Croatia's economic state, high demand shows promise for hotel investment

Westgate, Split, Croatia (High demand and economic growth have taken the lead in driving investment in Croatia's luxury hotel sector. )

Thanks to high demand, tax reforms and strong economic growth, Croatia's luxury hotel and residential real estate markets has shown growing success. Most of these properties are in Dubrovnik, Istria, Opatija and on the islands, including Krk, Hvar, Brač and seaside resorts. 

A few projects in Croatia's pipeline include Arqaam Capital and Four Seasons' luxury mixed-use waterfront resort on the Brizenica Bay of Hvar. The Four Seasons, which is expected to be complete in 2019, will have 120 keys and 60 residences. Meanwhile, Dogus Group's Maraska project will involve the redevelopment of a brownfield site in Zadar. The site is set to have 115 apartments, a hotel and a shopping center once the project is complete. 

The growing foreign demand for Istria's luxury residences is mainly attributed to Austrian, German and Slovenian visitors. However, investors from Czech Republic, Slovakia and Sweden have been showing strong interest in Dalmatia. While Croatia has several major building projects in its pipeline, this growing demand for luxury accommodation, especially for luxury seaside properties, continues to exceed the country's available housing stock, driving prices up in the rapidly growing tourism sector. 

The hotel and retail sector have been performing especially well not only due to expanding yield opportunities, but also greater investor confidence and strong economic performance. Croatia has also been benefiting from the EU's Cohesion & Competitiveness Program, which runs from 2014 to 2020 and allows the country to invest €6.8 billion on projects that reduce differences with more developed EU member states. As more EU funding is on the way, Croatia may continue to grow economically, especially since many tax reforms passed in late 2016 will begin to garner wealth among low earners and smaller companies. In response, this will increase the amount of disposable incomes and personal consumption. 

Investors have seen many large-scale, mixed-use developments across the country as great opportunities. For example, developers broke ground on Tower B in Split's Westgate project in January 2017 and is expected to be complete in early 2018. The mixed-use tower will have office space and the tallest hotel complex in Croatia currently being built with 27 above-ground floors and six underground stories. At approximately 361 feet above sea level, the hotel will have 189 guestrooms and four suites.