Croatia Tourism Report Q1 2009

Tourism Overview The most recent data are for the first eight months of 2008 and, as we expected, show a marked weakening in the growth of foreign tourist arrivals, with an increase of 2.6% year-on-year (y-o-y) to just over 7.8mn. Domestic tourism showed even more weakness, down 2% y-o-y over the same period, while overall tourism (domestic and foreign) increased 2% on a year earlier to around 9.2mn tourists. As regards the top five source markets, only two countries recorded positive growth, with arrivals from Slovenia up 3% y-o-y and the number of visitors from Germany rising just 0.3% compared with the corresponding period in 2007.

Forecast Scenario BMI maintains its forecast of a marked slowdown in foreign tourist arrival growth in 2008, while we now expect negative growth in arrivals in 2009. The background economic conditions in major source markets underline the forecasts, with the economic outlook for the eurozone deteriorating. Our 0.9% real GDP growth forecast for the eurozone in 2009 has been revised downward to 0.2%. The bloc’s economy contracted by 0.2% quarter-on-quarter (q-o-q) in Q208, and if anything, the outlook has darkened since then. A slow recovery is expected in 2010, however, with real GDP growth of 1.6%. In addition, we remain long-term bullish on the Croatian currency, the kuna, against the euro (with the kuna reaching a new seven-year high of HRK7.0905/EUR in September 2008), making the country relatively more expensive for foreign visitors from the eurozone.

Hospitality Latest data for the period January to August 2008 show a slowdown in the hospitality sector, although not as severe as that recorded earlier in the year. The number of tourist nights totalled some 48.7mn (domestic and foreign tourists), up 3% y-o-y, with the number of foreign tourist nights increasing by the same growth rate. Of the key source markets, only Germany and Slovenia recorded positive (but marginal) growth y-o-y in tourist nights over the eight-month period.

Croatia Airlines The Croatian flag carrier Croatia Airlines transported almost 1.72mn passengers in 2007, a relatively strong increase of 8.8% y-o-y. In line with these favourable data, the growth rate of operating revenues exceeded the growth of operating costs, with the result that operating profit was high at almost HRK50mn. The airline, however, recorded a small net profit of HRK1.04mn (US$208,400), following a net profit of HRK32.1mn (US$5.8mn) in 2006.

Adris Group In H108, Adris Group reported total revenues of HRK1.49bn (US$325mn), an increase of just 2.2% on the corresponding period of 2007. Profit before tax amounted to HRK371.9mn (US$81.2mn), up 3.2 % yo- y. During the same reporting period, tourist business units reported a small 1% increase in bednights compared with the first six months of 2007.