Challenges and improvements needed for Croatia to stay competitive as a destination

Croatia

Croatian tourism, traditionally one of the country’s most important sources of revenue, faces challenges following the 2024 season.

Croatia travel specialists Kroati.de in Germany, where the largest number of visitors to Croatia have traditionally come from, say declining tourist numbers, an oversupply of accommodation, staff shortages, and high prices are key issues straining the sector.

They say that these developments present Croatia with the challenge of maintaining its position as an attractive destination, while also implementing necessary measures for future growth.

They have compiled a detailed analysis of the various factors contributing to these trends, along with necessary strategies they say to secure the long-term future of Croatian tourism.

“It is clear that the industry must both respond to new market conditions and further strengthen its existing assets to remain sustainable,” they say.

Below is their detailed analysis:

Fewer tourists during the early season

Rovinj

This year’s early season saw a decline in tourist numbers of around 7 to 10 per cent compared to the previous year, which is alarming for the industry.

The most noticeable drops occurred in May and June, months typically regarded as indicators of the overall success of the season.

The decrease in early-season bookings was particularly evident in coastal regions where large numbers of tourists are usually expected.

Areas like Istria, Kvarner Bay, and Dalmatia, which normally benefit from a significant number of spring visitors, were among those most affected.

One key reason for this decline was the UEFA European Football Championship, held in part during June. Many potential holidaymakers postponed or cancelled their travel plans to watch the matches either at home or in the host country, Germany.

Additionally, unfavourable school holiday timings, such as Germany’s late Whitsun holidays, led many families to adjust their plans or choose alternative destinations that better fit the holiday calendar.

Another significant factor contributing to the drop in tourist numbers was ongoing inflation, particularly in Germany, which is traditionally one of Croatia’s largest markets. High inflation and the resulting economic uncertainties caused many German holidaymakers to cut back on their travel budgets or cancel their plans altogether, directly impacting booking figures.

Fewer tourists from German-speaking countries

(Image: Kroati.de)

A notable trend emerged during Croatia’s 2024 tourist season: while visitor numbers from the DACH region (Germany, Austria, and Switzerland) have decreased, there has been a significant rise in tourists from Eastern European countries such as Poland, the Czech Republic, and Slovakia.

This shift is due to various factors, including high inflation and economic uncertainties in traditional markets, leading many Western Europeans to scale back their holiday plans. In contrast, more and more Eastern European tourists are discovering Croatia as an attractive holiday destination.

However, this change also presents additional challenges, as the tourism industry must adapt its offerings and services to meet the needs of this new visitor group. Eastern European tourists often prioritise affordability and value for money, which requires the sector to be more flexible in catering to different expectations.

According to recent reports, the number of overnight stays by guests from Poland, the Czech Republic, and Slovakia increased by around 15% in 2024, while visitor numbers from the DACH region dropped by up to 10%.

The leading source countries for tourists in Croatia in 2024 are:

1. Germany (17%)

2. Slovenia (11%)

3. Austria (9%)

4. Poland (8%)

5. Czech Republic (8%)

6. Italy (7%)

These figures highlight the diversity of Croatia’s tourist base and underline the importance of flexibility for the industry.

More accommodation – less demand (a paradox)

Makarska

A concerning trend emerged in Croatia’s 2024 tourist season: despite a decline in tourist numbers, the supply of accommodation continued to rise.

Each year, around 25,000 new beds are added in private rentals, as many homeowners attempt to capitalise on tourism.

However, this strategy appears to be less successful in 2024, with many newly built apartments and holiday homes remaining unoccupied.

This oversupply of accommodation could become a long-term issue, as demand fails to meet expectations and the new capacity remains underutilised, leading to pressure on prices. Coastal regions and islands, where private rentals are traditionally abundant, are particularly affected.

The situation is exacerbated by the uncontrolled and uncoordinated expansion of tourist capacity, with many new properties not meeting modern standards and thus becoming less attractive to tourists.

According to the Croatian Tourism Board (HTZ), overnight stays in 2024 fell by approximately 7-10% compared to the previous year, while the supply of accommodation increased by around 5% during the same period. This discrepancy highlights the paradox:

More accommodation combined with declining demand is putting the entire industry under strain. If this trend continues, many small providers may be forced to close or sell their properties, leading to further price drops and heightened competition.

Strategic planning and better regulation of tourism development in Croatia are urgently needed to counteract this trend.

Sharp decline in excursions and activities

The year 2024 saw a notable decline in the demand for leisure activities and excursions in Croatia, especially when compared to previous years. This drop particularly affected activities such as boat tours, visits to national parks, and cultural events, which have traditionally been popular with tourists.

A key reason for this decline is the changing behaviour of tourists, influenced by economic uncertainties and rising prices. Demand for such activities has fallen, prompting many operators to adjust their prices or even reduce their offerings. This shift contradicts earlier forecasts, which had predicted steady growth in this segment.

It has also been observed that tourists are increasingly interested in individual activities that they can undertake independently, often away from typical tourist routes. This change has led to a decrease in demand for traditional leisure offerings.

The industry now faces the challenge of responding to this new trend while maintaining the appeal of its traditional activities to ensure future success.

Restaurants report fewer guests

Croatia

During the 2024 season, Croatia’s tourism sector, particularly the hospitality industry along the Adriatic coast, experienced a significant decline in visitor numbers.

Compared to July 2023, around 150,000 fewer tourists were recorded, which had a noticeable impact on Croatian restaurants.

Many restaurant owners reported revenue drops of an average of 20%, with declines of up to 30% in Istria and as much as 50% on the islands.

These losses stand in stark contrast to previous years, when the industry benefited from strong tourism growth.

A key factor behind this decline was the perception of high prices in Croatian restaurants. Many visitors felt that prices were excessive and chose to skip dining out, resulting in a marked decrease in demand, especially in an already challenging economic environment in Europe, characterised by high inflation and economic uncertainty.

Interestingly, restaurant prices in July 2024 increased by another 9.5% compared to the previous year, despite significant price hikes in previous years of 14.6% (July 2023 versus July 2022) and 16.8% (July 2022 versus July 2021).

These continuous price increases have undoubtedly contributed to the current situation, where Croatia’s hospitality sector is seeing fewer guests and declining revenue.

Labour shortages

The shortage of skilled workers in Croatia’s tourism industry worsened in 2024, particularly in the hospitality and hotel sectors.

The Croatian tourism sector, which relies heavily on seasonal workers, is increasingly forced to turn to foreign labour, especially from Asia and neighbouring countries.

In 2024, it was estimated that Croatia faced a shortfall of around 10,000 workers in the tourism sector alone.

As a result, the country issued over 100,000 work permits to foreign workers, many from Nepal and the Philippines. These workers fill roles in the service sector, such as waiters, chefs, and cleaners, which have become harder to staff as many Croatians move abroad in search of better wages.

The challenges in Croatia’s tourism industry have been compounded by the “Great Resignation” trend, where many workers switched careers during and after the pandemic to seek better working conditions.

It is expected that Croatia will employ over half a million foreign workers by 2030, highlighting the urgent need to find long-term solutions to make the local job market more attractive and reduce dependence on foreign labour.

High prices – A burden for tourists and locals

The surge in prices during the inflation of autumn 2022, which peaked at 13.5% in November, along with the introduction of the euro, led to significant cost increases and drove up prices in Croatia, particularly in the tourism sector. As a result, many locals are struggling with rising living costs.

Prices in the hotel and hospitality industry continued to rise moderately in 2024, with the cost of services, especially in tourism, remaining high.

In the first quarter of 2024, service prices increased by 5.5% compared to the previous year. Inflation remains persistent, especially in the services sector.

According to Croatia’s National Bureau of Statistics (CBS), the following price increases were observed in 2024: ▪ Prices in restaurants and hotels: +10.7% in May 2024 compared to May 2023 ▪ Food and non-alcoholic beverages: +2.8% increase in 2024 ▪ Transport costs: +6% in the same period ▪ Average price rise in services in the first quarter of 2024: +5.5% ▪ Specific service sectors (e.g. postal and courier services): +19%

Many tourists this year have tried to cut back on spending by bringing more food from home and opting to cook in their holiday accommodation rather than dining out. This trend of spending less locally has further impacted the local economy negatively.

Further challenges

In 2024, Croatia’s tourism sector faced significant challenges, further exacerbated by negative media coverage. A prominent example was the occurrence of an algal bloom, creating slime along some coastal areas.

Although this natural phenomenon is temporary and not uncommon in coastal regions, the media greatly exaggerated its impact, even though only a few sections of the coast were affected.

The reporting gave the impression that Croatia’s water quality was generally poor, damaging the country’s reputation as one of Europe’s destinations with the cleanest seas.

In addition, the media gave considerable attention to the numerous wildfires along the Adriatic coast. While these fires are a real threat and occur in many Mediterranean countries, the coverage was disproportionate, casting Croatia in a negative light and discouraging potential tourists.

To counter these challenges, Croatian tourism authorities increased their presence on social media and other platforms to correct misconceptions and highlight the positive aspects of the country.

Positives and Opportunities for Tourism in Croatia

Croatia is investing in comprehensive projects and initiatives to boost tourism and establish the country as a versatile destination.

The expansion of the motorway network, the Pelješac Bridge, and the extension of the airport terminal in Zagreb are improving transportation links and access to tourist destinations.

The country is also modernising its road and rail infrastructure and planning further connections to enhance regional integration.

In addition to infrastructure improvements, Croatia is pursuing projects aimed at promoting year-round tourism. Investments in health tourism, such as the development of wellness and spa facilities, are designed to attract both local and international visitors.

Cultural tourism is supported through the “Heritage Hotel” programme and cultural events, while the “Smart Destination” programme upgrades cities technologically to enhance the tourist experience.

Moreover, Croatia is committed to sustainable projects that promote environmental protection and quality of life, focusing increasingly on sustainable tourism, including eco, rural, and agritourism.

New tourist products such as nautical tourism, adventure tourism, and wine tourism complement the offering and enhance Croatia’s appeal to diverse tourist groups.

These varied projects, along with the excellent performance of the Croatian National Tourist Board, demonstrate Croatia’s commitment to developing the tourism sector sustainably and holistically and positioning the country as a modern and attractive destination.

Survey with Croatian Travel Agencies and Property Owners

(Image: Kroati.de)

We conducted a survey asking the question, “Were you satisfied with the 2024 season?” About 300 Croatian travel agencies and property owners participated in the survey. Of these, 40% answered “Yes” and 60% answered “No.” The results reflect the impressions of Croatian travel agencies and property owners regarding the season.

Conclusion and Outlook

The future of Croatian tourism largely depends on how successfully the country addresses existing challenges. While the positive developments of recent years provide a solid foundation, it is essential for Croatia to take proactive measures to remain competitive in the long term.

This involves adjusting the tourism strategy, diversifying markets, and managing economic risks. Croatia must particularly distinguish itself from the growing competition in the Mediterranean, which is also investing in infrastructure, marketing, and sustainable tourism.

To succeed in a saturated market, Croatia needs to rethink its tourism strategies and adapt to changing market conditions. Key steps include targeting new markets, especially in Asia and North America, and tailoring offerings to the needs of different visitor groups.

Investments in quality and infrastructure, promoting year-round tourism, and implementing sustainable practices are crucial.

Additionally, close collaboration with local communities can create authentic experiences and increase local acceptance. Through these flexible and innovative measures, Croatia can secure its position as an attractive destination in the long term and strengthen its competitiveness.