After 2020 which was marked by lockdowns, travel restrictions, social distancing, and other pandemic-related measures, 2021 followed with the easing of measures, recovery, and growth. Can 2022 be the year when the tourism industry can finally say: „We are back to normal!“? In this blog, we’ll discuss the current trends in the industry, and where they might take us.
After the aforementioned period of lockdowns and travel restrictions, 2021 started the recovery of the tourism industry, but still well below 2019’s levels. It should be noted that 2019 was a record year for Croatian tourism, so after the abysmal 2020, 2021 did manage to do a lot to set the tourism industry on the right track. As things are currently shaping out to be, the number of arrivals and overnight stays is increasing significantly compared to 2021, and it does have the potential to surpass 2019.
However, there are some factors that we should take a look at before we give too positive of an outlook. Two things come to mind immediately, the current Russia-Ukraine crisis and the inflationary pressures that are present across the world, but especially in Europe. The Russia-Ukraine crisis by itself should not have a strong „direct“ influence on the performance of Croatian tourism. This is because of several reasons: first of all, Russian and Ukrainian tourists make up only a tiny minority of both arrivals as well as overnight stays in Croatia. If we look at data since 2019 (before the pandemic), on average, Ukrainian arrivals accounted for 1% of all tourist arrivals, while Russian arrivals accounted for 1.53%. At the same time, they accounted for 1.4% and 1.5% of tourist nights on average, respectively. This means that even if most of the tourists from this region stopped coming to Croatia, the impact would not be significant.
Russia and Ukraine tourist arrivals and overnight stays as a percentage of the foreign total (2019 – April 2022, %)
Secondly, the largest market from where most of the tourists traditionally visiting Croatia come is the EU itself. The main way of transportation of these tourists is by road, usually in cars or campers. As the war in Ukraine does not have any direct impact on this type of tourism, it should experience growth in 2022. Moreover, the current inflationary pressures should not have a significant impact on these customers either, as these countries do have higher standards of living, higher saving rates, and traditionally spend their summers in Croatia. It should also be noted that the only country not from the EU, the UK (from where the tourists come mostly by air) does have some additional encouraging news. According to the UK’s Post Office, there has been a 137% increase in the exchange between GBP and HRK in 2022 as compared to 2021, showing that Croatia could benefit a lot from the British travelers this year.
Tourist arrivals as a percentage of total foreign tourist arrivals for select countries (2019 – April 2022, %)
Tourist nights as a percentage of total foreign tourist nights for select countries (2019 – April 2022, %)
Looking on the other side of the coin, inflation could also have a negative impact on tourist companies. This is because it puts a strong pressure on them to increase the prices of their services, potentially losing some customers. Furthermore, there has been a 20% decrease in bookings in March 2022, due to the uncertainty posed by the Russia-Ukraine crisis. Still, according to the biggest Croatian hospitality companies, in recent weeks a substantial increase in bookings was recorded, pointing towards 2019’s levels.
Meanwhile, the main problem that has been plaguing Croatian tourism for years, the lack of workforce, also presents a challenge. However, the tourist companies have started offering better working conditions (higher wages, stronger benefits, etc.), and have also increasingly imported foreign workers, so much of the demand for workers has been fulfilled this season. Because of this, the workforce shortage should not be so prevalent.
Taking all of this into account, why are the expectations for a good 2022 summer season still so high? Let’s look at some data from the European Travel Commission (ETC) in order to answer this question. Firstly, we’ll take a look at the survey they did on the people’s intention to travel. According to the survey, 76.8% of the participants answered they are likely or very likely to travel in the next six months. Considering the latest version of this survey was made in March 2022, when most of the negative influences on travel were already known, one wouldn’t expect this number to be so high. What’s more, this represents a 15.7 p.p. increase from the last survey that was made in December 2021. Finally, the participants from countries that were most likely to travel, i.e. Germany with 80.8%, the UK with 81.8%, Poland with 82.4%, and Italy, with 84.6%, are also some of the largest inbound markets for Croatia.
European Travel Commission „Intention to travel in the next 6 months“ survey, (July 2021 – March 2022, %)
At the same time, there are other indicators to consider. For instance, travelers’ planned spending amounts. The share of travelers who are planning to spend EUR 500 – 1,500 rose by 8%, while the share of those ready to spend over EUR 2,000 dropped by 8%. This is currently one of the best potential indicators of inflation’s influence. What can be surmised from this is the fact that people aren’t willing to cancel their summer plans, but rather choose more budget-friendly options. The last research to consider is the preferred countries of travel survey. On it, the South European destinations dominate, with Croatia tied in the 5th/6th place tied with Portugal, at 5.1% as a country of preference.
So, what can all of this data tell us? Firstly, the huge influence that COVID-19 travel restrictions had on the tourism industry. It’s not that most people weren’t willing to travel, especially when the vaccination rates started ramping up, it’s that most countries had a form of travel restriction in place. Secondly, after the removal of these restrictions, even when the current geopolitical uncertainty and inflation are taken into account, people have a strong willingness to travel. This is also supported if we look at the data from some of the largest inbound markets for Croatia (Germany, Austria, Italy, etc.), in which, Croatia still remains the country of preference.
Because of all of these reasons, we expect Croatian tourism to either match or surpass the 2019 levels in terms of arrivals, tourist nights, and overall revenue. At the same time, considering the uncertainty and changes that are happening on a daily, weekly, and monthly basis, profitability is next to impossible to estimate right now, so we’ll exclude it here.
To end this blog by answering the question in the title, yes, it can. And all things are pointing towards it being one of the largest eggs on record.