MARKETING ISSUES IN TOURISM DEVELOPMENT:

A CASE STUDY OF CROATIA

Mirna Leko-Šimić
School of Economics
Osijek, Croatia

and

Robert Velenik
Institute of Agriculture and Tourism
Poreč, Croatia

ABSTRACT
Tourism, alongside with food production has been identified as a strategic
development issue and was given a high development priority in Croatian economy in the past
few decades. More then 80% of tourists in Croatia are foreign and tourism is heavily
dependent on international market trends. These trends have changed in general during the
past decade, and there are additional challenges for Croatia due to the war, disintegration of
ex-Yugoslavia and processes of political, economic and cultural transition in Central and
Eastern Europe.

This paper examines the relative importance of tourism in the Croatian national
economy and application of macro strategies for tourism development, concentrating on
marketing issues. Additionally, a survey of 273 foreign tourists represents their image and
view of Croatian tourism.

Key words: tourism, Croatia, marketing

INTRODUCTION
A number of countries have recognized tourism as an attractive economic activity for
it for its major positive economic impacts: it increases foreign exchange earnings as well as
income and employment. (Mill and Morrison, 1997). Processes of globalization and market
liberalization have made tourism a truly international business activity where tourists –
international customers and their satisfaction with the product and its value create need for
different business activities. Although very resistant to changes in economics, politics, etc.,
tourism trends, both the supply and demand, have changed during the past few decades. On
the supply side trends of concentration, specialization and standardization of values and
quality as well as the market segmentation are evident. On demand side growth of
international terrorism (September11, 2001 in the USA), Iraqi war, new diseases like AIDS or
SARS have to a certain extent contributed to new demand patterns in international tourism:
-increased fear of traveling, especially flying,
-postponed booking (wait-and-see strategy),
-price sensibility
-preference for individual over group traveling
-preference for alternative accommodation over hotels.

In general, tourists are becoming increasingly demanding and more experienced. Their
destination choice, as well as their final evaluation of tourist destination depends on complex
package of motives and expectations. In this context, marketing activities prove to be
necessary in creation of destination image and attraction and maintenance of profitable
customers. These activities start with management of tourist destination, including
infrastructure, environment and natural attractions, development of specific strategies and
investments, segmenting and monitoring the tourist market, communication with tourist
market, and finally organization and management of tourism marketing (Kotler et al, 1996).

In addition to these global pattern changes, Croatia has faced a number of specific
challenges. Fist of all, Croatia is heavily dependent on international tourist market that makes
about 85% of total tourism turnover in Croatia. On supply side Croatian tourism bears a heavy
burden from the past; first, it is still often identified as Yugoslavia, and not Croatia as tourism
destination, and second, the tourism product was for a long time recognized as a relatively
cheap «sun & sea» destination with a very little value-added to offer. As such it could attract
only specific, lower income market segments and develop only mass tourism. The strategic
issue today is to create a new international image of Croatian tourism as a competitive high
value brand product.

The challenges are evident on the demand side, too. A part of previously emitting
markets has virtually disappeared, and some of the new markets of Central and Eastern
European countries are still underdeveloped for high quality demand. On the other hand, the
high-income segment of these markets has obtained relatively simple access to other
destinations competing with Croatia.

CROATIAN TOURISM AND ITS POSITION IN NATIONAL ECONOMY

Croatia has a long tradition in tourism and hospitality, mainly due to its favorable
geographical position for most European countries and natural resources, mainly associated
with Adriatic coast. Up to 1990, Croatia had a 7% market share of tourism within
Mediterranean and about 8.5 million of foreign tourists per year. The war period 1991-1995
has had an enormous negative effect on tourism development, both as physical resources
destruction (roads, hotels, supply, etc.) and negative image of safety and security, which lasted
much longer than the war itself. Tourism started recovering in 1999. Its contribution to the
national economy well-being is shown in Table 1.

Table1
International tourism share in the Croatian economy (%)

Revenue from int'l tourism 2001 2002

Share of GDP 17.1 17.0
Share of total exports 34.6 36.1
Share of service export 68.4 68.7
Source: Croatian Bureau of Statistics, 2003

Additionally, it has 27% share of total employment and covers more than 50% of Croatian
balance of payment deficit.

As Croatia became independent in 1992, tourism, especially international, alongside

with food production, has been identified as a major stimulus of the economy and was given
the highest development priority. Its development can be followed in Table 2.
 Table 2
Major tourism development indicators

1980 1985 1990 1995 2000 2002

No. of beds (000) 692 820 863 609 710 804
No. of tourists (000) 7929 10125 8498 2438 6620 8320
No. of overnights 53600 67665 52523 12885 38406 44692
(000)
Average overnights 77 83 61 21 54 56
per bed
Average overnights 6.8 6.8 6.2 5.3 5.8 5.4
per tourist
Source: Ministry of tourism report, 2003

There is evident decrease in all indicators in 1995, which is due to the war, but much
more disturbing is the evident long term trend of decreasing average overnights both per bed
an per tourist. The average overnights per tourist in 2002 were only 5.4 days, while, for
example in Greece it is 14 days (Buhalis, 1999). It clearly shows that contemporary tourists
need more experience then just “sun & sea”.

MARKETING ISSUES
1. Product
Croatia has a very attractive tourism potential, primarily the unique natural, cultural
and historical heritage. It is mostly recognized by the Adriatic coast and natural resources:
1800 km of coast and over 1000 islands have been recognized both by tourism strategy and
policy creators and foreign tourists as the main comparative advantage. TOMAS research
(2001) found that over 90% of foreign tourists come to Croatia for sun & sea. Such an image,
both projected by tourism bodies and perceived by foreign tourist does not bear the danger of
the gap between the two, which usually results in disappointment and future avoidance of the
destination and dissemination of the negative image (Gitelson and Kerstetter, 1994).
However, it underestimates the other potential tourist destinations within the country (national
parks, health tourism, sport tourism, cultural and historical heritage, etc. in the inland), limits
the tourist season to only few summer months and makes it less profitable then it could be.
Another correlated problem is the bed structure: only 40% of tourist beds are in hotels and
resorts and the rest is camping sites and private rooms and apartments, which are to a large
extent not officially registered, not standardized and often a part of a gray market.

2. Price
The relative price of competing tourism destinations can have a significant influence
on the choice of destination by potential customers – tourists (Dwyer, Forsyth and Rao, 2000)
especially within the trend of increased price sensitivity. Thanks to its geographical position,
Croatia is an attractive, close and relatively easily reachable destination for both Western and
Eastern European travelers. During the past few years 500 million Euros have been invested
into the tourism industry, and large part of it into modernization of roads and traveling
infrastructure in general. However, the major problem concerning price competitiveness is the
difficult task to reposition Croatia as a cheap destination of mass tourism to the middle and
upper class tourism destination. Only the price changes as it was done during the past few
years resulted in the contra effect: foreign tourists have recognized only the price, but not the
quality increase, as it is also shown in our research. The other problem considering prices in
Croatian tourism is that is not recognized and used as an additional marketing tool. Croatian
tourism managers seem to be very stiff and inflexible in their price decisions. For example,
last minute travel options with lower prices were introduced only this year.

3. Promotion
Promotion activities carried out on both national and local level can significantly
contribute to Croatian tourism product repositioning. Promotional budget for Croatian tourism
stipulated in the national government budget for 2004, is about 6.2 million Euros and makes
almost 28% of total tourism budget for the current year (Ministry of Tourism, 2003).
Promotional activities on national level are created by National Tourism Association and
Ministry of Tourism and mainly directed towards most important foreign markets and include
following major activities: (Ministry of Tourism, 2003a)
-participation in major international tourism fairs throughout the year (75 in 2003), including
being a "partner country" in some of them, giving press conferences and presentations,
organization of "Croatian evenings", etc.
-printing of brochures and handouts with general tourism information that are distributed in
foreign tourist offices, on the border and in local tourism offices, as well as special brochures
on sailing in Croatia, Croatian cultural heritage, hunting in Croatia, etc.
-"Croatian angels", the tourist 24-hours a day toll free service information during the summer
months,
-official Croatian tourism web site (www.croatia.hr) with multimedia contents of 600 tourism
destinations, and possibility for online registration and booking,
-advertising in print, electronic and other media in 20 countries where most tourists come
from,
-TV advertising through CNN, Eurosport, TW1 and ORF,
-info-kiosks and welcome service for tourists at major airports and border crosses,
-hands-on promotional projects by tourism offices in 16 major emitting markets,
-organization of study tours for tourism journalists (633 in 2003) and foreign travel agencies
representatives (from 17 countries in 2003), as well as numerous activities on local level.

4. Distribution
Product distribution systems in tourism are complex and affected by many factors.
Increased accessibility of both information and destinations significantly influences
traditional distribution systems and calls for new technologies and know-how in the area of
distribution. On the destination level itself, provision of infrastructure is complicated and
problematic for a few reasons:
 tourism is highly seasonal which makes it difficult to maximize returns on
investment in assets, especially for private investors, and
 there is significant involvement of government agencies on both national
and local level.
Although there were significant investments in infrastructure improvement, it is still often
incapable of supporting the suprastructure growth and thus transportation, water and
electricity supply and other services are under enormous pressure during peak summer
months to satisfy the demand density.

RESEARCH
We did a pilot survey of 273 foreign tourists that have spent their summer holidays
2003 in Poreč, Istria. Istria is a peninsula and the most developed tourism region in Croatia
that makes about 40% of total tourism turnover in Croatia. The town of Poreč is a top tourism
destination in Istria and Croatia which has won the "Champion of Tourism Award" for the last
four years in a row. Analyzing the situation in Croatia, Poreč is one of the rare places that
have managed to define a high quality tourism destination image combining natural resources,
cultural heritage, sporting activities and numerous events.

Our sample consisted of 273 foreign tourists that came from 16 different countries:
36.3% from Germany, 20.1% from Austria, 12,5% from Great Britain, 9.2 from The
Netherlands (altogether 78.1%) and the rest came from all over the world: Russia, Sweden,
Slovenia, Hungary, Czech republic, Italy, Poland, etc. 54.9%of the sample were male and
45.1% female. The majority of the sample was of age between 26-60 (62.6%), 24.5% were
older then 60 and 12.8% of the sample was 25 or younger. 63.7% were employed, 26%
retired, 7% students and 3.3% unemployed. For over 40% of the sample this was their first
visit to Croatia, and 39.2% have already been to Croatia for holidays. 20.1% of the sample
regularly spends holidays in Croatia.

They were asked to evaluate their holidays in general, as well as the specific aspects of
Poreč as the tourism destination. On a 5 points Likert scale the average mark they gave to the
holidays in Poreč in general was 3.83, and the specific aspects were marked as follows:
Natural resources (beauties) got the highest average mark of 4.05, hospitality got the second
best mark of 3.95; food got 3.90, accommodation 3.81. Entertainment and fun possibilities got
the lowest mark of 3.45. In more detail, 72,5% of the respondents have evaluated the
accommodation above the average (marks 4 and 5) 78% evaluated natural beauties and
hospitality above the average. 70.7% have evaluated food above the average. Only 51.6% of
respondents have marked entertainment possibilities above the average, while14.5% has
marked it either bellow average or even totally unsatisfactory. In all other categories, marks
bellow the average were given by less than 6% of the respondents. 31.1% of the sample has
spent more than 100 kunas (about 15 Euros) per person daily. Interestingly, 60.8% of them
claim that they have spent most of their money on food and drinks, 25.6% on excursions and
only 9.9% have bought souvenirs ands things to take home. Finally, 47.6% of the sample
considers holidays in Croatia comparative to other Mediterranean countries, 34.4% less
expensive than other Mediterranean countries, and 12.8% consider it more expensive in
comparison to other Mediterranean countries. Among those who consider holidays in Croatia
price competitive are 60,6% tourist who visit Croatia for several times. Generally, it seems
that those who visit Croatia for the first time are more critical and give lower marks to most of
the criteria.

STRATEGIC IMPLICATIONS
According to the Ritchie and Crouch model of competitive destination (Ritchie and
Croutch, 2000), it seems that Croatian tourism has its major strengths in core resources and
attractions and supporting factors and resources, while the destination management, policy,
planning and development are the weak points. However, it only accounts for the Adriatic
coast area, while the continental resources and possibilities are very much underestimated. So,
foreign tourists, when thinking about holidays in Croatia associate it with Adriatic coast, i.e.
“sun & sea”. If Croatia wants to improve its general tourism product, there will have to be a
significant improvement of communication channels targeted at the potential tourists by
National Tourism Association, Ministry of tourism and travel agencies on two levels:
1. to offer and inform potential tourists about alterative destinations and holiday
possibilities away from the coast, and
2. to emphasize other value-added connected to the “sun &sea” in order to create new
image of the destination.
These improvements should be aimed at defining the vision of “authentic Croatian
experience” unifying tradition, natural resources and originality of different regions (Croatian
Tourism Cluster, 2003). Furthermore, there is evident lack of managerial know-how and a
lack of strategic vision, especially on the local level. Entrepreneurial activities are still at the
starting point, which is partly due to lack of education and partly to macroeconomic
processes, i.e. still uncompleted process of privatization. Marketing is another significant
problem. In most of the cases in Croatian tourism the product-orientation is still being
followed. In order to avoid the present mass tourism destination image, it will be necessary to
research and define most important existing and emerging market segments, maximize their
potential and stimulate the supply of differentiated specific tourism products to meet market
requirements. For example, Australia has recognized backpackers as one of the key tourism
market segments and develops a whole range of specific products to satisfy their needs
(Tourism Green Paper, 2003).

CONCLUSION
The analysis of Croatian tourism clearly illustrates its importance of the industry to the
national economy well-being. The strategic issue of Croatian tourism development is to
reposition the product from low value-added “sun & sea” destination into high value,
internationally recognized brand. In order to achieve this goal in the past focus has been on
the volume, but in the future we will have to earn more from fewer international tourists.
Thus, growth will need to be focused on yield, rather than profitless volume. A key factor to
increasing Croatia’s tourism export performance and competitiveness is better intelligence on
international market and the distribution and utilization of that intelligence in effective
international marketing and tourism management, raising the standard and quality of tourism
products and businesses.

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