Conquering the south

The slowdown of hotel development across theregion is now areality. Croatia and Montenegro, however, seem tobe exceptions totherule. But for how long?

Mladen Petrov

W                     2009. In thefirst ten months of 2009, there were 10.6mlnvisits tothecountry, compared tothe10.9mlnvisits throughout                

For what it’s worth, theambitious project in Savudrija developed byCroatian-based company Skiper Hoteli, has already generated anenormous buzz. The Kempinski hotel is itself part of thefirst Croatian 5-star coastal Golf & Spa Resort. In addition tothe165 rooms, 19 suites and two presidential suites, thefacility also boasts aprivate beach, achapel, an18-hole golf course, 32 villas with private swimming pools and 14 residential buildings containing 260 apartments. The president spent thenight in one of thebiggest greenfield investments in Croatia, theinvestment costs of which come toEUR 230mln. The scheme was seven years in themaking before Mr Mesić could officially cut theribbon. According toLjubica Marfan, CEO of Skiper Hoteli: “This project was realized with thefinancing of its investor and part-owner, Hypo-Alpe-Adria-Bank International AG of Klagenfurt. Theprofitability of theproject relies upon thesale of thereal estate section of thecomplex, which will not detract from thetourist appeal of theproject, as some of theapartments and estates are being purchased strictly as aninvestment.”

In spite of thecredit crunch and thedifficult access tofinancing, which has led toalarge number of high-end hotel projects being put on hold, the news about bold large-scale projects in Croatia and neighbouring Montenegro are one of thefew things that are keeping journalists covering hotel development in theCEE region busy these days. For thetime being journalists are mainly reporting on new projects, but according toanumber of theanalysts ‘Eurobuild CEE’ spoke tofor this story, many projects exist, but not all of them are going toget off theground. And this might actually be agood thing, at least for those developers that succeed in bringing their projects toamarket hungry for quality product.

Busy, busy bees

The pipeline, indeed, is quite impressive. While this story was being written, thenews broke about aproject tobuild arotating marina hotel in theSplit                    
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Finally, another developer, theRussian-based Mirax Group, is currently developing aEUR 200mlnseaside Astra resort in Budva. The resort will include ahotel, residential and recreation facilities, with atotal area of 94,000sqm over 8.7-ha. According tothedetailed plans drawn up byBudva council, a25-40 floor skyscraper hotel and docks for luxury yachts will also be constructed. The design of thetower is tobe inspired bythefamous Burj Al Arab hotel in Dubai.

Avoiding theCosta del Sol                                sn’t gone flat over 2009 – a difficult year for thehotel industry. There is akey issue, however. The investors looking at theregion donot have tochoose only between Croatia and Montenegro. For them these are but two of theoptions. Those looking tobuild in Montenegro are also looking at Greece, for example. There is lot of competition,” Mr Hochedlinger adds.                          

According toanalysts, a4-star, internationally branded hotel offering awide variety of services is asafer bet in thecurrent conditions. And in addition, hoteliers should also find away tolengthen theseason and encourage tourists toeven make out-of-season visits. Building agolf course nearby certainly helps, but patience is crucial when working on such a project. “The biggest challenge was theobtaining of all thedocumentation for theconstruction of thegolf course. Our golf course is thefirst and only one tobe opened on theCroatian coast, although it was in 1997 that thegovernment published adocument outlining astrategy for theimprovement of tourism bydeveloping golf courses,” Ms Marfan recalls.

What in fact happened next was theintroduction of highly restrictive regulations regarding development for areas  km from thecoastline, allowing only theconstruction of hotels and tourist facilities in theprotected zone. This is not theonly problem hoteliers in Croatia complain of when it comes torelations with thegovernment. It is also common that erstwhile tourism companies founded in theformer Yugoslavia are using state land without having topay anything for it. As aresult, private hotels are burdened with higher expenses, while seeing theincomes steadily rising of hotels in which thestate owns astake. “The existing conflict between theold and thenew has reached anew level in unfair competition,” Ljubica Marfan comments. “This situation puts us on anunequal footing, increasing our expenses, while their income contnues to grow.”

And thewinner is...

            and will stay there, while on theother hand Montenegro is strong enough toboth create and draw demand.” Ljubica Marfan agrees when asked about theplanned Kempinski hotel in Montenegro. Does she see it as athreat for thehotel in Istria? “Kempinski already has ahotel in our vicinity, in Portoroz, Slovenia. Nevertheless, there is no competition as weare talking about two different hotels and two different “personalities”, in terms of establishing their reputation and clientele. When Kempinski opens ahotel in Montenegro it will be adifferent product. Montenegro is thefavourite destination for Russian guests, who love tovisit our region as well; but still our target markets are Slovenia, Italy, Austria and Germany. Our offer and thedriving range distance from themajor Central European cities are our main trumps.” It seems that everyone is a winner