BMI's Executive Summary

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Tourism Overview

Data for the period January to August 2007 show foreign tourist arrivals were up a relatively strong 8% year-on-year (y-o-y), while domestic tourism recorded slightly stronger growth of 11% y-o-y (the tourism sector appears to have been little affected by a considerable number of major forest fires in mid-2007 in Croatia). Overall tourism (domestic and foreign) was up 8% compared with the corresponding period of 2006. Arrivals from the top two source markets, however, recorded weak growth rates, with German and Italian arrivals both up a lowly 1% y-o-y (this is surprising given the very strong growth rates recorded in the early part of the 2007). After strong growth in 2006 though arrivals from Japan, Australia and the US, the trend continued in the first eight months of 2007. Croatia also attracted more foreign visitors from Central & Eastern Europe, with buoyant y-o-y growth rates in arrivals from Romania, Russia and Slovakia, for example. Over the same period, foreign vessels realised 390 cruises in Croatia, up some 5% compared with the corresponding period of 2006. Passenger numbers on these cruises, however, increased strongly, by 16.2% y-o-y to some 436,230, with each passenger staying on average 1.6 days in the country.

Forecast Scenario

After a stellar first quarter out-turn, the government has upwardly revised its full-year 2007 real GDP growth estimate to 6-7%. BMI favours a more conservative 5.5%, given tight monetary conditions and slow progress on key structural reforms. We now project average growth from 2007-2011 of 4.9%. BMI forecasts a strong recovery in foreign tourist arrivals in 2007, although tourist arrival growth is expected to slow in 2008 and 2009 (our forecasts remain unchanged this quarter). Given that we foresee EU accession in 2011, a pick-up in the tourism sector in that year is also anticipated. The background economic scenario is that BMI is expecting the eurozone economy (the main tourist source region for Croatia) to remain in solid shape through the forecast period, although growth is set to moderate from 2006's cyclical high of 2.7%. With regard to the Croatian currency, the kuna, against the euro, BMI anticipates further gains for the kuna towards HRK7.0000/EUR over the forecast period, but this will only be a gradual trend, making the country relatively more expensive for foreign visitors from the eurozone.

Hospitality

Recent data for the first eight months of 2007 show that the total number of tourist nights amounted to 47.5mn (domestic and foreign tourists), up a reasonable 6% y-o-y and suggesting a more favourable outlook for 2007 compared with a year earlier. The number of foreign tourist nights was also up 6% y-o-y to some 42.3mn nights (89% of the total). The average number of nights per foreign tourist arrival was 5.5 nights. Of the foreign tourist nights, the key source markets recorded a very mixed picture. Germany showed an increase in nights of just 1% y-o-y, while Slovenian foreign tourist nights were up a favourable 9% y-o-y. Nights by Italian tourists over the period, meanwhile, were down marginally. Overall though, the data indicates that Croatia is successfully diversifying its source markets.

Croatia Airlines

Latest figures for the period January to July 2007 show Croatia Airlines carried a total of 930,240 passengers, a relatively strong 8% increase compared with the corresponding period in 2006. Over this same period, scheduled international flights carried 11% more passengers y-o-y (a total of 577,477 passengers), while passenger numbers on scheduled domestic flights also recorded good growth y-o-y. Moreover, the airline achieved its best ever month on record – since the start of commercial flights in 1991 – in July 2007, with 201,635 passengers.

Chapter 1 - Executive Summary

Tourism Overview

Forecast Scenario

Hospitality

Adris Group

Chapter 2 - Market Overview

Tourism Outlook

Table: Croatia Tourism Industry - Historical Data & Forecasts

Table: Croatia Travel Industry - Historical Data & Forecasts

Table: Croatia Tourism Industry SWOT

Chapter 3 - Travel

Commercial Airlines

Chapter 4 - Hospitality

Accommodation

Table: Structure of Accommodation Market

Accommodation Developments

Table: Croatia Hotel Industry - Key Players (2005)

Gaming

Infrastructure

Chapter 5 - Forecast Scenario

45% Growth Expected For Full-Year

Table: GDP, Output and Population

Risks To Outlook

Chapter 6 - Middle East, Europe and Africa Tourism Business Environment Rankings

Table: Middle East, Europe and Africa Tourism Business Environment Rankings Matrix

Long-Term Political Risk

Country Business Environment

International Tourism Receipts

Visitor Arrival Growth

Investment Environment

Shock Factor

Croatia Business Environment

Table: Business Environment Outlook SWOT

Foreign Direct Investment

FDI Regime

Table: Emerging Europe, Annual FDI Inflows

Table: Annual FDI Inflows

Chapter 7 - Company Profiles

Croatia Airlines

Adris Group

Cubus Lux

Liburnia Riviera Hoteli

Hilton

Chapter 8 - BMI Forecast Modelling

How we generate our industry forecasts

Tourism Industry

Tourism sector data

Sources

Competitive Landscape for Emerging Europe Tourism Reports: Sample of Companies Ranked

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Comparative cross-border analysis assessing business and regulatory factors to rank Asia’s most competitive tourism markets. Indicators used include Political Risk, Business Environment Risk, Forecast International Tourism Receipts, Visitor Arrival Growth, Investment Environment and Shock Factors (taking account of any special factors such as terrorism, natural disasters and disease). Company SWOTs for leading resort, hotel, airline, travel and tourism operators in each market, including competitive intelligence on overall geographic presence, competitive positioning and relationships with international operators; % share of operator markets; % share of international arrivals and departures; % share of busiest domestic routes; main products and services; panregional expansion, merger and acquisition strategies.

Network of European Tourism Sources

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BMI's European Tourism Reports are based on an extensive network of multilateral organisations, government departments, tourism industry associations, chambers of commerce and company reports. Information sources include: