Home Business Opportunities for Hotel Operators and Hotel owners in Croatia

Opportunities for Hotel Operators and Hotel owners in Croatia

by Klara Matić MRICS

The number and market share of international hotel chains in Croatia is growing every year. Hotel players already present in Croatia are Melia, TUI, PPHE, Falkensteiner, Hilton, Rixos, Marriott (brands Sheraton & Le Meridien) etc.

Over the last 2 years there has been a huge increase in inquiries by international hotel operators who are looking to enter the Croatian market. Colliers Croatia has recorded demand from around 20 market newcomers representing over 60 different hotel brands. Most of the existing and newcomer hotel operators have no interest in owning the hotels (real property). Instead, they prefer light-asset strategy and running the business of the hotels via different key operating models – Hotel Management Agreement, Franchise Agreement or Lease Agreement.

While the demand from the hotel operators is very strong, predominantly owner-operated supply is quite limited making the expansion or market entry difficult and slow. This can be explained by three main factors:

  1. Size constraints: the average size of all hotels in Croatia is 79 rooms; below a required minimum of 100 rooms by the hotel operators. There are around 220 hotels in the country with 100 rooms or more. For the requirements at or above 300 rooms the number of hotels is 41.
  2. Ownership: a significant share of hotel stock is owned by domestic hotel chains which have their own domestic brands. In addition, domestic hotel chains own the majority of largest hotels. Less than 30% of hotels with 100 or more rooms are independent hotels while +70% are part of hotel chains.
  3. One part of independent hotel owner-operators are not acquainted with possibilities and benefits of splitting the hotel ownership and management.
    Source: Ministry of Tourism, edited by Colliers International

Where are the opportunities for the hotel operators?
a. Domestic chains – collaborating with strong local partners can be a great way of market entry or expansion. Large local companies have been gradually opening up for the international brands and we expect this trend will continue.
b. Independent hotels – a slower process but might mean less competition and potentially better terms.
c. Acquisitions of existing hotels / hotel companies or partnering with investors
d. Greenfield development / partnering with developers
e. Banks – partnering with investors who can buy NPLs or refinance and solve a critical situation with the professional management

What are the benefits for the hotel owners?
Owners can get numerous benefits from professional hotel operator contracts. The main is that it provides owners with quality and professional management and recognition, while he retains ownership benefits (such as cash flows, depreciation deductions etc.).

Advantages of professional management for the Owner include:

a. Expertise in hotel operations
b. Lower market / operating risk
c. Access to development, design and operations support from brand
d. Access to wider marketing platform and global distribution systems
e. Post Covid-19 confidence tied with strong brand
f. Easier to obtain financing
g. Stronger upside potential after fees

Colliers HTL services include: Operator Search and Selection, Hotel Valuations, Hotel Brokerage, Market and Financial Feasibility Studies, Development recommendations. For more information please contact us at croatia@colliers.com or +385 1 4886 280.

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