The year 2025 in Croatian tourism brought much-needed market stabilization after a three-year period of strong oscillations, but also a strong reminder that without a new investment cycle — especially in the hotel portfolio — we will not be able to raise quality, reduce seasonality, or maintain profitability in an environment where costs grow faster than revenues. The structural picture of the sector remains unchanged: private and other forms of short-term rental accommodation make up the dominant part of capacity, while hotels, although efficient in creating added value and generating year-round demand, remain in the minority. This is precisely why the industry is increasingly emphasizing the need for a new investment cycle in hotels — from the thorough renovation of existing facilities to selected new projects — in order to increase value per guest and reduce the seasonal concentration of traffic.

Seasonality and accommodation structure: the necessity of a shift towards hotels

Seasonality remains a key challenge. July and August still carry the largest share of annual traffic, while the pre-season and post-season, despite progress, remain an insufficiently utilized potential. The share of hotel accommodation in total capacities is still modest, and the supply of private and similar non-hotel accommodation is above average. It is precisely this unfavorable structure that causes revenue per accommodation unit and per overnight stay to lag behind competitive destinations with a higher share of hotels. Experts warn that the solution lies in systematically increasing the share of 4* and 5* hotels and developing high value-added content that extends the season.

Tourism statistics show that private accommodation and "holiday homes and similar short-stay facilities" account for about half of overnight stays, while hotels in normal seasons participate with roughly a quarter to a third of total overnight stays. In practice, this means that two-thirds of the total turnover of short-term rentals fall precisely in the peak season, while hotels, although more efficient across a wider range of months, achieve only a smaller part of the annual result in July and August. Such seasonal concentration makes human resource planning difficult, increases operational risks, and weakens the negotiating position in the supply chain. The shift towards hotels is not just a matter of image or star category, but primarily an instrument for balancing demand throughout the year and stabilizing revenue.

Stabilization of volume, but acceleration of costs

This year, the recovery of physical indicators slowed down: the number of arrivals and overnight stays in the peak season stagnated or oscillated slightly, while modest growth was achieved outside the peak. At the same time, labor, food, and service costs continued to rise. Employers in the hotel industry report that total operational costs are growing faster than revenues, which is also visible at the level of EBITDA margin and net profit margin. In this context, labor costs — including the increasingly pronounced seasonal labor shortage — have become the most sensitive planning item: the growth of hourly wages, employee accommodation and transport, as well as the costs of training and retaining key profiles, strongly affect the expenditure side. Under such conditions, a simple price increase is not a sustainable strategy; a combination of smart segmentation, quality improvement, operational excellence, and precise revenue management is necessary.

Pressures on input food costs have not eased either. Although inflation rates are gradually coming down, price pressures on catering services and the food chain are still above the euro area average. For hotel companies, this means permanently more expensive F&B operations, higher costs for procuring premium assortment, and the need to contract longer but flexible supply arrangements.

Why hotels are key to increasing value and reducing seasonality

Hotels generate a greater multiplier effect on the local economy than private accommodation: they employ a larger number of workers throughout the year, achieve higher average spending per guest, expand the supplier base, and invest more intensively in destination infrastructure (wellness, congress halls, sports facilities, staff education). Increasing the share of hotels — especially 4* and 5* facilities with recognizable concepts — directly raises the average daily rate (ADR), revenue per available room (RevPAR), and average spending, and indirectly reduces demand volatility through stronger loyalty programs and better risk distribution across sales channels.

Analyses of major hotel investments in Croatia in the last decade show that the newly created value generally equals the amount of investment within eight years of operation, and that through taxes, contributions, and parafiscal charges over a period of about twelve years, additional value comparable to the invested capital flows into the state budget and local budgets. Such economic logic makes the hotel investment cycle socially and fiscally profitable, not just corporately profitable.

Investment priorities: brownfield renovation and selective greenfield

In an environment of limited space and stricter spatial planning conditions, a smartly designed investment wave must rely on two components. The first is the systematic renovation of existing hotels (brownfield), which combines energy efficiency (envelope renovation, waste heat capture, rooftop photovoltaic power plants), functional improvements (redesigning rooms to increase average square footage and flexibility, reorganization of back-of-house), and the improvement of high value-added content (spa and wellness, adults-only and family concepts, signature F&B, rooftop facilities, beach clubs). The second is selective greenfield — exclusively where the infrastructure is adequate and where it is possible to develop a complete resort with its own facilities and year-round demand generators (MICE, sports halls, health programs, golf, marina, thematic attractions).

For both types of investments, a predictable regulatory framework and efficient permit issuance processes are crucial. Investors seek transparency and speed, and destinations that shorten the time from idea to facility opening become more competitive in attracting capital. The role of counties and cities is to ensure quality utility and transport infrastructure, smart parking lots, and public transport that relieves seasonal congestion, while the national level can help with targeted fiscal stimulation for energy renovation and digitalization. Success will be achieved by those projects that, alongside physical renovation, also implement a deep transformation of the business model — from sales and marketing to operations and human resources management.

Operational adaptation: how to neutralize cost growth

To maintain profitability, hotel companies highlight three priority directions. The first is more sophisticated revenue management regarding combining dynamic pricing with deeper demand segmentation and tracking elasticity by channels. The second is radical process optimization — from housekeeping standards and cleaning times to centralized procurement and predictive logistics for F&B, including the use of contracted quality specifications and precise control of losses and write-offs. The third is product redesign: moving to stronger branded and clearly differentiated concepts that justify a higher price through experience, not just through a list of amenities. The combination of these three directions brings measurable benefits: it reduces costs per occupied room, increases the share of direct channels, and raises RevPAR.

In conditions of higher input prices, greater added value of the product is necessary. This means clear and differentiated concepts (adult only, family premium, active & sports, wine & dine), recognizable design and storytelling, integrated spa and wellness services, curated local experiences, and partnership programs with local producers. Guests are willing to pay a higher price if the quality and experience justify the price bracket.

Digitalization and data management

The digital evolution of hotel business — from CRM and CDP to advanced analytics and AI tools — is no longer an option but a prerequisite. Advanced systems enable more precise demand forecasting, real-time price adjustment, personalization of communication, and optimization of budget allocation across channels. In F&B operations, digital ordering and contactless payment shorten service time, while digital inventory systems and menu analytics are key to food cost control.

At the destination level, data consolidation (eVisitor, CBS, CNTB, and local tourist boards) and the availability of analytical dashboards help hotels in realistic capacity planning, especially outside the peak. Hotels that integrate their own data with market signals (air traffic, event calendar, weather conditions) react faster to changes and increase occupancy in shoulder periods.

MICE, sports, and health tourism as a season "shock absorber"

The strategic development of the MICE segment (congresses, corporate events, incentive travel) directly increases year-round employment and occupancy of hotels in urban centers and major tourist hotspots. Comparatively, sports preparations and tournaments, cycling and hiking routes, golf and nautical tourism, as well as health and wellness programs generate demand in months with lower ADR. Investments in modular congress halls, technical equipment, sports facilities, and medical programs (physical therapy, rehabilitation, and preventive programs, including specialized clinics and partner polyclinics) allow hotels greater demand elasticity and better annual occupancy.

Policies and regulation: balancing the growth of short-term rental

The faster growth of private accommodation in recent years has created visible imbalances: pressure on infrastructure and space, housing affordability for the local population, uneven service quality, and strong seasonal concentration of traffic. In European cities, there are therefore increasingly more regulatory solutions limiting the number of rental days, introducing zoning, or requiring stricter categorization and registration. Croatia can learn from these examples and harmonize standards and fiscal frameworks to ensure a fair competitive framework for all types of accommodation. The goal is not to suppress private accommodation, but to encourage its transition towards higher quality and greater compliance with sustainability and safety standards.

Human capital: from seasonal improvisation to a sustainable staffing model

The key limiting factor for development remains the workforce. After a series of seasons with a distinct lack of qualified staff and growing reliance on workers from third countries, hotels are investing intensively in internal academies, dual education models, and retraining programs. The sector needs a predictable migration framework, but also a long-term solution through the education system: vocational schools and colleges that follow the standards of leading international institutions. Partnerships with the academic community and internship programs are increasingly linked to destination and hotel branding — because a strong employer brand reduces turnover, accelerates onboarding, and raises the service standard.

Examples of good practice and industry awards

At the annual gathering of hoteliers, the achievements of individuals and companies pushing the standards of management and quality were highlighted. Expert jury awards further illuminate the importance of leadership in portfolio transformation and guest experience. It is precisely the leading hotels with the highest standards that are the first to close capacity in pre-sales and carry the reputational capital of the destination. Field experiences confirm that demand is growing fastest in the premium and luxury segment, especially where content and service are clearly differentiated, and sustainability and digital convenience are integrated into every contact with the guest — from booking to check-out.

Financing: how to lock in more favorable conditions in a volatile environment

In conditions of elevated interest rates and risk premiums, capital structure becomes crucial. Investors and banks look for strong business plans with conservative assumptions of occupancy and ADR, a clear CAPEX schedule, and sensitivity scenarios. Hotels that can prove resilience through year-round demand sources more easily lock in more favorable financing conditions. Additionally, green components of the project (energy efficiency, emission reduction, smart water and waste management) open the door to more favorable lines and subsidies. But a favorable cost of capital is not enough on its own: it is necessary to simultaneously redesign products, strengthen commercial teams, and ensure high discipline in monitoring key operational and financial KPIs.

What follows in 2026: demand stabilization, the fight for value

In 2026, a continuation of demand stabilization with moderate price growth is expected, but also further differentiation of performance by destinations and products. Hotels that proactively invest in upgrading categories, high value-added experiences, and advanced commercial tools will continue to grow faster than average. Those who remain in price competition without a qualitative leap will face margin erosion. Therefore, today, in conditions of stabilized volumes, is the right moment for strategic decisions on portfolio, branding, and capital allocation — so that the next cycle is met with a stronger revenue structure and greater resilience.

Recommendations for the public and private sector

• Accelerate brownfield renovation through incentives for energy efficiency, digital transformation, and safety standards; introduce a "fast-track" for projects with clear destination multipliers.


• Selectively develop greenfield in year-round destinations and with complete facilities (MICE, health, sports).


• Parameterize short-term rental through standards, zoning, and registration to ensure fair market competition and reduce seasonal concentration.


• Strengthen MICE and events through a calendar of international conferences and sports competitions and joint budgets of destination partners.


• Invest in personnel: dual education models, scholarships, internal academies, and partnerships with international schools.


• Accelerate digital transformation — CDP/CRM, advanced advertising, revenue science, operational analytics, and automation.


• Diversify demand sources with a focus on markets with higher spending per guest and on segments that fill the pre-season and post-season.