Croatia's appeal extends to hotel brands

Sutivan, Brač, courtesy of (Sutivan Brac)

TUI is laying down plans to expand in Croatia, setting up a joint venture with Croatian company Sunce Koncern after buying 50 percent of a local hotel operator for €31.5 million.

TUI’s deal came as speculation suggested that Hard Rock International was eyeing the country for expansion, describing the Croatia’s culture as fitting its “business philosophy.”

Sunce Koncern has established a joint venture with TUI after selling the German group 50 percent of hotel operator Punta Zlatarac Tucepi. TUI will own 51 percent of the JV, with Sunce the remainder. The deal came after this summer’s opening of the TUI Blue Jadran, which was owned and operated by Punta Zlatarac Tucepi.

Following the agreement, the JV purchased 32 hectares of land on the island of Brač, where it will build three TUI hotels, with TUI providing a shareholder loan to fund the deal.

TUI’s chairman & CEO, Friedrich Joussen, took the opportunity of the group’s third quarter results to describe Croatia as “growing strongly,” contrasting it with Spain, which it commented was “not growing strongly because it is full.” Joussen’s opinion was shared by fellow travel and hospitality group Thomas Cook, where CEO Peter Fankhauser said that the country was “coming up”.

With overseas investors looking at Croatia, its government was preparing to exit the hotel sector, with the local press suggesting that 88 groups had tabled first-round bids across a group of three hotels: the Maestral Hoteli and Hoteli Markarska in Dubrovnik and Crikvenica’s Jadran. Both foreign and domestic investors were rumored to have participated. A decision on the three hotels is expected to take place in the first quarter of next year, with the state expecting a minimum of Kuna 458 million ($72 million) as its pursues a strategy of privatization to help cut debt.

As the government was riding the increase in investment, Hard Rock International said that it was interested in opening in the country, with Josh Littman, HRI’s VP development, EMEA, visiting Zagreb to take place in an investment conference.

“Apart from becoming more and more popular among investors and brands, Croatia is a very interesting market for us because it fits with its rich culture into our business philosophy,” Littman said. “We are interested in Split, Zagreb and Dubrovnik and the northern Adriatic coast and we hope to realize a four- or five-star hotel project in some of these destinations in the forthcoming period. We are open to various options, from franchise to contract management or investment.”

The company is thought to be looking across the region, including in Montenegro and Serbia.

As competition for travelers looks set to increase, the Hilton Imperial Dubrovnik was set to close for an extensive renovations program, with reopening set for April 2018. Works will include full refurbishment of existing rooms, plus adding two more, as well as overhauling the public areas, adding a lobby bar.

The Imperial was Dubrovnik's first purpose-built hotel, opening in 1897, with its own electric lightning, steam central heating throughout, hot and cold running water, bathrooms, an electric lift, room bells, reading salons and card rooms and, Hilton reported “a special hall for ladies.”

With hotel brands, investors and potential guests all targeting Croatia, rivalry for visitors is pushing the demand for quality higher.

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.