The Dark Side of Croatia’s Tourism Boom

As Croatia attempts to rebrand itself as the EU’s newest luxury tourist destination, the hotel industry is literally lying in ruins. We took a look at 21 of the nearly 100 derelict hotels and resorts that still mar the landscape, waiting to be revived by the country’s much-hyped tourism boom

In many ways, Croatia’s tourism sector is thriving. Last year, 11.8 million tourists descended upon the “land of 1,000 islands” and spent more than nine billion euros. And as the senior advisor for the Agency for Investments and Competitiveness was quick to remind me, Croatia was one of the few countries in Europe to register an increase in tourist arrivals last year. But all the ebullient reports about “soaring” numbers hide a seemingly incongruous fact: The Croatian hotel industry is on the brink of disaster.

Of course, with Croatia still riding the wave of optimism that has accompanied its entrance into the EU and the government’s increasing preoccupation with developing “upscale” tourism, the current state of the hotel industry has gone largely unacknowledged. The reality is that dozens of hotels across the country have been deserted, and are now deteriorating into dangerous ruins. Zdenko Cerovic, a professor of tourism and hospitality at the University of Rijeka, says there are a staggering 96 abandoned hotel structures in Croatia.

In a country that has often viewed tourism as its principal path to prosperity, occasionally at the expense of diversification both within the sector and outside of it, these devitalized structures are an unpleasant reminder of the potential for failure.

Fully operational hotels are in trouble too. Anyone who’s visited the Croatian coast in recent years might recognize this. When was the last time you opted to stay in a sprawling 1970s hotel rather than a private rental? As all those Zimmer frei signs attest, private rooms, apartments, and even villas have become increasingly popular accommodation options, and many visitors now view hotels, especially those built during the socialist era, as undesirable, lacking amenities, luxuries – even depressing.

Former Croatian Hotel Association president Andjelko Leko says that well over half of foreign tourists and about 90 percent of domestic tourists now stay in cheap, privately owned flats rather than in commercial hotels. There’s even a name for this shift: apartmanizacija — “apartmentization”.

Of all the beds reserved for tourism in Croatia — in private apartments, hotels, camping areas, and other miscellaneous accommodation — a mere 12.5 percent of beds are in hotels. That’s awfully low for a major tourist destination. How does this compare to some of Croatia’s competitors in the region? Hotel beds account for 60.6 percent of tourist accommodation in Austria, 47.5 percent in Italy, 48.4 percent in Slovenia, and 54 percent in Spain. Croatia represents a serious departure from the pattern, as 50 percent of all beds for tourists are in private apartments rather than hotels.

Another alarming fact: Before Croatia achieved its independence from Yugoslavia, there were more hotel beds than there are today. The hotel industry isn’t just unpopular, it’s also shrinking: In 1990, there were 142,917 hotel beds in Croatia. As of 2011, there were only about 128,000. Last year, Cerovic put that number closer to 113,000.

Even the hotels that aren’t among the 96 that aren’t completely derelict are starting to look a little worn out. The average hotel operating in Croatia is 45 years old, but hasn’t undergone any renovations for almost six years.

Unsurprisingly, few want to invest in these hotels. A full 20 percent of them are still state-run, which is “very high considering their strategic significance,” according to a report published in Economic Research earlier this year. “Croatia has been especially unsuccessful in privatising enterprises in tourism, namely the hotel industry, which is all the more disconcerting since it is generally perceived that foreign investors are usually highly interested in the unique resources within this particular sector,” the report concluded.

The numbers backing this up are pretty dramatic. During the period 1993 to 2012, only 2.3 percent of all foreign direct investment in Croatia was in the hotel and restaurant industry. After the global financial crisis hit in 2008, it’s been closer to zero.

Zeljka Krhac, senior advisor at the Agency for Investments and Competitiveness told Balkanist that Croatia is currently seeking investors for 14 state-owned hotel operators, 11 of which “are in pre-bankruptcy”. The Economic Research report notes that the size of these hotels’ outstanding debts, along with the fact that many of them are “ruined/poorly maintained and have not seen any investment for years” means that they’ll require massive investments — something that has driven many potential investors away.

Other complications include the legacy of corrupt privatizations dating from the 1990s, multiple unresolved ownership disputes, and the notoriously painful procedure for obtaining building permits, especially for properties on the coast.

Unsurprisingly, Croatia has earned a particularly bad reputation among foreign investors. Though Krhac claims that “a lot of effort has been made to change the business climate”, it seems to have done little to change perceptions. This year, Croatia ranked 84th on the World Bank’s “ease of doing business list”, dropping four places since 2011. Croatia is now considered a more difficult place to do business than Moldova or Kyrgyzstan.

When it comes to ease of dealing with construction permits, Croatia ranks an abysmal 143rd, below Syria and the West Bank. Protection of investors is also an area of serious concern, as Croatia is currently ranked 139th — a spot it shares with Uganda and Yemen.

What follows is an introduction to some of the 96 derelict structures that were once Croatia’s hotels or resorts. Like the Haludovo Palace Hotel, each of them has its own story — often about corruption, war, and criminal levels of neglect. Few, if any, guilty parties have ever been held responsible, including the state.

Next Page: Hotel Dalmacija

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Lily Lynch

Lily is co-founder and editor-in-chief of Balkanist Magazine. She lives in Belgrade, Serbia.