Saying adieu to Croatia’s dysfunctional obsession with tourism

(This is the English verison of a column that ran in the daily newspaper Jutarnji List today.)

An Expat in Zagreb

By Roger Malone

Croatia should end its obsessive affair with tourism. It’s a dysfunctional relationship that has only left the country in tears.

And by tears, of course, I mean economic doldrums that have lasted for more than five years, even as most other countries recovered from the 2008 global economic meltdown. I mean a government struggling unsuccessfully to contain public debt and expenditure. And I mean an economy with few private jobs that can absorb the number of workers that need to be kicked from the public payroll.

Croatia is unusually blessed by its cultural heritage, landscape and climate. Scenic drives along the Adriatic are as beautiful as those along the Amalfi Coast in Italy, the Pacific Coast in California or the Gold Coast in Australia. The vistas in the Istrian interior rival those in Tuscany. Croatian islands regularly appear on global lists of must-see destinations. And Gorska Hrvatska, while not quite as spectacular as the Alps or the Rockies – is beautiful nonetheless.

Croatia’s cultural heritage spans an unusual range of civilizations, from early man to the empires of antiquity and through some of the most brutal conflicts of the 20^th Century. Domestic products, from wine and olive oil to Kraš chocolates, could hold their own in any market.

But Croatia must turn its back on tourism.

First of all, Croatia doesn’t treat this mistress too well. It takes her for granted, assuming she’ll always be there waiting with her heaving bosom and glistening lips.

Sometimes it seems Croatia does everything possible to put obstacles in front of the tourists who would love to come here and spend their money. Croatia has had almost two decades of peace to figure out how to cater to the tourists who directly and indirectly feed more than a quarter of the country’s GDP. And still, it seems clueless. It’s the Mediterranean as it once was before consumer focus groups.

Among the quirks that baffle tourists are restaurants and other businesses that don’t accept credit cards or charge an additional fee disguised as a “cash discount,” ferries that don’t accept reservations and lack basic customer service standards, a shortage of English-language newspapers (new this year, by the way), few food options that go beyond the troika of grilled meat, grilled fish and pizza and a travel industry focused on private cars that pollute the environment and create massive traffic jams. And, outside the view of most tourists, I’d add an overall environment hostile to tourist investment by foreigners.

Many of these shortcomings are relatively easily remedied with thoughtful policy that goes beyond clever marketing. Croatia doesn’t need more tourists; it needs tourists who spend more. Croatia may attract five times more tourists a year than Slovenia, but each tourist in Slovenia spends about 50 percent more than those in Croatia. If Croatia wants to replace cars full of tourists who bring everything with them but a sink with more tourists who bring nothing with them but a credit card, it has to rethink the offering.

But this love affair with tourism not only leaves visitors wanting, it also leaves Croatia sick and pallid.

In 1996, I wrote an article for Dow Jones under the headline, “Croatian Recovery Leans Heavily on Tourism Revival,” and I could probably do the same again today. Tourism has made Croatia economically lazy. Much as in the oil-rich Middle East and other resource-rich economies, the low-hanging fruit of tourism has made Croatia less aggressive on international markets and overly reliant of revenues from a single source to support a bloated bureaucracy as completing factions fight for control of the inflows.

Between 2005 and 2010, Croatia’s exports grew more slowly than those from any other Central or Eastern European country. Part of the problem is that services comprise nearly half of Croatia’s exports, compared with less than 20 percent for the region as a whole. In Croatia, tourism alone accounts for more than 40 percent of total exports.  Economic growth in other emerging markets has invariably been supported by manufacturing exports. India is known as the world’s back office because of its large outsourcing and offshoring industry, but even there services only account for about a third of total exports.

Indeed, benefits abound from a development and growth model based on services. Modern service industries tend to be less polluting and create more value for each hour worked or dollar invested. China, heralded for its rapid growth in recent decades, is working to shift its economy away from manufacturing into more services. But I don’t know of any country that has succeeded without a solid manufacturing export base. In recent years several countries have prospered as services growth has outpaced manufacturing growth, but success stories have been built generally around IT services and transportation, not tourism.

Relying on tourism is also problematic because so many factors are beyond the control of the Croatian government or businesses. Unlike mineral resources such as oil or diamonds, there are no “known reserves” of tourists lying under Croatia that can be tapped regularly each year. Croatia is competing with scores of other destinations for the same pool of international travelers. While it can improve the offering and tweak the marketing, the country can do little to impact global travel trends, economic conditions, weather conditions and other reasons behind tourist decisions on when and where to travel. And, alone, any growth in tourist arrivals or spending is unlikely to produce the economic momentum the country needs.

Tourists, of course, will always have a special place in Croatia’s economic heart, and the country should make reasonable efforts to appease their fickle nature. But rather than waiting breathlessly each summer for this mistress to arrive – counting on her to support of the economy and public budget for one more year and grieving like a jilted lover when she doesn’t meet expectations – Croatia should play the field a little more. Invite tourists, woo them and give them what they like, but also cheat on them a bit with manufacturing and other service industries.

[Follow Roger Malone on twitter at @ExpatinZagreb or at http://expatinzagreb.blogspot.com/]

What cars full of tourists in Croatia don't bring ... money

Driving back and forth to the Adriatic Coast over the summer, I joined the annual migration of cars filled to the brim with suitcases and plastic bags. It's amazing how much food and other consumables foreign tourists bring with them as they head for their holiday rentals on the coast and the islands. It's equally amazing how quickly Croatia's new, modern highways can be packed to capacity.

But it's stunning how little these tourists spend in the country.

Back in Zagreb, I came across a 2013 report from the UN World Tourism Organization that underscores this point, Looking at countries listed among Mediterranean and Southern European destinations, Croatia was ranked No. 5 in terms of arrivals in 2012, but was No. 10 in terms of receipts per arrival. Here's a chart I threw together from the UN agency data:

Portugal is best in class. It attracted about three quarters the number of foreign tourists as Croatia last year, but, since each tourist spent so much more, its total receipts from tourists were about 25 percent more. Imagine taking away about a quarter of the cars from Croatian highways each summer, but still gaining massive tourism revenues.

One can dream. (Unless, of course, you're the highway operator.)