Dubrovnik: still waiting to tee off



The sun-blasted walled city of Dubrovnik is one of the world’s leading visitor attractions, as can be seen by the international tourists shoving past each other along the Placa, the old town’s marble main street. But once visitors have walked the walls and visited churches, there isn’t much else for them to do, which is what spurred the idea of building a golf course above the arid hill that towers over Dubrovnik.

That was six years ago – and the $1.1bn project, Croatia’s largest potential greenfield investment, is still frozen, waiting for approval from local authorities who are reluctant to give the go-ahead for fear of spoiling the view.

“This is a touristic town but all the amenities are old – we are trying to create something new,” Ivan Kusalic, head of Razvoj Golf, tells beyondbrics.

Kusalic is hoping for a breakthrough in the next few months, expecting that the regional government is ready to change its mind. The project is backed by Aaron Frenkel, an Israeli businessman, and Greg Norman, the Australian former golf pro and now leading course designer. The two investors have already sunk $100m into the scheme.

“We hope to start construction by 2014,” he says.

Also waiting for approval is a smaller $46m Fenestra Village project, which wants to build 26 villas above Dubrovnik. The approvals have been dogged by a fight between Dubrovnik’s left-of-centre mayor, Andro Vlahusic, who is keen for the projects to move ahead, and its centre right governor, Nikola Dobroslavic, who is more sceptical, worrying that the cityscape will suffer. The sharp-tongued mayor has called his regional rival an “idiot” for opposing the project, but the city’s 40,000 people are more ambivalent, with a survey showing that about two-thirds are opposed to the golf course going ahead.



Local politics aside, the interminable wait to get a thumbs up or down on permit applications is one of the reasons that Croatia lags in the World Bank’s Doing Business rankings – coming in 80th out of 183 countries in this year’s listing, in large part because of the delays in getting construction permits approved. The Bank puts Croatia at 143rd place for that, with the average wait time at 317 days. Craig Cameron, who directs Fenestra Village for project manager CMC Global, says that one of the problems bedevilling investments is the overlapping levels of government and their different election schedules, which often leave investors facing politicians with conflicting electoral priorities.

“Things could be done a lot quicker. The system can be quite cumbersome for investors,” he says, pointing out that projects in other CEE countries like Poland, which also has a reputation for fearsome red tape, are much smoother than those in Croatia. With the country joining the EU next July, the Social Democratic government in Zagreb has made slashing red tape and attracting investment a centre-piece of its economic programme, aimed at bumping up growth from the EBRD’s projected 0.6 per cent contraction this year.

“We know that this process is complicated and we were counting on waiting about two years,” says Kusalic. “This has been a very unpleasant surprise and we’re still not sure we’ll get the permit in the end.”

Cameron hopes that his project gets the nod by October. He adds that other investors are keeping an eye on how the Dubrovnik scheme is treated.

“Our clients have an appetite to invest more in Croatia – they are just looking at the outcome of the planning process,” he says.

December 17, 2012 12:03 am

Economy break

By Andrew MacDowall


Foremost attraction: Dubrovnik is known as the ‘pearl of the Adriatic’

With its brilliant white walls and lapis-lazuli dome, Villa Sheherezade in Dubrovnik is an eyecatching sight on a steep, forested hillside above the Adriatic Sea.

The lovingly restored 1920s villa, surrounded by lush gardens, has played host to rich and famous international guests, including actor Kevin Spacey, Prince Saud bin Abdul Mohsin of Saudi Arabia and Viktor Vekselberg, the Russian billionaire who rented the property for six months, reportedly paying €750,000 for the privilege. With a bill like that, Vekselberg may well have retreated to the striking blue dome, which houses a meditation room.

The opulent villa’s rates are beyond the means of most visitors but its appeal to the super-rich is a sign of the revival of Croatia’s tourism fortunes. Less than two decades after the end of its bloody war of independence, Croatia’s tourism sector is flourishing.

Almost 10m visitors came to Croatia from January to August, a rise of more than 4 per cent on the same period in 2011, says Veljko Ostojic, the country’s tourism minister. “This is the best tourist season in Croatia’s history,” he says.

Ostojic expects tourism income to rise 3-5 per cent this year, to more than €7bn.

While adventurous visitors had been coming to the Adriatic coast for years, the Croatian tourism industry really began to emerge in the 1960s, according to Leila Kresic-Juric, director of the tourism section of the Croatian Chamber of Economy.

As the most liberal – and least pro-Soviet – of the communist countries in eastern Europe, Yugoslavia adopted an open policy towards tourism, enticing visitors from western Europe with package holidays to the Croatian and Slovenian coasts.

Big resort hotels were built and by the mid-1980s tourism was booming, with Croatia alone receiving about 10m visitors a year.

But at this time national tensions within Yugoslavia were increasing. Croatians’ desire to keep more of the tourism revenues was a bone of contention, if not the most important, in the disputes between the Yugoslav republics. With the outbreak of war in 1991, tourist numbers plunged, although the country still welcomed more than 2m visitors a year until the war ended in 1995.

The recovery began almost as soon as the guns fell silent, with tourist numbers climbing steadily year on year to top 11m in 2011.

Both the government and private sector are anxious that Croatia should capitalise fully on its success. Further revenue growth, diversification and increasing value are priorities, not least as tourism is a rare bright spot in an economy that has failed to register meaningful growth since 2008.

According to Tihomir Nikolas, a board member at Riviera Adria, a holiday company, Croatia’s core customers are families from western European countries including Germany.

As Kresic-Juric notes, Croatia combines its geographical advantages – a long and beautiful coastline, more than 1,000 islands and a warm Mediterranean climate – with relatively low costs, although visitors to Dubrovnik might quibble with the suggestion that the country is a budget destination.

Sun and sea remain the main draws, not least on the islands. Krk, the largest, is a centre for package tourism; Hvar has acquired a reputation for its nightlife and luxury accommodation; while rocky, arid Pag is developing a niche in gastronomy, partly thanks to its salty, herby cheese. Nautical tourism is a growing interest for the sailing fraternity, while the string of Venetian-influenced towns along the coast is another draw.

Most notable is Dubrovnik, the “pearl of the Adriatic”, hemmed in by its famous walls and packed with churches, palaces and atmospheric narrow streets. The city, which suffered three months of bombardment during the war, is Croatia’s foremost tourist town, attracting visitors from around the world.

“Anyone who has visited Dubrovnik can see Croatia already rivals the best holiday destinations in Spain and France,” says Kresic-Juric.

Croatia’s other coastal draws include Split, where the palace of Roman emperor Diocletian is at the heart of the vibrant city; Trogir, with its beautiful, carved cathedral portico; Zadar, where Roman ruins stand within a picturesque medieval town; and Rovinj, reminiscent of Italy, with its stunning hilltop setting above the sea on the Istrian Peninsula.

Places like these – as well as the elegant capital, Zagreb – are central to Croatia’s drive to build the cultural tourism segment, one of a number of niches in which industry leaders perceive particular competitive advantages. Others include adventure tourism, capitalising on Croatia’s mountainous and unspoiled landscape, medical tourism and gastronomy.

These appeal to well-heeled tourists and the hope is that developing such niches can help Croatia increase the sector’s value-added element.

Achieving this will require greater private investment in accommodation, resorts, infrastructure and attractions. The bulk of input currently comes from local investors such as Riviera Adria and Maistra, a hotel and resort operator owned by Adris Group, Croatia’s largest tobacco company.

Significant foreign investors include EPIC, the Austrian owner of Valamar Group, which runs hotels and resorts along the coast, and Luksic Group, a Chilean outfit founded by Andronico Luksic, the late Croatian emigrant.

Several large international hotel chains are present. Hilton brands the famous Hotel Imperial in Dubrovnik, while Sheraton has hotels in Zagreb and Split. But there is still a feeling that more could be done to attract foreign investment, with improvements in the business climate seen as vital if the country is to realise its gains.

“The most important thing the government can do is to speed up investment in tourism, but the global [financial] crisis has hindered investors’ optimism,” says Boris Suljic, owner of the Boskinac Hotel and winery on Pag.“This is especially true in the tourism sector, where investment is returning to normal somewhat slowly.”

He adds: “The state is on the right track and aware that without investment there can be no economic growth. We want to believe that within the next year the government will bring forth better, more efficient laws that will speed up processes to encourage domestic as well as foreign investment in Croatian tourism.”

Suljic is confident Croatia’s EU accession, which is expected in July, will help catalyse investment, with membership helping to underline improvements in Croatia’s political, economic and legal stability.

Croatia is in the fortunate position of having the advantage of cultural and natural attractions to develop high-end tourism. A few islands and patches of coast aside, it has managed to avoid a race for the mass market.

On the other side of the Balkan peninsula, Romania and Bulgaria – beautiful and fascinating countries – have largely focused on low-cost beach (and in Bulgaria, ski) tourism. As a result, stretches of the Black Sea coast are blighted by high-rise hotels and both countries are struggling to break out of the perception that they are destinations for cheap package holidays.

Bosnia-Herzegovina, Serbia and Macedonia, all with substantial tourism potential, also lag well behind Croatia, although the former Yugoslav neighbours to the north and south, Slovenia and Montenegro, have done well.

Slovenia has carved out a niche as an adventure tourism destination, as well as benefiting from Ljubljana’s improving air connections to western Europe. Montenegro is home to the world’s fastest-growing tourism industry, according to the World Tourism and Travel Council, an industry body.

Like Croatia, Montenegro benefits from a coastline studded with attractive towns, as well as a mountainous interior. Long a popular destination for Serbs (particularly since the war, when many have felt unwelcome in Croatia), Montenegro’s appeal has widened in recent years, with western Europeans and Russians flocking to its coast; investment in tourism property has become an important economic driver.

Porto Montenegro, the country’s flagship luxury resort – owned by Peter Munk, the Canadian gold magnate – has been touted as a model for tourism development in the country and beyond.

With the region’s wider economic landscape still bleak, tourism in Croatia and Montenegro is a welcome eastern European success story.