 Croatia’s Tourism Industry: Beyond the Sun and SeaKristian Orsini and Vukašin Ostojić No 36, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission Abstract: With its advantageous location and natural beauties, Croatia has been an important tourist destination ever since the surge of large-scale international tourism. The wars in former Yugoslavia of the early 90s severely affected both international demand and the tourist infrastructure, but in the past 20 years tourism has been on the rise again. International tourists' expenditure in Croatia amounts to almost 20% of GDP – by far the largest share in the EU. Croatia features a typical "sea and sun" tourism model with stays concentrated in coastal areas in the summer months. The accommodation offer is skewed towards relatively cheap structures (such as private vacation houses and camping grounds) and average tourist spending is below that recorded in EU peers. Structural differences in tourism models across countries are typically reflected in a different sensitivity of demand for tourism services to income and prices. We estimate the international tourism demand for Croatia and three other Mediterranean destinations using a comparable specification where demand is modelled as a function of purchasing power in the EU, the relative price of tourism services and travel costs for each country. We find evidence that the international demand for Croatian tourism is more income elastic than for other Mediterranean destinations. Our findings confirm that tourism demand can be extremely sensitive to prices, although Croatia features the lowest price elasticity among the countries considered. Tourism revenue in Croatia – more than for other destinations – is driven by the increasing number of tourist arrivals and overnights, while average spending per tourist is stagnating. These findings suggest that tourism is set to remain a key sector of the Croatian economy. However they also highlight that an excessive reliance on the current model may not be sustainable in the long term. The supply of new and well differentiated tourism services could mitigate the risks of stagnation, maximise the impact on other sectors of the economy and reduce congestion and environmental costs. Croatian authorities are aware of challenges and opportunities, but differentiating away from the traditional offer has proven difficult so far. This calls for renewed and coordinated efforts by policymakers at all government levels to address the existing shortcomings and support the development of the tourism sector in terms of scope and quality of the offer. Keywords: Croatia, tourism demand, income elasticity, price elasticity, tourism model, tourism spending; consumer theory, Orsini, Ostojić. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:euf:ecobri:036 Access Statistics for this paper More papers in European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission Contact information at EDIRC. |
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