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Croatia’s Tourism Industry: Beyond the Sun and Sea

Author

Listed:
  • Kristian Orsini
  • Vukašin Ostojić
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.

Suggested Citation

  • Kristian Orsini & Vukašin Ostojić, 2018. "Croatia’s Tourism Industry: Beyond the Sun and Sea," European Economy - Economic Briefs 036, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecobri:036
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    References listed on IDEAS

    as
    1. Mr. Alexander Culiuc, 2014. "Determinants of International Tourism," IMF Working Papers 2014/082, International Monetary Fund.
    2. Andrea Mervar & James E. Payne, 2007. "Analysis of Foreign Tourism Demand for Croatian Destinations: Long-Run Elasticity Estimates," Tourism Economics, , vol. 13(3), pages 407-420, September.
    3. Juan Eugenio-Martin & Juan Campos-Soria, 2011. "Income and the substitution pattern between domestic and international tourism demand," Applied Economics, Taylor & Francis Journals, vol. 43(20), pages 2519-2531.
    4. James E. Payne & Andrea Mervar, 2002. "A Note on Modelling Tourism Revenues in Croatia," Tourism Economics, , vol. 8(1), pages 103-109, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Zeljka Mesic & Viktorija Primorac & Marija Cerjak, 2022. "Push Travel Motivations As A Basis For Segmentation Of Tourists In Emerging Rural Tourism Destinations: The Case Of Croatia," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 31(1), pages 303-325, june.
    2. Mikulić, Josip & Vizek, Maruška & Stojčić, Nebojša & Payne, James E. & Čeh Časni, Anita & Barbić, Tajana, 2021. "The effect of tourism activity on housing affordability," Annals of Tourism Research, Elsevier, vol. 90(C).
    3. Kristian Orsini & Arian Perić, 2021. "Understanding the Croatian Export Boom," European Economy - Economic Briefs 065, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Robert Maršanic & Edna Mrnjavac & Drago Pupavac & Ljudevit Krpan, 2021. "Stationary Traffic as a Factor of Tourist Destination Quality and Sustainability," Sustainability, MDPI, vol. 13(7), pages 1-13, April.
    5. Marija Beg & Martina Basarac Serti?, 0000. "The Signs Of Dutch Disease In Croatia," Proceedings of Economics and Finance Conferences 11413238, International Institute of Social and Economic Sciences.
    6. Kristian Orsini & Mario Pletikosa, 2019. "Croatia's Tourism Industry – Part 2: Curse or Blessing?," European Economy - Economic Briefs 047, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

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    More about this item

    Keywords

    Croatia; tourism demand; income elasticity; price elasticity; tourism model; tourism spending; consumer theory; Orsini; Ostojić.;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Z30 - Other Special Topics - - Tourism Economics - - - General
    • Z32 - Other Special Topics - - Tourism Economics - - - Tourism and Development
    • Z38 - Other Special Topics - - Tourism Economics - - - Policy

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