Zagreb Hotel Capacities to Increase, Numerous Projects on Coast

By 7 February 2023

February the 7th, 2023 - Zagreb hotel capacities are set to increase significantly this year, with numerous projects in the pipeline down on the coast from Dubrovnik to the Istrian peninsula.

As Poslovni Dnevnik/Marija Crnjak writes, although the aforementioned items are investments that have been going on for a few years now, 2023 will bring the most news to the Zagreb hotel scene, which is finally returning to pre-pandemic tourism numbers, and business events are going along with it. Maistra is set to open the newly renovated former Panorama, Arena in the centre will open Radisson, a in Praska ulica, a hotel is being completed by an Albanian investor - the Abau company.

After the implementation of several large projects down on the Adriatic over the past few years, such as Adris's Grand Hotel Park, Arena's Grand Hotel Brioni, Hotel View in Postira, summer destinations mostly have minor adaptations or investments set up for this season, aimed primarily ay improving the quality of the content and services. Several new large projects are being prepared, which won't be completed until the beginning of the 2024 summer season, such as Split's Marjan or the first Croatian Hyatt, which the Turkish Dogus has now finally started building.

These are all projects that were planned long before the outbreak of the coronavirus pandemic or the jump in inflation that slowed down or postponed many such projects. In addition, Croatia still has unresolved issues of tourist land and maritime property, which partially slow down decision-making on investments all along the Adriatic.

A survey conducted by the Association of Employers in the Croatian Hotel Industry back at the end of the last season showed that around 400-500 million kuna will be invested in the preparation of the next tourist season, which is roughly half of the potential it does boast. At the same time, the total investment potential of the members is about 35 billion kuna, but only when it comes to ''ready-made'' projects. Part of those projects will be financed through the NPOO, for which the tender is still ongoing, and so far the public is only partially informed about investment projects in thermal capacities in the continental part of the country.

Although the revenues of tourism companies over the first nine months of last year were higher by 22 percent compared to the revenues in the same period of pre-pandemic 2019, at the same time, operating expenses increased by 41 percent. The costs of raw materials and other such items increased by 45 percent, and labour costs by 26 percent, which is why most of the standard financial indicators of tourism companies last year had a negative trend, both in relation to 2021 and 2019.

The gross profit margin of tourism companies, which was 13.5 percent back in 2018, was almost halved last year to 7.6 percent, the share of profit before interest, taxation, depreciation and amortisation (EBITDA) in total revenues decreased compared to 2021 for 8 percentage points, and the rate of return on business has also decreased compared to 2019.

The analysis showed that tourism companies' pre-tax profit of 1.238 billion kuna from 2021 and 2022 (estimates for the entire year based on results achieved over the first nine months) still doesn't cover the pre-tax losses of 1.551 billion from pandemic-dominated 2020. On top of all that, the rate of change in long-term tangible assets fell, which is indicative of a slowdown in the investment cycle, and this potentially endangers the realisation of the business results of tourism companies in the future.

As has now been learned, investments in the tourism portfolio managed by Valamar Riviera for the year 2023 are planned in the amount of 58 million euros, which includes various projects in all of their destinations, as well as the continued development of the Istra Premium Camping Resort.

Investments worth around 32 million euros are also underway down in Dubrovnik, related to the repositioning of the Valamar Tirena Hotel to 4*, the rebranding of the Valamar Club Dubrovnik hotel to the Sunny Plus brand, and the investment in the Valamar Lacroma Hotel and Maro World facilities for children, which are all part of the investment cycle of Imperial Riviera after the recapitalisation of Dubrovnik hotels by both Valamar Riviera and AZ pension funds. A special emphasis of investments in 2023 will be placed on further investments in digitisation, sustainability and product improvement, the company says.

The total planned investments of Adris Group in the tourism part of the business in 2023 will amount to a massive 820 million kuna, of which more than 300 million kuna will be directed to improving the quality and offer of Istria's many campsites. Preparations for two strategic tourism projects, the Westin hotel in Zagreb and the Marjan hotel in Split, are also in the pipeline. The reconstruction and repositioning of the former Zagreb hotel Panorama was part of the investment plan for last year and amounted to almost 220 million kuna, and they expect the opening of that particular new Zagreb hotel this spring.

That Zagreb hotel will undergo a major transformation, and one of the main ideas of the project is for the lower part of the hotel to be maximally open to the public and become the lifeblood of this part of the capital. Adris also noted that they have invested more than six billion kuna in tourism so far, and in the period 2023-2025, they plan to invest an additional 460 million euros in total.

Furniture is already arriving at the hotel in Zagreb's Praska ulica, and this upcoming Zagreb hotel is taking shape well, although the exact date of the opening, as well as the amount of the investment that was launched five years ago by the Abau company in the building it bought from Zagrebacka banka, hasn't yet been communicated. The company Abau was founded back in 2015 with its headquarters in Lovran by the Albanian company Gener 2 SHKP, which is in the construction and energy business, and among others, they are involved in the construction of the Adriatic pipeline.

After the completion of the Arena Franz Ferdinand hotel in the Austrian Nassfeld ski resort, in the second quarter of this year, the Arena Hospitality group plans to complete the project of the Zagreb Radisson Hotel, a high-category lifestyle hotel that was launched back in the autumn of 2021.

This 118-room Zagreb hotel will include a restaurant and bar, wellness and spa facilities, a fitness centre, event spaces and parking. The hotel will also include the first and only rooftop pool and bar in all of the City of Zagreb. While the project is progressing without any underlying construction or structural issues, delays and complications related to the supply chain adversely affect the planned completion of the works. As a result, the project is scheduled to be completed in the second quarter of 2023 only, the investor noted in the third quarter report.

They also added that the group is still exposed to the high inflation costs that are continuing to prevail throughout all of Europe, which negatively affects the cost of purchasing goods and services, not to mention raw materials. The expected profitability over the coming months is therefore affected by the increasing operating costs, overheads and salaries. The group is working on a number of energy conservation initiatives across its operations and is also planning to invest in solar energy to reduce energy costs.

Arena's important investment this year will also be the beginning of the second phase of the repositioning of the Arena Stoja camp, a project worth around 3 million euros. This phase includes a new entrance to the camp, an extensive renovation of the main restaurant and cafe bar, along with major infrastructure upgrades.

After last year's investment of 45 million euros, the Sunce hotels company is continuing its investment cycle in its Bluesun hotel chain, and they're set to enter into the renovation of Hotel Afrodita in Tucepi and Hotel Bonaca in Bol on the island of Brac, which is why the Arab investor Eagle Hills Real Estate plans to recapitalise the company with almost 9 million euros. As has since been learned from that particular company, in addition to the renovation of these two hotels, there are also several smaller operations to improve their offer and raise the quality of services in other facilities going on.

A big investment cycle is also starting further inland in Plitvice, where the renovation of the Plitvice and Belevue hotels, the demolition of the Grabovac hotel and the construction of a new hotel with four stars, 146 rooms, a swimming pool and a congress hall are underway.

Works are also starting on the Hyatt Regency Zadar Maraska hotel, which should open its doors next year, as many as eight years since the Turkish Dogus announced its entry into this investment. Hyatt Regency Zadar Maraska will operate as part of the well known Regency brand of Hyatt International Group, and is the first hotel under the Hyatt brand in all of Croatia so far. This Zadar hotel will have 133 rooms and suites, a bar, restaurants, a spa area, and a conference hall spanning an impressive 400 square metres in total.

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