Tourist impulse: Tourist companies expect a drop in net profit and a reduction in investment potential

November 18, 2020

first_imgThe key emitting markets, which generate almost 30 percent of total overnight stays in Croatia, Germany, Italy and the United Kingdom, are recording a slowdown in economic activity, it was emphasized in the Tourist Impulse.  Tourist impulse / Source: HUT This year, the largest reduction in investments is expected in hotels (by 36 percent) and tourist resorts (by 84 percent), while in camps, investments are expected to increase by 30 percent compared to last year. The survey showed that the largest tourism companies in 2019 expect that the growth of labor costs will exceed the growth of income, which will negatively affect profitability and reduce the investment potential of the sector and the wider economy. Finally, they emphasize that almost all key laws that define the business environment in tourism are currently being prepared and expect active involvement in the process and the adoption of a framework that is much more favorable for investment and business in tourism than the current one.   HUT presented the results of a survey on the expectations of key business indicators conducted among the 15 leading tourism companies that generate 40 percent of the total revenue of the accommodation business in Croatia. “Our response to increasing uncertainty in emitting markets must be to raise quality. We cannot compete with cheap eastern Mediterranean destinations for the price because that would lead to the devastation of Croatian tourism. But to raise quality, investments are needed that need to be encouraged by improving the business climate. Despite challenging economic developments in our emitting markets in the European Union, tourism is increasingly growing globally as an industry. Today, Croatian tourism is the sector that has the greatest potential for attracting investments, growth, creating new jobs, increasing salaries and living standards. “, said Veljko Ostojic, director of HUT. The annual cumulative booking from Germany records a slight minus compared to last year, and the figures of tour operators show that under the strong influence of the expectations of the UK leaving the European Union, UK bookings for the Mediterranean decreased by an average of 10 percent.  All the later bookings of tourist arrivals, unfavorable economic trends in key emitting markets in the European Union and the large return of the Eastern Mediterranean market, especially Turkey, add uncertainty to this year’s tourist result. Also, market uncertainty is a determinant that will mark the next tourist season, are the conclusions of the presentation of the Tourist Impulse, the first overview of tourist trends presented by the Croatian Tourism Association (HUT).  Key emitting markets are declining  Without a significant change in business conditions in the tourism sector, such trends reduce the investment potential, so companies in 2019 expect a reduction in investment of 20 percent compared to last year.center_img In the next two years, in 2020 and 2021, tourism companies expect a further reduction in investment at a rate of 33 percent compared to the period from 2018 and 2019. This level of investment is sufficient only to maintain the level of quality, not for the necessary step in the direction of increasing quality that would ensure the improvement of business indicators of overall Croatian tourism. The tourist impulse showed that the largest tourist companies this year, due to everything, expect a slowdown in revenue growth by 11,4 percent compared to 2018. At the same time, they expect an increase in labor costs of 18,4 percent, cumulatively in 2018 and 2019 compared to 2017. The result is a drop in net profit this year of 4,8 percent compared to last year’s result.  Travel companies expect less investment  Tourist impulse / Source: HUT HUT points out that Croatia is currently the least competitive for investing in tourism compared to the surrounding countries. They point out that there is an understanding in the Government of the effects of reducing the VAT intermediate rate on the entire range of tourist services and expect an argumentative debate on this move, which HUT is convinced can open much-needed space for investment and salary increases. . Veljko Ostojić, director of HUT / Photo: Josip Regovic / PIXSELL In addition to the uncertainty in the environment, an additional challenge for domestic tourist companies is posed by the dominant determinants of the business environment in Croatia, which are labor shortage i uncompetitive business climate. Also, Ostojić added that with the increase in labor costs, on the other hand, salaries for chefs, waiters and other tourist staff are 30% lower in Slovenia than in Slovenia, and even practically 100% lower than in Austria. Attachment: HUT – TOURIST IMPULSE Q1 2019last_img

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