

Board, in order to tap the potential of this important sector. Such an

NCB would play a valuable part in raising the level of the MICE

business in Croatia to that of an important economic contributor and

would embrace the following tasks:

■ Ensure complete coordination and synergy for the promotion of

Croatia’s MICE business;

■ Position Croatia in the international marketplace as a leading

MICE destination;

■ Serve as an initial/focal point of contact, distributing leads and

allocating business transparently;

■ Provide conference industry leadership and coordination, raising

the level of professionalism in the sector;

■ Serve as a clearing-house of convention industry information;

■ Exert influence and link industry and government.

Special events can complement the growth in conferences and

exhibitions. Croatia has already been successful in hosting several

international events, such as the ATP Tennis Tournament in Umag. Such

events can help put a small region like Umag on the global map. In order

to secure future business with guaranteed economic returns for all

stakeholders, the Croatian National Tourist Board should develop a

sophisticated capability for the evaluation of special events and the related

economic returns, in order to assist in the future targeting of events.

Domestic Tourism

In 2002 domestic tourist arrivals totalled 1.3 million as against 1.6

million in 1989.There is clearly room for growth, but the prospects for

this would seem to be bright. As the Croatian economy grows, this

should stimulate consumer and business travel. If targeted effectively,

domestic tourism can help generate increased earnings and employment

for less developed parts of the country, encouraging support from local

communities for tourism development.

Several factors can influence the growth of domestic tourism.

These include the effectiveness of marketing and promotion to local

residents, the development of suitable tourism products and services and

– last, but by no means least – price, or value for money. According to

the World Travel & Tourism Competitiveness Monitor, Croatia is

currently ranked 88th among 128 countries featured in the Price

Competitiveness Index (in which 128 is the least competitive).

The ranking is based on each country’s rating within the Hotel

Price Index, which compares hotel room rates for each country1, and

the Purchasing Power Parity Index, which shows the amount of goods

or services a single US dollar can buy within a given destination2.The

Monitor indicates that Croatia is relatively highly priced compared with

other countries featured, including several other Mediterranean

destinations. Fiscal policies should therefore pay attention to the

purchasing ability of residents, helping to ensure the growth of domestic

as well as international visitors.

Price Index Price Competitiveness

Value Ranking

Tunisia 82.30 27

Turkey 74.91 46

Cyprus 60.54 85

Croatia 59.53 88

Greece 54.90 93

Spain 40.66 107

France 40.33 108

Source:World Travel & Tourism Competitiveness Monitor, 2002

1Hotel room rates in US$ per night in 2002 Source: www.placestostay.com

2 Source:World Development Indicators,World Bank 2001

37

Invest More in Effective Marketing andPromotionsNational investment in the effective marketing and promotion of Croatia as

a tourism destination is critical to ensuring sustained demand from existing

markets and to generating new demand.The National Tourist Board should

continue to promote Croatia as a safe and welcoming destination, helping to

eradicate images of the country related to a war that ended over ten years

ago. Efforts should also focus on reducing seasonality, as well as on spreading

the benefits of tourism to all parts of the country. In addition, particular

attention needs to be paid to erasing the image of Croatia as a cheap

destination.

The Strategic Marketing Plan Croatia 2001–2005 outlines a new branding

strategy and positioning for Croatia. Aiming for a brand built on the

country’s well-preserved natural and cultural environment, Croatia has

adopted the slogan ‘Croatia – the Mediterranean as it once was’.This new

brand and the marketing strategy outlined in the report are aimed at

addressing Croatia’s image as a cheap, summer-only destination for the mass

market. This strategy is expected to be implemented aggressively over the

next five years and should help to increase tourism volumes and spending, as

well as to extend length of stay, improve geographic spread and seasonal

patterns of tourism.The strategy should be incorporated into the National

Tourism Policy and updated every five years, or as market trends require it.

The Croatian National Tourist Board’s budget for tourism marketing

and promotion comes mainly from a tourist tax, which was established in the

early 1990s to fund the activities of the national, regional and city tourism

boards of Croatia.The budget covers the cost of all activities for the national

and regional tourism boards. As is the case in most other key tourism

destination countries, Croatia should work more closely with the private

sector to improve the effectiveness of marketing spend and to develop joint

promotional activities, which would help to sustain Croatia’s traditional

markets, while tapping into new markets.

The National Tourist Board should support efforts to promote tourism

in the less developed rural parts of the country and Croatia’s islands, in an

effort to stimulate growth in these regions. Inbound tour operators, or

destination management companies (DMCs), have an important role to play

in this area, as they can develop and market programmes offering new

tourism experiences in underdeveloped regions of the country. Croatia has

few experienced DMCs operating at national level. This is a handicap for

Croatia in its efforts to penetrate international source markets, whether

through foreign tour operators, travel agents, or directly with consumers.

Timely market intelligence is an important resource for DMCs,Travel

& Tourism operators and potential investors in Croatia.The National Tourist

Board should work in much closer partnership with provincial governments

and the private sector to facilitate the monitoring of trends and to stretch

research dollars.

National investment in the effectivemarketing and promotion of Croatia as atourism destination is critical...

38

HIGHLIGHT THE STRATEGICIMPORTANCE OF TOURISMRecognize Travel & Tourism’s EconomicImportanceTravel & Tourism is Croatia’s leading export sector, generating the

highest share of foreign exchange income. Not only does it enhance the

country’s balance of payments; it also creates large numbers of jobs and

long-term career opportunities, and stimulates entrepreneurial activity,

thereby contributing to reduce the country’s high rates of

unemployment.

The National Tourist Board should adopt a campaign to ensure that

all public and private sector stakeholders recognize Travel & Tourism’s

full impact across the national economy – not just on hotels, restaurants

and retail business, but also on construction, real estate and other sectors.

Even more importantly, stakeholders should be made aware of the

industry’s untapped potential and of the benefits of tourism that filter

down through all levels of the community. Proposals to develop a

National Tourism Congress, which would bring stakeholders together to

discuss Travel & Tourism challenges and opportunities, would be an

effective way of promoting the importance of the industry to public and

private decision-makers.

Implement Satellite Accounting on an Annual BasisTravel & Tourism needs to be measured effectively in order to understand

its full impact throughout the economy. As a new industry, Travel &

Tourism is not discretely identified in charts of national or provincial

accounts – its component parts are scattered throughout the accounts.

Public sector analysis and related policies tend to overlook, or at least

understate, the impact of the industry, or deal with its smaller individual

components.

The technique of satellite accounting is designed to measure the new

service sectors. This new tourism satellite account (TSA), developed by

WTTC and OEF for Croatia, is a significant tool for planning and policy

development.WTTC recommends that the Croatian Central Bureau of

Statistics update this TSA on an annual basis, to ensure that adequate data

is available to factor Travel & Tourism into economic and employment

strategies. The TSA is a significant tool for planning and policy

development.

Travel & Tourism is Croatia’s leadingexport sector, generating the highestshare of foreign exchange income.

39

DEVELOP THE HUMAN CAPITALREQUIRED FOR GROWTHUsing World Bank data on illiteracy rates, education, employment,

population, training and gender indicators, the World Travel & Tourism

Competitiveness Monitor provides an indication of Croatia’s

competitiveness, in terms of the quality of its human resources. On an

index from 0 to 100, in which 100 represents the best performance,

Croatia’s value is rated at 87. Even though this rating is favourable

compared with many of the countries featured in the Monitor – it gives

it a ranking of 51 out of 115 countries in terms of the quality of its

human resources – this does not automatically benefit the Travel &

Tourism industry in Croatia. In fact, many international tour operators

and their clients confirm that service levels in Croatia are poor compared

with competing destinations.The Croatian Government should ensure

that human resource development meets the needs of the industry and

the demand for improved levels of service worldwide.

Human Resources Human Resources

Index Value Ranking

France 97.62a 12

Spain 97.62 14

Austria 96.43 15

Italy 94.05 20

Greece 91.67 32

Croatia 86.90 51

Turkey 73.81 95

Source:World Travel & Tourism Competitiveness Monitor, 2002

a Where countries have the same Index Value, the Monitor ranks them in alphabetical order

Promote a Positive Image of the Travel &Tourism Industry as a Provider of Jobs andCareersFew industries in Croatia have as pervasive an impact on the local

community as Travel & Tourism. It is one of the largest generators of

employment in the country, offering career opportunities ranging across

the entire employment spectrum.WTTC/OEF estimates show that the

Travel & Tourism Industry will directly generate around 13 per cent of

total employment in Croatia in 2003, or some 139,000 jobs.The Travel

& Tourism Economy overall will account for a 27 per cent share, or

294,000 jobs. The number of jobs accounted for by the industry is

expected to rise by 3.7 per cent a year between now and 2013, and

Travel & Tourism Economy employment will increase by a projected 3.8

per cent per annum over the period.

The Croatian Government should help to promote a positive image

of the industry as an employer to young graduates, who have a tendency

to pursue careers in other fields, mainly outside the country.WTTC also

recommends that flexible working practices should be considered to

increase industry responsiveness, productivity and innovation. At the

same time regulatory rigidities and protectionism should be avoided, as

these would have the reverse effect.

The Grey Economy

The WTTC/OEF TSA findings do not include the large number of

unregistered hospitality providers, operating in the so-called ‘grey

economy’ of Croatia. This hidden economy is estimated to cater for a

substantial number of international visitors each year and comprises

family-run facilities, with the host families having little or no training in

Travel & Tourism. Businesses in Croatia’s grey economy of continue to

endanger the country’s efforts to erase its image as a cheap destination.

The Croatian Government needs to tackle this issue quickly and,

through the introduction of incentive schemes, attract operators into the

mainstream economy.

Place a High Priority on Education & TrainingGiven the projected growth in Travel & Tourism demand in Croatia, it

is important to plan ahead to attract sufficient numbers of employees

with the appropriate credentials. On the one hand there is a need for

higher academic skills and increased technological know-how, yet there

is also a need for more broad-based training, which helps develop a

variety of skills and customer service skills.

The attraction of leading multinational Travel & Tourism businesses

to Croatia would help the country gain access to globally competitive

private sector training schemes, supporting student placements and

research on industry/education advisory committees. However, the

majority of Travel & Tourism businesses in Croatia are small to medium-

sized enterprises employing fewer than ten people.These businesses lack

international know-how and the funds required for developing human

resources. WTTC recommends that the Croatian Government play a

leading role in the development of human resources for the sustainable

growth of Travel & Tourism in Croatia.

Special attention has already been paid to placing education and

training at the forefront of Travel & Tourism development, introducing

it into school curricula and implementing measures to improve skills,

such as training accreditation programmes. Other schemes, including the

‘From University to Work’ programme, intended to assist graduates in

finding employment within the sector, need to be promoted more

widely and more vigorously to employers and students themselves.

One of the main challenges facing Croatia is the increase in

technology, which has changed the way the customer looks at

price:value relationships and at how transactions are made. With the

possible exception of universities, such as the Faculty of Tourism and

Hospitality Management in Opatija, the country’s formal education and

vocational training system has failed to adapt to the rapidly changing

needs of the industry.

In its bid to attain higher quality services, Croatia will need to

attract quality leadership to the Travel & Tourism industry, or grow its

Few industries in Croatia have as pervasive an impact on the local community as Travel& Tourism. It is one of the largest generators of employment in the country, offeringcareer opportunities ranging across the entire employment spectrum.

40

own leaders. Bridging the gap between education authorities and the

industry, and establishing liaison groups between the two sectors, will help

public education authorities develop the skills required by the industry

ENCOURAGE OPEN MARKETS ANDSKIES AND REMOVE BARRIERS TOGROWTHOpen MarketsTravel & Tourism needs to operate within open and competitive markets.

It is only in this way that the industry will be able to flourish and realize

its full socio-economic potential.There is no room for protectionism in

an industry that depends on the free movement of people and capital.

Instead, there is a need to create rapid and transparent systems of

interchange to deal with international trade and mobility. The World

Travel & Tourism Competitiveness Monitor shows that, with regard to its

openness towards international tourism – including visa requirements,

international trade and taxation – Croatia is currently ranked 57th out

of a total of 177 countries worldwide. This ranking highlights the fact

that that there is still much progress to be made in terms of increasing

Croatia’s competitiveness in this area.

The Croatian Government continues to implement tough economic

and monetary policy towards a liberal market economy. The start of

negotiations regarding the Stabilization and Association Agreement with the

EU was a major step on the country’s path to EU Membership. Similarly, its

membership of the World Trade Organization (WTO/OMC) reflects

Croatia’s determined approach to liberalization and open markets. Sustained

efforts should be made to incorporate Travel & Tourism as a key element in

the WTO/OMC mechanism and ongoing programmes towards progressive

liberalization. Reform policies should be pursued diligently and should be

conducive to the sustainable growth of Travel & Tourism that would, in turn,

accelerate Croatia’s attainment of economic targets. Broadly speaking, these

policies should include:

■ Reducing the size of government and the level of direct state

intervention;

■ Balancing budgets, healthcare and pension reforms;

■ Maintaining price and exchange rate stability;

■ Accelerating privatization;

■ Streamlining regulation and reducing red tape; and,

■ Attracting foreign direct investment.

Increase Private Participation in TourismDevelopment and PromotionDuring the war, hotels were used by the state to accommodate refugees.

Many refugees still remain in hotels throughout the country, although the

majority have now left or been rehoused in more permanent

accommodation. After the end of the war in 1995, hotel operators took

loans from banks to restore their properties in an effort to reopen hotels to

tourists. Interest rates at the time were extremely high, averaging 18 per

cent, with short grace periods. The Kosovo crisis in 1999 had a second

devastating impact on Travel & Tourism demand within a ten-year period,

putting most hotel operators with high levels of debt out of business.

The Privatization Fund established by the Croatian Government has

41

already privatized a number of hotels acquired through debt equity

swaps, whereby state-owned banks wrote off the bad debts of hotel

companies in return for shares in the enterprise. A number of hotels

were also acquired by the government as a result of the privatization

process, which started ten years ago, and these are now owned by the

Agency for the Rehabilitation of Banks and Deposit Insurances, the

Privatization Fund or local authorities.

The Croatian Government has taken steps to encourage various

forms of private sector participation including the provision of

marketing and management services, joint ventures, lease agreements,

concessions, the purchase of shares in hotels, and the outright purchase

of hotel and leisure facilities as assets. Few hotels remain in state hands,

as the Privatization Fund eagerly aims to meet its target deadline.

However, by doing so, the Fund runs the risk of transferring hotel

properties into the hands of enterprises that do not have Travel &

Tourism expertise, nor any long-term vision for developing the hotel

into a competitive and sustainable business enterprise.

Evidence also suggests that disengagement of the State could be

damaging to the destination’s competitiveness if it is not done so

effectively,with long-term interests at heart.WTTC recommends that all

future efforts towards privatization be undertaken in close cooperation

with the Ministry of Tourism, enabling the Ministry to lead the decisions

taken by the Privatization Fund. This will ensure that decisions are

complementary to the vision and long-term objectives for Travel &

Tourism development established in the National Tourism Policy.

Attract Foreign InvestmentRecognizing the value of international expertise, the power of

international brands in attracting high-spend international visitors, and

the immense job-creating potential of multinational Travel & Tourism

businesses, the Croatian Government has actively opened markets to

internationally recognized management companies such as Sol Meliá,

Hilton and Starwood Hotels. In terms of investment into real-estate,

property and development projects, challenges remain that continue to

hamper the attractiveness of Croatia to the world’s leading Travel &

Tourism companies. Tackling these challenges should be made a key

priority in the National Tourism Policy and should be adopted by all

government agencies, including the Privatization Fund. Priorities

include increased transparency in the privatization process, land

ownership issues, the removal of red tape and intelligent taxation.

Land ownership issues in Croatia concern land surrounding

properties that have been or are in the process of privatization, such as

the outdoor facilities of hotels and campsites.A delay in the resolution of

land ownership issues between the state, private land owners and the

industry will hamper much needed investment in the renovation of hotel

properties. Croatia’s attractiveness to foreign direct investment is also

hampered by frequent changes in regulation and the absence of a legal

framework providing protection of investments for potential investors.

Tax IntelligentlyGovernment taxation policies affect tourism demand and supply,

irrespective of whether these policies relate to the economy as a whole

or apply only to tourism.Taxation raises the price of tourism products

and services and, if the price becomes too high compared with that of

competing destinations, tourism demand will fall. The strong

appreciation of the kuna makes this a very sensitive issue for Croatian

Travel & Tourism. Complex taxation regimes also deter investment.

Taxes associated with Travel & Tourism in Croatia are expected to

total Kn8.3 billion (US$1.1 billion), or 16.8 per cent of total taxes

collected in 2003.This is a significant share – much higher than in most

competing destinations.While Travel & Tourism should pay its fair share

of taxes, the growth and prosperity of the industry – including the

investment necessary to generate these future revenue flows – will

depend in no small part on the competitiveness of Travel & Tourism.

This also depends on whether it receives equitable treatment to other

industries and to competing destinations.

In January 2001, the value-added tax (VAT) rate of 22 per cent on

tourism services was waived for organized international inbound

tourism. Proposals to reduce the rate of VAT by more than half to a set

rate for the industry should be implemented swiftly, helping to provide

a more competitive environment for Croatia’s Travel & Tourism

operators, as well as to encourage domestic tourism.Tourist levy charges

also need close scrutiny, to ensure that travellers are not paying duplicate

or multiple fees for what they see as a single journey. As an example,

each of Croatia’s main airports – owned by the local authority and

acting as an autonomous entity – charges passengers its own air

passenger duty tax, with varying rates for international and domestic

departures. For passengers transiting via one or another airport, this

sometimes results in a duplication of taxes, adding to the price of what

is perceived to be a single journey.

New tax proposals are currently under consideration by the

Croatian Government. These include a new tourism tax, to be

introduced in the coming year, which will require all private homes

offering more than 20 beds to register their activities and pay their due

taxes.The new proposals will also require homes offering more than six

beds to pay a fixed rate of tax each year.While these proposals will go

some way to stamping out the grey economy, care should be taken to

ensure that they do not harm the overall productivity of the sector.

There is a tendency worldwide for governments to target Travel &

Tourism as a revenue generator to meet short-term budget objectives,

with little thought to the long-term consequences on demand and job

creation.

WTTC recommends that the Croatian Government develop fiscal

regimes that encourage tourism growth, exports, investment,

infrastructure, business innovation and job creation. The ‘User Pays –

User Benefits’ principle should be applied, with funding collected

earmarked for the related Travel & Tourism infrastructure, transparently

Croatia’s attractiveness to foreign direct investment is also hampered by frequent changesin regulation and the absence of a legal framework providing protection of investmentsfor potential investors.

42

dispersed and with collection time limited to the specified project

completion. Given the price sensitivity of tourism, special taxes should

not be levied on the tourism industry unless they are hypothecated – in

other words, unless the revenues derived therefrom are used wholly and

exclusively for tourism development and/or marketing.

Facilitate Airline Access, Air TransportLiberalization and Open SkiesOne of the biggest challenges facing Croatia’s Travel & Tourism industry

is that of developing a competitive air transport environment. Air

transport is the second most important means of access to, from and

within Croatia and, for some markets, it is the most important.

Nevertheless, the national carrier, Croatia Airlines, has a relatively small

international fleet, which mainly operates between Zagreb and

Germany. As a result, traffic rights for airlines operating from many

major European cities and potential tourism generating markets are

restricted.The shortage of airline services has also had a negative impact

on Zagreb’s aim to become a major gateway between western and

southeastern Europe.

The Croatian Government should not be tempted to protect its

national carrier in this way, but should open its air transport market to

attract more international services – both short- and long-haul – which

will improve regional networks.An expansion of liberal aviation accords

will help to attract an increased number of scheduled flights and charter

activity from Croatia’s main markets, while low-cost carriers can help

generate new markets from within Europe, greatly benefiting local

economies. By way of example, plans for Ryanair to operate direct

services between the UK and Pula will help to market Pula as a

destination in its own right to the UK market, bringing Travel &

Tourism growth to the region.

Enhance Safety & SecurityThe conflict over Croatia’s independence led to land mines being laid

on Croatian territory, mostly in former areas of confrontation, including

the Danube region and the former Krajina.The government continues

to de-mine affected areas. High priority must be given to completing

this process so as to avoid the risk of accidents involving local residents

or tourists.

Public safety and security do not pose major problems in Croatia

at the present time. However, isolated incidents resulting from actions

prompted by ethnic tensions have occurred.Therefore, these incidents

should be factored into central and local policing strategies, with

contingency plans drawn up to protect tourists.

43

MATCH PUBLIC AND PRIVATEINFRASTRUCTURE WITHCUSTOMER DEMANDExpand Infrastructure Adequate infrastructure and access to generating markets are two of the

most important prerequisites for the development of any Travel &

Tourism destination.Without these two components, the industry’s full

potential for employment, export earnings and regional development

cannot be achieved. The infrastructure requirements of the industry

affect most other sectors of the economy and, in most cases, public

infrastructure that supports Travel & Tourism expansion will serve other

urban and regional development purposes.

Quality infrastructure is essential to diversify Croatia’s product

base, remove bottlenecks, ensure good service and distribute the

benefits of tourism flows across the economy. It is not only a question

of coping with increasing numbers of visitors, but also of making sure

that the patterns of flow do not affect the natural or built heritage, nor

run counter to local interests.

The Croatian Government has made considerable investments in

the development of municipal infrastructure, including a major waste-

water treatment plant, which will improve the safety and reliability of

drinking water in the region of Zagreb, and prevent pollution of the

Sava River. The government has acquired high levels of financial

support from international creditors – including the European Bank for

Reconstruction & Development, the World Bank and the European

Investment Bank – for this and other important developments that will

support the growth of Travel & Tourism in Croatia.

Good communications are essential to the successful development

of any business. Travel & Tourism, which moves people and services

across wide geographical areas, requires excellent transport networks.

Three important infrastructure developments have been initiated to

facilitate improved connectivity and transport links, supporting

economic growth both within Croatia and between the country and

tourism generating markets.These include:

■ The rehabilitation of the railway infrastructure and the

modernization of the Croatian railway linking the country to

Hungary and Bosnia Herzegovina.The project will contribute to

the improvement of railway service on an important transit

corridor, assisting the integration of Croatia with neighbouring

countries and with the EU. This development could help spur

more growth in Travel & Tourism from these markets and with

markets further afield.

■ The construction and rehabilitation of motorways throughout the

country, starting with one of the country’s main motorways, a 189-

kilometre toll road, which will link Zagreb with the coastal city of

Split, and eventually Dubrovnik further down the Dalmatian coast.

■ In anticipation of growing air traffic in and around Croatian

airspace, Croatia Control Limited – the country’s air navigation

service provider – will replace the core air traffic management

system, including radar data, flight processing systems and

communication equipment, towards facilitating growth and

ensuring safe operations.

While these developments will assist Travel & Tourism growth and

economic development for the country, there are several other areas

that require urgent attention, such as connectivity between the airports

and major cities and improvements to slip roads linking the motorways

with towns and coastal areas.

Six of the country’s nine international airports are located on the

Croatian coast. Bad weather conditions have a serious impact on airline

service to and from these airports, and urgent improvements to road and

rail connections are required. As an example, many flights approaching

Dubrovnik airport, situated close to the Adriatic Sea coast, have to be

redirected to Split in bad weather conditions. Construction of a new

runway may not be feasible due to geographic limitations. Poor

connectivity between the two airports, in terms of road and rail (there

is currently no rail connection), extends potential journey times by up

to three hours.This does not bode well for Dubrovnik’s aim to develop

tourism throughout the autumn and winter seasons, especially the

MICE market.

WTTC recommends that a task force be established, involving

public and private sector leaders from the two regions, to identify and

discuss new approaches to accessibility for the region during the autumn

and winter months, when weather conditions are at their worst.

Airport expansion and modernization, as well as streamlined

immigration and border clearance facilities, need to be upgraded in most

of the country’s airports. The efficiency of transport-related

infrastructure can play a significant role in customer acceptance of

airport hubbing strategies.

Sea-related activities, including marine/nautical tourism, are

estimated to represent more than 90 per cent of total tourist activity in

Croatia3.This sector is expected to attract high levels of growth in the

foreseeable future. Nevertheless, investment in the improvement of

marinas and ports has not been in line with the projected growth in

demand. Poor connectivity between the islands and the speed and quality

of transfers between the islands and the mainland of Croatia continue to

hamper investment and Travel & Tourism demand for these regions.

Investment in seaports and airports on the islands will help to spread

economic opportunities, wealth and jobs to these local communities.

There is a general acceptance that the highest priority for Croatian

Travel & Tourism development at this time is the speedy reconstruction

and restoration of hotel accommodation in the country. Most Croatian

hotels were constructed between 1960 and 1980 to accommodate

visitors from other socialist economies of the time.Thus accommodation

standards do not comply with the international standards expected by

the more sophisticated travellers of today. The structure of many

properties needs to be modified to meet international requirements, star

ratings and quality benchmarks. Urgent investment is needed in this area

to bring Croatia’s hotel capacity up to the level required to meet the

projected growth in Travel & Tourism demand over the next ten years.

According to estimates by the German Investment & Development

Company, there are currently less than half the number of hotel beds in

the three- to five-star categories required to meet the projected demand

for 70 million overnights by 2010.

Government proposals to introduce a programme entitled

‘Incentive for Success’ will help to increase levels of private home/villa

accommodation.The government is contemplating a proposal to secure

3Data from Horwath Consulting Zagreb

44

a low, set rate of interest on loans to expand and modernize local homes

as private villas, in order to accommodate more tourists. It is generally

accepted that, while this measure would help upgrade the quality of

accommodation facilities, it would not help expand infrastructure to

meet the projected growth, as many of these homes are already in use

for this purpose. The National Tourism Policy should aim to attract a

diversity of accommodation types, especially hotel developments – a

sector that requires urgent expansion.

Improve Land-use Planning and ProtectionLand-use planning by regional governments and local authorities,

particularly zoning, should be encouraged to protect the character of

the natural environment, which is one of Croatia’s major attractions for

residents and visitors alike. The Croatian Government should address

the potential danger of uncontrolled real-estate development that may

affect the positioning of Travel & Tourism in Croatia and the value

offered to international visitors. In this case, the introduction of

incentive programmes for private sector capital investment and small

business development could help by ensuring timely access to capital

resources and funding.

Admittedly, central government cannot enforce all types of

legislation, but it can show leadership and encourage buy-in for

legislation by regional and local governments. Special incentives should

also be proposed for the rapid modernization and upgrading of Croatia’s

rural areas in order to spread the benefits of Travel & Tourism across

the country.

Experience has shown that investment – whether foreign or

domestic – is extremely sensitive to economic changes.To guard against

this, continued efforts need to be made, through the development of

incentive schemes, to attract sustained capital investment in the

country’s Travel & Tourism industry from domestic and foreign sources.

At the same time, however, it is important to guard against the

dangers of excessive development that bears no relation to existing or

projected demand.This can result in cut-throat competition, leading to

declining operating performances and lower profits.

FAVOUR TECHNOLOGICALADVANCEMENTUnsurprisingly,Croatia has not yet been able to embrace the full potential

of technology. The World Travel & Tourism Competitiveness Monitor

illustrates the country’s level of progress in terms of modern technological

systems and infrastructure, the use of data regarding telephone mainlines,

mobile phones, high technology exports and Internet hosts.According to

the Monitor, Croatia has an Index Value of 22, where zero is given to the

country with the lowest performance and 100 to countries with the best

score.This rating ranks Croatia in 64th position among the 206 countries

surveyed. As a technology intensive industry,Travel & Tourism can help

Croatia obtain and apply information technology systems and

telecommunications at a competitive pace.

Index Value Ranking

Austria 59.59 18

France 58.18 19

Italy 53.85 26

Greece 47.45 31

Spain 38.89 40

Croatia 22.00 64

Turkey 19.23 67

Source:World Travel & Tourism Competitiveness Monitor, 2002

TelecommunicationsAn increasing share of Travel & Tourism operations – and virtually all

distribution and sales transactions – flow through telecommunications

circuits.Where telecommunications are monopoly controlled, there are

often restrictions on access, high costs and unreasonable operating

conditions. This in turn limits the potential of market-oriented

expansion of Travel & Tourism, with negative impacts domestically and

internationally in terms of cost, operational efficiency and customer

service.

WTTC recommends that the Croatian Government continue

pursuing its policy of open telecommunications markets,which will help

to lower costs and enhance services for travellers and tourism companies.

45

E-Marketing and DistributionIn today’s increasingly competitive global marketplace, there is a real need

for a strong national leadership branding which optimizes resources,

focuses the myriad of interests – public and private sector, national,

regional and local – and attracts the attention of travellers. This will

require particular emphasis on a coordinated approach to Internet

marketing and distribution to optimize Croatia’s visibility.

The Croatian National Tourist Board has already taken the lead in

developing a national tourism e-business for Croatia.This new strategy is

centred on a newly designed website and national database, collectively

providing an interactive one-stop information shop for potential travellers

to Croatia.

Experience in other countries around the world has shown that,

while public sector support for national destination databases is critical,

the operation and marketing of these databases are best left to the private

sector. Best-practice models include Ireland,Austria and the Netherlands.

The central and regional governments of Croatia should provide support

for local companies so that they can promote and distribute their

products through the website, as well as developing access to other

technology advances.This will help them compete more effectively with

foreign-owned companies in Croatia and with suppliers in competing

destinations.

PROMOTE RESPONSIBILITY INNATURAL, SOCIAL AND CULTURALENVIRONMENTSEstablish Clear Procedures and GuidelinesTravel & Tourism destinations increasingly recognize that their

competitiveness in the medium to longer term depends not only on the

provision of high quality services at competitive prices, but also on

whether this occurs in a sustainable way – in harmony with the local

environment and local communities. According to the World Travel &

Tourism Competitiveness Monitor, Croatia is fairly well positioned in

comparison with the other 205 countries featured in the Monitor,

ranked as number 34. This score indicates that the Croatian

Government’s awareness towards environmental aspects of development

is fairly high.This rating also takes into account current levels of CO2

emissions and the ratification of environmental treaties.

As the number of people within a given area increases, so too does

the pressure placed on the local environment and community. Planning

to meet this growth in a sustainable fashion is fundamentally important

to the long-term success of Travel & Tourism. Important areas for

consideration by the central and local governments in Croatia include

consumption, waste and resource utilization.

Croatia’s well-preserved cultural and natural environments are the

country’s biggest tourism assets. In the past, a high level of environmental

consciousness has helped Croatia develop Travel & Tourism in a

sustainable way. The Croatian constitution places the environment as a

whole – particularly the sea and coastal areas, the islands, flora, fauna and

cultural monuments – under the special protection of the government.

This has helped Croatia preserve much of the natural beauty on which

its Travel & Tourism industry so heavily relies.

The Law on Environmental Protection, established in 1994,

commits the Croatian Government to developing environmental

strategies and programmes and detailing these, together with guidelines,

in reports. It is important that government plans highlight positive case

studies and deliver a manual for implementation. Procedures and

guidelines should be communicated to all stakeholders and implemented

as widely and as quickly as possible. Implementation of these procedures

and their impact should also be closely monitored.

Education and awareness are two of the best tools for the

development of responsible tourism – at the social, economic and

environmental levels. The Croatian Government should accelerate its

efforts to build these concepts into the education system, promoting the

economic, social and environmental benefits of sustainable Travel &

Tourism development.

Local campaigns can add impetus to national efforts. Last year the

Croatian National Tourist Board ran an exemplary campaign under the

theme ‘I love Croatia’.The objectives of the campaign were to enhance

the general appearance of Croatian tourism areas and improve the

satisfaction levels of tourists. Media attention was drawn to the

presentation of the award ‘Tourist Flower of 2002’ to the most successful

participant. The campaign helped to enhance the quality of the

environment in many local regions and to inject a sense of pride among

the local population in the participating towns and villages.

Sustainability will need a balance of private initiative, economic

incentives and regulation. Global principles should be reflected in local

action and market-based delivery mechanisms should be encouraged.

Pilot projects should be used to evaluate and demonstrate local

sustainability. It is important for sustainability to be accepted as a policy

across the industry as a whole, and not just as a policy for rural and

nature-based tourism.

One very clear and practical example of this is the Blue Flag

programme.This initiative involves a prestigious annual award to beaches

that conform to international standards such as environmental and

tourist friendliness, cleanliness and visible security. Croatia has been

successful in attaining the Blue Flag for many of its beaches.

Increase Branding through Internationaland/or National DesignationsCroatia boasts several examples of world-class natural and cultural

resources that have been awarded World Heritage Site designation, such

as the Old City of Dubrovnik, Split,Trogir and the Plitvice Lakes.The

Croatian Government should also consider developing and promoting a

national heritage designation, with clearly defined criteria to support

quality. Such a designation should be accompanied by increased

government funding for the development and promotion of identified

areas of particular heritage value. A focus on national and international

designations will assist Croatia’s development of their new brand,

‘Croatia – the Mediterranean as it once was’.

Croatia boasts several examples of world-class natural and cultural resources thathave been awarded World Heritage Sitedesignation

46

1998 1999 2000 2001 2002E 2003E 2013P

Croatia Travel & Tourism - Kn mn

Personal Travel & Tourism 7,613.80 7,519.30 8,819.80 9,165.40 11,296.60 12,598.00 31,106.80

Business Travel & Tourism 2,242.60 3,696.60 2,916.10 3,261.30 3,617.40 3,922.91 7,293.89

Corporate 1,480.10 2,439.80 1,924.60 2,152.50 2,362.23 2,559.68 4,977.97

Government 762.49 1,256.80 991.47 1,108.80 1,255.17 1,363.23 2,315.92

Gov't Expenditures - Individual 116.36 141.29 117.34 34.57 41.38 53.58 108.59

Visitor Exports 17,927.00 18,136.00 23,465.00 28,681.00 30,622.60 35,474.90 93,693.70

Travel & Tourism Consumption 27,900.00 29,493.00 35,318.00 41,142.00 45,577.90 52,049.40 132,203.00

Gov't Expenditures - Collective 1,054.00 990.15 1,002.90 254.78 318.45 412.34 835.70

Capital Investment 5,501.80 5,214.40 5,075.70 4,914.10 4,726.73 4,921.25 10,635.30

Exports (Non-Visitor) 2,369.50 2,713.40 3,502.30 3,515.80 3,529.85 4,101.95 12,735.60

Travel & Tourism Demand 36,825.00 38,411.00 44,899.00 49,827.00 54,153.00 61,485.00 156,410.00

Travel & Tourism Industry Aggregates (Direct Impact Only)

Employment ('000) 123.76 122.59 119.71 131.68 128.75 138.97 200.07

GDP 10,270.00 10,390.00 13,246.00 15,970.00 16,910.60 19,664.70 52,239.10

Travel & Tourism Economy Aggregates (Direct and Indirect Impact)

Employment ('000) 293.78 291.28 283.90 282.52 275.32 294.06 427.38

GDP 24,978.00 25,088.00 30,285.00 33,819.00 36,000.00 41,609.90 111,590.00

Note: Employment in ‘000 Jobs

T&T Accounts as % of National Accounts

Personal Travel & Tourism 9.39 9.22 9.84 9.37 10.62 11.02 15.55

Gov't Expenditures 3.19 2.88 2.81 0.75 0.92 1.15 1.38

Capital Investment 17.16 15.79 15.25 13.19 11.61 11.06 10.69

Exports 37.40 36.18 37.68 40.11 40.22 43.83 56.23

T&T Imports 17.67 19.13 18.40 17.93 18.70 19.09 22.03

Travel & Tourism Industry Aggregates (Direct Impact Only)

Employment 11.68 11.54 11.59 12.72 12.27 12.95 15.86

GDP 7.46 7.34 8.68 9.80 9.76 10.58 14.80

Travel & Tourism Economy Aggregates (Direct and Indirect Impact)

Employment 27.72 27.43 27.48 27.30 26.24 27.41 33.88

GDP 18.15 17.72 19.86 20.76 20.78 22.39 31.62

Travel & Tourism Real Growth (% per annum, except 2013 = 10-year annualized)

Personal Travel & Tourism -3.25 -4.42 12.60 1.31 20.09 8.60 6.57

Business Travel & Tourism -13.48 59.52 -24.27 9.03 8.08 5.60 3.58

Gov't Expenditures 10.06 -6.44 -4.95 -74.82 21.18 26.09 4.53

Capital Investment 21.94 -8.28 -6.55 -5.61 -6.27 1.39 4.03

Visitor Exports 1.28 -2.09 24.21 19.16 4.04 12.81 7.32

Other Exports 1.60 10.82 23.91 -2.13 -2.17 13.16 7.50

Travel & Tourism Consumption -1.28 2.31 14.96 13.57 7.95 11.21 6.88

Travel & Tourism Demand 2.10 0.95 12.21 8.19 5.90 10.56 6.89

SATELLITE ACCOUNT

47

1998 1999 2000 2001 2002E 2003E 2013P

Travel & Tourism Industry Aggregates (Direct Impact Only)

GDP 3.22 -2.09 22.39 17.54 3.18 13.24 7.38

Employment 6.43 -0.95 -2.35 10.00 -2.22 7.94 3.73

Travel & Tourism Economy Aggregates (Direct and Indirect Impact)

GDP 8.90 -2.80 15.88 8.87 3.73 12.55 7.48

Employment 0.21 -1.04 0.20 -0.49 -2.55 6.81 3.83

Croatia Travel & Tourism - US$ mn

Personal Travel & Tourism 1,196.70 1,057.20 1,065.60 1,099.00 1,457.62 1,625.55 4,013.79

Business Travel & Tourism 352.49 519.74 352.33 391.05 466.76 506.18 941.15

Corporate 232.64 343.03 232.54 258.09 304.80 330.28 642.32

Government 119.85 176.71 119.79 132.96 161.96 175.90 298.83

Gov't Expenditures - Individual 18.29 19.87 14.18 4.15 5.34 6.91 14.01

Visitor Exports 2,817.70 2,549.90 2,835.10 3,439.00 3,951.30 4,577.41 12,089.50

Travel & Tourism Consumption 4,385.20 4,146.70 4,267.20 4,933.10 5,881.03 6,716.06 17,058.50

Gov't Expenditures - Collective 165.67 139.21 121.17 30.55 41.09 53.21 107.83

Capital Investment 864.76 733.14 613.26 589.22 609.90 635.00 1,372.30

Exports (Non-Visitor) 372.43 381.50 423.16 421.56 455.46 529.28 1,643.30

Travel & Tourism Demand 5,788.10 5,400.60 5,424.80 5,974.40 6,987.48 7,933.55 20,181.90

Travel & Tourism Industry Aggregates (Direct Impact Only)

Employment ('000) 123.76 122.59 119.71 131.68 128.75 138.97 200.07

GDP 1,614.20 1,460.80 1,600.40 1,914.90 2,182.01 2,537.38 6,740.53

Travel & Tourism Economy Aggregates (Direct and Indirect Impacts)

Employment ('000) 293.78 291.28 283.90 282.52 275.32 294.06 427.38

GDP 3,926.00 3,527.40 3,659.10 4,055.10 4,645.17 5,369.02 14,398.70

Travel & Tourism - 1990 Constant US$ mn

Personal Travel & Tourism 1,150.70 1,099.80 1,238.40 1,254.70 1,506.83 1,636.38 3,089.93

Business Travel & Tourism 338.94 540.68 409.46 446.44 482.52 509.55 724.52

Gov't Expenditures - Individual 17.59 20.67 16.48 4.73 5.52 6.96 10.79

Visitor Exports 2,709.40 2,652.70 3,294.80 3,926.10 4,084.69 4,607.90 9,306.86

Travel & Tourism Consumption 4,216.60 4,313.80 4,959.10 5,632.00 6,079.56 6,760.80 13,132.10

Gov't Expenditures - Collective 159.30 144.82 140.82 34.88 42.48 53.56 83.01

Capital Investment 831.51 762.68 712.70 672.69 630.49 639.23 1,056.44

Exports (Non-Visitor) 358.12 396.87 491.77 481.28 470.84 532.81 1,265.06

Travel & Tourism Demand 5,565.50 5,618.20 6,304.40 6,820.80 7,223.36 7,986.40 15,536.60

GDP

Travel & Tourism Industry 1,552.10 1,519.70 1,859.90 2,186.10 2,255.67 2,554.29 5,189.06

Travel & Tourism Economy 3,775.10 3,669.50 4,252.40 4,629.50 4,801.98 5,404.79 11,084.50

TABLES

WTTC would like to express its appreciation to thefollowing organizations that contributed their

knowledge, insight and data/information to the policyreview effort included in this report.

Atlas AirtoursAtlas Travel Agency

Croatia Airlines Croatian National Tourist Board

Croatian Ministry of Tourism Croatian Bureau of Statistics

DEG, German Investment & Development CompanyEkonomski Fakultet, Zagreb

Faculty of Tourism Hospitality & ManagementFakultet Za Turistički, Opatija

Gulliver Travel Agency, DubrovnikHotel Esplanade, Zagreb

Hotelijerski FakultetHorwath & Horwath Consulting

Institute for Tourism, CroatiaKompas Zagreb

Pucić Palace, Dubrovnik Republic of Croatia, Region of Istria

Sol Meliá Croatia LtdTHR International Tourism Consultancy

TZ Żupanija IstarskaTZ Żupanije Primorsko-goranske

UHPA,Association of Croatian Travel Agencies Zagreb Convention Bureau