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Serbia’s hotel subsidy scheme: A closer look at state funding allocation

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Serbia’s efforts to meet the rising demand in its tourism sector through subsidizing hotel construction have come under scrutiny, with the bulk of the funds going to companies closely linked to the ruling parties, as reported by Balkan Insight.

Despite a surge in tourist numbers, evidenced by a 15% increase in visitors during the first ten months of 2023 compared to pre-pandemic levels in 2019, concerns arise regarding the allocation of state subsidies. While tourist revenue soared to approximately 2.1 billion euros, Russian visitors accounted for 12.5% of overnight stays, followed by Turkish and Bosnian tourists.

In response to this growth, the Serbian government inked 15 subsidy contracts for hotel construction between October 2018 and December 2023, amounting to a total project value of 271.8 million euros, with the state contributing 48 million euros. However, over half of this sum—26.5 million euros—was directed to just three companies, known for their close ties to state authorities.

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Millennium Resorts, a subsidiary of Millennium Team, received a substantial 10.1 million euros subsidy for constructing a wellness center and two hotels in Vranjska Banja. Similarly, Promont Group was granted 7.4 million euros for a luxury resort in Fruška Gora, while Inobačka, through its subsidiary, secured nearly nine million euros for a new hotel in Novi Sad.

Despite these investments, concerns have been raised regarding project execution and adherence to contractual obligations. Both Millennium Resort and Promont Group have requested contract modifications, with Millennium extending project deadlines, and Promont reducing the number of employees on its project.

Looking ahead, Serbia’s plans to host EXPO 2027 have underscored the need for expanded accommodation options, prompting President Aleksandar Vučić to announce the construction of over 100 new hotels in Belgrade alone.

While the surge in tourism is welcomed, questions persist regarding the allocation of state funds and whether luxury projects warrant subsidies. Critics argue that subsidizing companies already capable of self-sustaining ventures diverts resources that could benefit smaller businesses or areas lacking in tourism infrastructure. As the tourism sector continues to evolve, policymakers face the challenge of balancing growth incentives with equitable distribution of resources to foster sustainable development.

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