Croatian tourism must transition from growth to development – MICE, investments and premium offer are key to competitiveness

Croatian tourism has recorded strong results in recent years, but at the same time, questions regarding long-term competitiveness, investments, seasonality and the actual value created are increasingly being raised. Has Croatia reached its price ceiling? Why are we lagging behind in attracting major hotel investments? How much of the potential of the meetings industry are we actually utilizing, and how should we respond to global trends that are rapidly reshaping the industry?

We discussed these and other key topics with Siniša Topalović, partner and Global Head of Tourism Advisory at Horwath HTL, and one of Croatia’s leading experts in tourism development and investments, who has spent many years advising destinations, investors and the public sector in Croatia and abroad.

How do you assess the current state of domestic tourism and, based on the latest indicators, what can we expect from the rest of this year's season? Is there a noticeable change in occupancy within the hotel sector compared to previous years?

In the first five months of this year, we can see that hotels achieved an average price increase of around 5-7% compared to the same period last year, while occupancy rates remain roughly at last year's level, with a slight increase of 1%. We are currently processing the data for June, but this trend is expected to continue. During the peak summer season in the hotel sector, we expect single-digit growth rates in business performance, driven more by rising prices and somewhat less by increased occupancy.

In the private accommodation segment, as expected, there has been an average drop in performance due to supply outstripping demand, coupled with sharp price increases that were not accompanied by an upgrade in quality.

Croatia must become a more serious, faster and more predictable investment destination

We are witnessing ongoing debates about whether Croatian tourism has reached its price and capacity peak. Have we, as a destination, overpriced ourselves and started charging premium rates for a product that has in reality remained average? What does "premium tourism" actually mean, and where is Croatia currently lagging behind the most in achieving this goal?

I would not say that Croatia has reached its price or capacity peak. On the contrary, in certain segments, we are still far from our true potential. However, we must clearly distinguish between two things: the price of the existing product and the potential to develop new, higher-quality and market-stronger products.

For a portion of the existing offer, it is true that there is no longer much room for further price increases. Some products are already at the limit of the value they deliver, and some are indeed overpriced. Today's guest compares Croatia with Italy, Greece, Spain, Montenegro, Albania or Turkey, and very quickly sees where the price matches the value and where it does not. Therefore, charging a premium price for a product that has actually remained average is unsustainable.

On the other hand, Croatia still does not have a sufficiently developed luxury tourism segment. We do not have a significant number of international luxury and ultra-luxury hotel brands, we lack top-tier global resorts, mixed-use resorts, golf resorts and international convention centres. We also do not have enough dining, wellness, nautical and lifestyle concepts capable of generating the highest levels of value. Consequently, average daily rates (ADRs) in the high three-digit range are still relatively rarely achieved in Croatia, whereas they are a standard reality for established luxury brands.

The same applies to capacity. In July and August, there is not much room for further physical growth in tourism volume along the coast, nor would that be desirable given the pressure on space, traffic, beaches, infrastructure and the local community. However, on an annual level, Croatia has vast untapped potential, particularly in the pre- and post-season.

The question is not how to get even more guests in August, but how to create sufficiently strong motives for travel during March, April, May, September, October and November.

Premium tourism should not be reduced solely to luxury hotels. It can be a superb gastronomic experience at a rural estate, an overnight stay in a lighthouse, a private wine tour, a boutique hotel in a restored historic core, a premium wellness retreat, or even a private helicopter tour or an ultra-luxury yacht. Premium is, above all, the perception of exceptional value, authenticity and quality of execution.

Croatia has excellent prerequisites for premium tourism but still has a lot of work to do in actually shaping it. If we want to increase the competitiveness of Croatian tourism, a significant effort is required to raise the quality of services and products, and only then will raising prices in that context become justified.

Analyses show that countries like Albania are becoming increasingly successful at attracting hotel investments thanks to incentives and clear development policies. Are we losing the regional race for investors, and what in practice makes investing in Croatia most expensive? How could we become more competitive in attracting major projects?

Unfortunately, Croatia has never been particularly adept at systematically attracting foreign investors to its tourism sector. Although we have one of the most attractive coastlines in the Mediterranean and very strong tourism demand, a series of structural issues has dragged on for decades. First and foremost, there are the inherited and never fully resolved issues of tourist land and maritime domain, slow or non-existent activation of state-owned assets, complex property-legal relations, legal uncertainty, lengthy procedures and poorly prepared investment projects. In this context, the uncompetitive regulatory framework must be highlighted, which last year almost banned the concept of branded residences in tourism zones, making us the sole exception in the Mediterranean. Fortunately, this did not happen in the end, but a negative signal was sent to international investors by releasing such a legislative proposal for public consultation. According to comments from foreign investors, this caused damage, even though the proposal was ultimately not adopted.

The problem is not that investors do not see Croatia's potential. They certainly do. The problem is that we often fail to offer them a clear, fast and predictable path to project realization. Large international investors look beyond just the beauty of a location; they assess the speed of return on investment, legal certainty, the speed of procedures, land availability, development potential, incentives, the tax and regulatory framework, and the overall risk-return ratio.

In this regard, countries like Albania, Montenegro and Greece are currently much more open and proactive towards foreign investors. They communicate very clearly that they want hotel investments, international brands, resort developments and high-value-added projects. In addition, they offer clearer and more competitive investment incentive policies and actively promote investment opportunities on the international market. Thus, they do not wait passively for investors to come to them, but actively target, inform and guide them through the process.

In Croatia, investments are made even more expensive by high land prices coupled with the increasingly unrealistic expectations of sellers, rising construction costs due to a shortage of quality construction firms, a relatively short season and underdeveloped public tourism infrastructure that could create conditions for a stronger shoulder season. However, the biggest issue is not just the cost, but the uncertainty. An investor can accept a high price if they know the rules of the game, the timelines and the risks. What is hardest to accept is a situation where, even after several years of project development, it remains unclear when and under what conditions the investment can actually be realized.

For Croatia to become more competitive, it needs to transition from a passive to an active investment model. This means resolving key tourist land issues, accelerating and taking a professional approach to activating state-owned property, reducing legal uncertainty, preparing investment sites in advance, developing a clear portfolio of projects and professionally promoting Croatia as a tourism investment destination. We also need selective incentives for projects that bring real added value: upper-midscale and luxury hotels, international brands, year-round business operations, quality jobs, as well as convention, wellness, medical, sports and nautical facilities.

Croatia has exceptional market appeal but must become a significantly more serious, faster and more predictable investment destination.

Seasonality cannot be solved with a marketing campaign

At the recent tourism forum in Zadar, you pointed out that our coast, alongside Bulgaria and Romania, is among the three most seasonal destinations in Europe. We are all aware of the pressure this puts on infrastructure and local communities during the summer months. Which concrete levers within the tourism system do you consider crucial to bridging this seasonal gap?

It is vital to understand that seasonality cannot be solved through promotion alone. We cannot extend the season with a marketing campaign if the destination lacks open hotels, adequate air connectivity, activities, events, restaurants, attractions and clear reasons to visit during the shoulder seasons. Seasonality is resolved by changing the structure of the tourism product and the business model of the destination. Unfortunately, all previous strategies have failed to seriously address this challenge and provide a solution.

One of the most important levers is air connectivity outside the peak summer period. Without regular and market-relevant flights in the pre- and post-season, it is difficult to seriously attract demand. In doing so, Croatia is missing out on opportunities not only in long-haul markets but also in traditional markets such as Germany, Austria, Switzerland, Benelux, Poland and the United Kingdom, where quality point-to-point air connectivity could generate significant traffic outside the main season.

Another key lever is the development of tourism products that have a real reason to operate outside of summer. This primarily refers to higher-quality hotels and resorts, sports tourism, food and wine tourism, MICE, health tourism, outdoor activities and a range of other products. Destinations that rely dominantly on a seasonal holiday apartment model find it much harder to build year-round demand.

A particularly important response to seasonality lies in systematically strengthening the infrastructure for MICE and the meetings industry, along with its associated air connectivity. Congresses, conferences, incentive travel and corporate events naturally take place outside the peak summer months and can be one of the most powerful tools for filling destinations in the shoulder seasons. However, small hotel meeting rooms are not enough for this. We need major convention and multipurpose facilities, quality technical and production infrastructure, professional convention bureaus, active international sales and clear coordination among hotels, airports, tourist boards, DMCs, PCOs, restaurants, cultural institutions and local suppliers.

In addition, it is essential to develop a serious destination calendar of activities. A guest will not visit outside of summer just because a hotel is open. There must be a reason to travel: events, restaurants, local tours, cultural programs, wellness offerings, sports events, wine and food festivals, outdoor products and attractions that are available and well-organized outside of July and August.

Finally, much better coordination between the public and private sectors is required. Extending the season cannot be achieved by a single hotel, a single tourist board or a single airline. It must be an agreed destination project where everyone knows who is opening hotels, who is developing content, who is co-funding connectivity, who is driving sales, who is communicating to the market and who is taking the initial risk.

In practice, it looks like this: hoteliers say they cannot operate because there are no flights and activities in the destination, while airlines and agencies say there are no flights because the hotels are closed. How do we break this vicious cycle, and who must assume the financial risk of opening a destination outside the peak summer months?

This vicious cycle can only be broken through coordination. Hoteliers cannot open the season on their own if there are no flights and activities, airlines will not introduce routes without demand certainty, and agencies will not program a destination if hotels, restaurants and attractions are closed. Therefore, the problem does not lie with a single stakeholder, but rather in the lack of a collaborative destination model.

The key is regional activation. This means that the airport, tourist boards, the hotel sector, local and regional government, and key tourism stakeholders must collectively define the priority markets, periods and routes they want to develop. Everyone cannot work in isolation and expect the season to magically extend itself.

In practice, this requires a very concrete agreement: which hotels will remain open, which destinations will offer activities, what events and products will be on offer, which airlines need to be incentivised, how long the pilot period will last and who will assume which share of the risk. In the first phase, this risk must rest primarily with the public sector. The public side must participate because the benefits of extending the season are not just hotel-specific, but destination-wide - affecting employment, overall turnover, tax revenues, hospitality, local suppliers and better infrastructure utilization. The private sector must participate by keeping capacities open, creating commercial packages, driving sales and maintaining operational readiness, without holding back.

It is particularly important to reform the existing national system for promoting Croatia's air connectivity. Today, this system is largely archaic and insufficiently effective for what we truly need - namely, the development of relevant point-to-point routes in the pre- and post-season, especially towards markets that can generate short breaks, MICE, premium leisure, sport, wellness and city break demand. It is not enough to simply co-fund a market presence; we must measure the actual impact of routes, occupancy rates, spending, hotel performance and the contribution to extending the season.

In other words, the financial risk cannot be borne by a single actor. Initially, it must be shared by the public sector, airports, tourist boards and the private sector, but through clearly defined goals and measurable results. If a certain route or market proves to generate real demand, then the share of public support can be gradually reduced, allowing the market to take on a larger role.

The worst thing we can do is to continue with the current model where everyone waits for everyone else. Extending the season requires a regional agreement, a joint fund for developing connectivity and content, clear pilot projects and professional impact measurement. Without this, we will continue to have the same debate every year.

While the coast copes with the pressure of seasonality, continental Croatia offers vast potential for year-round tourism, cultural and business projects. What incentives or strategies should be applied to steer investors more towards the interior of the country?

Continental Croatia has great potential for year-round tourism, but without significant capital investments, it is difficult to speak of creating true destinations. The continent cannot be developed solely through promotion or individual small projects. Public investments are needed to create reasons to visit, establish tourism infrastructure and build a foundation that the private sector can later build upon.

A good example is Bjelovar, where the Terme Bjelovar project is laying the groundwork for a new thermal destination in a city that previously lacked a strong tourism profile. This is a major public pool and thermal complex project, backed by significant EU/NPOO funding, which can kickstart wider private sector investment once the public sector completes the first and most challenging infrastructural step, valued at over €40 million.

This is precisely the model the continent needs: the public side must first create a tourism platform — thermal spas, museums, sports and recreational facilities, cultural attractions or similar. At the same time, we should not delude ourselves into thinking that small investments will significantly raise the potential of a continental region. It is necessary to approach this systematically and develop powerful motives for travel that then generate demand. Only after that can private investors more easily develop hotels, restaurants, villas, campsites, wellness facilities, agencies and other commercial projects.

Similar potential exists across a range of other continental attractions. For example, the State Stud Farm Đakovo could become a world-class tourism attraction recognized at a European level, but this will not happen on its own. This requires a clear development strategy, a master plan, a tourism activation plan, heritage interpretation, new visitor facilities, events, hospitality, accommodation support and broader destination infrastructure to turn potential into reality.

Thus, the continent needs larger public development projects, the utilization of EU funds for major projects, the activation of state and local property, clear master plans and thematic clusters — thermal spas, health, culture, heritage, equestrian tourism, gastronomy, nature and business events. Without this, private capital lacks a strong enough reason to enter.

MICE must stop being a footnote in Croatian tourism strategies

You mentioned that business events and the meetings industry are among the solutions for extending the season. In your opinion, how well is Croatia currently utilizing the potential of congresses, conferences, incentive travel and corporate events, where do you see the greatest room for improvement, and how can it be concretely achieved?

Croatia currently utilizes only a fraction of the potential it possesses in the meetings industry and broader business tourism. The problem is that MICE is too often viewed superficially in our country - more as an additional segment that can help in the pre- and post-season, but without a full commitment to completely utilizing its potential. The meetings industry and business tourism are not just about a hotel meeting room, a few events and the goodwill of hoteliers.

I see the greatest room for improvement precisely in Croatia stopping its treatment of MICE as a side topic and starting to develop it as one of the key levers for extending the season. However, to achieve this, several concrete steps are required.

First, Croatia must clearly define its MICE destinations and their roles. Zagreb has one logic, Dubrovnik another, Split a third, while Zadar, Opatija, Istria and continental destinations each have their own. Not every destination can target every type of event, but each can develop a clearer profile - ranging from large congresses and associations to incentive programs, corporate events, smaller premium board meetings, professional gatherings and thematic industry conferences.

Second, investments in modern and multipurpose MICE infrastructure are essential. Croatia still lacks high-quality congress and event venues that can compete with serious international destinations. This refers not only to large convention centres but also to flexible spaces for medium and small gatherings, high-quality technical equipment, production, logistics, exhibition capacities and venues that can serve multiple functions – business events, culture, education, trade shows and local events.

Third, MICE must be developed hand-in-hand with air connectivity. MICE and air connectivity must be planned together. If a destination wants to attract international congresses, corporate meetings and incentive programs in March, April, May, October or November, it must have a viable way for guests to arrive in those months. This means that the development of congress capacities must be linked with airline development policies, agreements with carriers, international bidding for events and professional promotion of the destination in the MICE market.

Fourth, we must professionalize the sales of MICE products. This means strengthening existing and establishing new convention bureaus, active participation in international bidding, leveraging all the benefits of international memberships in professional associations, systematic market presence, organizer databases, high-quality destination materials, clear packages and coordinated sales.

Fifth, we must better connect business events with the local experience. Today’s MICE is not just about a meeting room and accommodation. Participants expect gastronomy, culture, networking, local identity, incentive programs, outdoor activities, wellness, unique venues and content that makes the event worth attending. Here, Croatia has a major advantage, but it must organize and commercialize it better.

Croatia still treats MICE as an add-on to the hotel industry rather than a strategic destination product. If we want MICE to truly become a tool for extending the season, it must stop being a footnote in strategies and become one of the key development priorities of Croatian tourism.

Building and maintaining dedicated congress facilities requires major investments. Do you think that investments in multipurpose MICE infrastructure should be incentivised more through public-private partnerships, rather than solely by hoteliers?

I want to be very clear on this: major MICE capacities cannot be expected from hoteliers alone because their impacts extend far beyond any individual hotel. This is destination infrastructure, not just hotel infrastructure. It is just like a school, a hospital or a kindergarten.

The reason is simple: such facilities rarely have an attractive investment logic when viewed in isolation, solely through the revenue of room rentals. Their real impact is seen much more broadly - through filling hotels, private accommodation, restaurant turnover, transport, airline routes, DMCs, technical production, local suppliers and destination activation in the shoulder seasons.

Therefore, it is unrealistic to expect hoteliers to independently finance serious MICE infrastructure whose benefits spill over to the entire destination. Hotels can and should develop their own MICE capacities, but larger convention centres, multipurpose halls and exhibition spaces require a different logic - that of public investment in the destination's competitiveness.

Public-private partnerships can make sense, but only in specific cases. For example, if the congress facilities are bundled with the development of a broader mixed-use project featuring hotels, offices, apartments, garages, shopping or other commercial content that can drive a return on investment. However, in Croatia, such a model is difficult to expect on a larger scale in the near future due to complex zoning procedures, sensitivity towards construction and the complexity of such projects.

Yet, public investment does not mean non-commercial management. On the contrary – such facilities must have professional management, strong international sales, links with the convention bureau, airport and airlines, hotels, DMCs and the destination’s calendar of events.

If we view convention centres solely as construction projects, they are hard to justify. But if we view them as a tool to extend the season, increase spending, boost international visibility and raise the value of the destination, then their development logic becomes much clearer.

Croatian tourism between global trends and management failures

What global trends are currently most strongly shaping the hotel and business tourism industries internationally, and is Croatia keeping pace with them fast enough?

Global trends in tourism are changing extremely rapidly today, but I would boil them down to several key directions that are specifically shaping the hotel sector and business tourism.

The first is experience personalization. Guests no longer want a generic product, but rather an experience tailored to their interests, travel style, lifestyle, diet, work rhythm, family, health or business needs. In the hotel industry, this means a much more precise understanding of the guest before, during and after their stay. In business tourism, it means that congresses and corporate events can no longer be just standard programs in a hall, but must offer relevant content, networking, local experiences, gastronomy, culture, incentive elements and clear value for the participant.

The second trend is artificial intelligence and wider digital transformation. AI is already changing how guests plan trips, select hotels, compare prices, receive recommendations and communicate with destinations. In hotels, it is used for revenue management, personalized sales, operations optimization, guest communication and better data management. In the event industry, AI is increasingly entering program planning, attendee analysis, matchmaking, real-time translation, content management and event impact measurement.

The third trend is sustainability, but no longer just as a marketing badge. Sustainability is increasingly becoming an operational, investment and reputational standard. This includes energy efficiency, water management, local supply chains, waste reduction, climate resilience, spatial preservation, relations with the local community and the workforce. Especially in premium and business tourism, clients increasingly demand verifiable standards rather than just general claims about green business.

The fourth trend is the strong growth of experiential, lifestyle and wellbeing tourism. Hotels are no longer just accommodation facilities, but platforms for experiences: gastronomy, wellness, sports, work, culture, local authenticity and social interaction. Wellness has also shifted; it is no longer just about a spa centre, but about mental health, sleep quality, nutrition, nature, longevity and a holistic sense of well-being. This is particularly important for upscale hotels, resort projects and incentive travel.

The fifth trend is the evolution of business tourism. Business events are returning because companies see the value of face-to-face meetings once again, but more is being demanded of them than before. Events must justify the time, cost and travel. There is growing talk about return on experience rather than just return on investment. In other words, it is not enough to organize a gathering; one must prove that the event created knowledge, relationships, inspiration, motivation, sales or reputational impact. Global reports on the MICE sector for 2026 particularly emphasize the importance of meaningful meetings, creativity, technology and the measurable impact of events.

The sixth trend, which is especially important for Croatia, is climate adaptation. Increasingly warm summers, extreme heat, pressure on water, beaches, public spaces and infrastructure are changing how Mediterranean destinations will be managed. In luxury and premium tourism, the comfort of the stay, shade, green infrastructure, spatial quality, lower crowding, nature and the ability to travel outside the hottest part of the year will be increasingly valued. This opens up additional opportunities for the shoulder seasons but requires more serious destination planning and a stronger mobilization of all public and private sector destination stakeholders.

Croatia is keeping pace with these trends, but not fast enough and not systematically enough. In many aspects, we are lagging behind significantly. Despite having excellent individual elements of the MICE product (quality hotels, good restaurants, strong food and wine regions, authentic experiences, an increasing boutique and lifestyle offer, and individual destinations that think more seriously about sustainability and spatial management), we lack stronger national and regional platforms that would systematically deal with this product.

You have been involved in the in-depth analysis and advisory of tourism for many years, both in Croatia and globally. When you look at all the strategies written, published and expired during this period, what cardinal errors in tourism management do we persistently repeat? What should be done to finally stop making them?

The problem is that strategies are too often treated as the end of a process, when in fact they should only be its beginning. The cardinal error is an insufficiently strong implementation mechanism: clear projects, budgets, deadlines, responsible institutions, political support and systematic monitoring of results. For successful clients, the first step after drafting a strategy is the reorganization and adaptation of the main implementation body. Namely, it is difficult to implement a strategy operationally if it is carried out by an organization or organizations set up in the past without a focus on the implementation function. Strategies require resources for implementation, and this includes both people and organizational capabilities, which can only be secured after the strategy is adopted – with clear purposes and goals.

The second major mistake is relying on spontaneous growth for too long. Croatian tourism developed for a long time on the basis of the exceptional attractiveness of the coast, safety, proximity to emitting markets and strong demand. This created the impression that tourism would grow almost on its own. However, such a model has clear limits that everyone is witnessing today – in terms of space, infrastructure, workforce, service quality, the local community and the perception of value for money.

The third mistake is an excessive focus on the number of arrivals and overnight stays. These are important indicators, but they are not enough. If success is measured primarily by volume, it is easy to neglect profitability, spending per guest, the quality of jobs, the structure of accommodation, spatial pressure, local resident satisfaction and the long-term sustainability of the destination.

The fourth mistake is fragmented management. Tourism is often viewed as an isolated sector, whereas it actually depends on spatial planning, transport, air routes, housing, municipal infrastructure, education, culture, agriculture, environmental protection, investment policies and public asset management. As long as these policies are not aligned, tourism produces pressures and conflicts instead of quality development.

The fifth mistake is a lack of decisiveness in managing space and capacity. For too long, serious decisions regarding growth limits, over-apartmentization, tourist land, the activation of state property, the quality of public space and the actual carrying capacity of destinations have been avoided. These are politically and operationally demanding topics, but serious tourism management is impossible without them. Moreover, public debate is often framed incorrectly. There is frequent talk about favoring "large-scale private capital" (whatever that actually means!?), while the actual spatial outcome in many destinations is almost the opposite. In many cases, tourism zones designated by spatial plans for the development of hotels, resorts and other high-quality tourist facilities have remained undeveloped or inactive for decades. At the same time, residential zones, which should primarily serve the housing needs of the local population, have been transformed into an unregulated real estate Eldorado that displaces the local community and drives property prices sky-high, fueled by the symbolically taxed activity of short-term rentals.

To stop repeating these mistakes, strategies must become operational documents rather than mere declarative frameworks. Every strategic goal must have concrete projects, funding, responsible bodies, deadlines and measurable indicators. The entities responsible for implementation must be realistically capable of taking on these tasks (for example, tourist boards), which then brings us back to the question of the necessary further reform of the tourism management system in Croatia.

Ultimately, Croatian tourism must transition from a phase of growth to a phase of development - which, of course, can include further physical growth, but of a different nature and intensity.

All of this essentially means fewer declarative goals and more implementation; fewer general formulations and more concrete projects; less passive reliance on the attractiveness of the coast and more active management of destinations, investments, space and the value that tourism creates.